Avoid Foreclosure Market Until the Dust Settles

EDITOR’S NOTE: Read this carefully and you start to understand that the paperwork is no trivial matter as the Wall Street Journal editors want to say on behalf of the financial services industry. Priority of liens and the foreclosure procedure contains multiple features that can be used by borrowers Stay alert. Show up ON TIME at the auction, you  might be surprised by what happens.

And remember that “credit bid” is not from a creditor. It is a fake credit bid and thus all things that flow from it are void.

October 15, 2010

Are you out of your mind to even consider buying a foreclosed property right now?

Todd Phelps and Paul Whitehead didn’t think they were last month when they were the winning bidders in a foreclosure auction on the steps of the main Riverside, Calif., county courthouse. They thought they had won the lottery.

For years, they had been living in a rent-controlled apartment in Santa Monica and waiting out the housing bubble in hopes of buying a weekend getaway in the Palm Springs area. And on Sept. 10, they thought they had finally done it, getting a house for $137,000.

Several days later, however, they realized that what they had really bought was a second mortgage from Wachovia on a house that still had an enormous, unpaid primary loan. In other words, they did not own the home free and clear, and the auction company wouldn’t give back their $137,000 check.

The tale is certainly enough to give anyone pause, especially as several banks slow or halt their foreclosure proceedings amid questions about how they cut corners to speed up the process. Still, roughly half the recent home sales in hard-hit states like California, Arizona and Nevada have been foreclosures or short sales, according to RealtyTrac. Anyone wanting to buy homes in those and other states hit hard by the housing crisis will probably encounter these sorts of properties.

And the houses will be tempting for scores of first-time homebuyers, second-home seekers and people looking to get an early jump on buying a retirement home while prices and interest rates are low.

So given the pitfalls, are they crazy? The answer is no, not always. But it’s important to keep something in mind.

“The whole foreclosure process is adversarial, even though it’s nonjudicial in many areas,” said Tom Cahraman, the presiding judge in Riverside County. “One person is losing their home, and another person is trying to get a new home at a discount price.”

He’s absolutely right. Strap on the body armor, and think hard about the following five factors if you find foreclosed homes even remotely enticing.

THE LOAN First of all, many banks that own foreclosed properties would prefer that you stay far away from their listings. In fact, they may sell a property for less money to an investor who can pay all cash.

You, on the other hand, will probably need a mortgage, and your need for bank approval can delay the sales process because your lender may hesitate when you say you’re interested in a foreclosed property.

“Lenders will usually only give you a loan on homes that are pretty ready to be lived in,” said Andy Tolbert of Oneir HD Realty in Longwood, Fla., who represents buyers shopping for foreclosed and other homes and invests in distressed property herself. “If the carpet is ripped out and the toilets are missing, they are not going to give the loan.”

This is especially important to consider if you’re using a Federal Housing Administration or Veterans Administration loan, where there may be particularly stringent requirements. “I have seen V.A. lenders require torn carpet to be repaired or replaced because they see it as a hazard to the new occupants,” said Mike Goblet, a mortgage broker with United Mortgage Financial Group in Mesa, Ariz.

There are some exceptions. The F.H.A. offers a mortgage called a 203(k) that may allow you to borrow money to buy and substantially rehabilitate a foreclosed property. But it could take a while to find a bank that offers the loan and to get your project approved. Some sellers, meanwhile, won’t let you buy with F.H.A. loans.

THE AUCTION PROCESS Foreclosure auctions can be a dangerous place for people who don’t know what they’re doing or are relying on help from people who are sloppy or negligent.

Mr. Phelps and Mr. Whitehead had a real estate broker who was supposed to be checking the records of the home they wanted to buy at auction. But the broker did not discover, or did not report to them, the fact that the property had several claims against it.

They considered suing the broker, but first turned to the auction company, Executive Trustee Services, a unit of GMAC Mortgage (one of the companies that suspended many foreclosures in recent weeks). At the company’s Burbank, Calif., office, a representative told Mr. Phelps that all sales were final and that Executive Trustee was merely a middleman. Mr. Phelps asked for further documentation and was told that he could have it when he returned with a subpoena. Classy, no? Gina Proia, a spokeswoman for the company, did not respond to requests for comment.

The couple also wrote plaintive letters to executives at Wachovia, now part of Wells Fargo, because both defaulted loans attached to the home they were trying to buy came from that bank. (The auction company was working on the bank’s behalf.)

After a couple of rounds of e-mail and phone inquiries on my part, the bank decided to give Mr. Phelps and Mr. Whitehead their money back. “Given the circumstances, we have decided to rescind the sale on the property and return the funds to the buyers,” Vickee J. Adams, a Wells Fargo spokeswoman, wrote in an e-mail on Friday.

Meanwhile, the couple, having nearly lost most of their life savings, now realize that they were in way over their heads bidding for homes at auction and were lucky to get their money back. “Trust no one,” Mr. Phelps said. “We didn’t get involved when the market was going crazy and everyone was getting subprime mortgages, and we felt like we were smart and that this was our reward for sitting on the sidelines. But there are enough bargains to be had on a straight sale.”

THE INSPECTION Let’s say you do manage to get a loan, resist the auctions and take the straight sale approach, shopping through a real estate agent. You’ll want to make any bid for a home contingent on a thorough inspection from someone familiar with foreclosed properties.

Mold may be your first concern, especially in more humid climates, given that many foreclosed homes have been uninhabited for months.

Then there’s sabotage. You should arrange (or have the real estate agent arrange) to have the power and water turned back on before the inspection if possible. Why? The previous owner (or vandals who have been in the home since) may have cut wires behind walls or poked holes in pipes in various places. Having running water and power can make these things easier to detect.

The pour-concrete-down-the-toilet trick is one that most good inspectors know to look for. But Jon Bolton of The Inspectagator in Oviedo, Fla., recently ran into a bit of destructive ingenuity he’d never encountered.

“Someone went on the roof with a bag of cement and dropped it down the chimney,” he recalled. “It rained, and now you have a solid block of concrete somewhere where it’s extremely difficult to get in to break it up. That’s just wrong.”

Also, don’t forget to inspect the minutes of the condominium board or homeowners’ association, if there is one. It may be in deep financial trouble if other foreclosures have occurred. Ms. Tolbert says that a good title insurer may be able to help with contacts if you have no luck finding the manager or treasurer on your own.

THE TITLE INSURANCE Speaking of which, title insurance is a must, particularly now. In the unlikely event that a former owner somehow wins back rights to the foreclosed home you end up buying and then tries to kick you out, you will need to make a title insurance claim.

And if you plan to put a lot of money into fixing up the home, you’ll want to ask about a rider on the insurance policy that can cover you for more than what you paid to buy the property.

THE WAITING GAME Still worried about the prospect of former owners showing up someday and asking for their home back? Cyd Weeks, a real estate agent with Palmcoasting.com in Palm Coast, Fla., suggests waiting a few months before trying to buy a foreclosed home. Now that all eyes are on the foreclosure process, he said, homes coming on the market early next year will probably have been foreclosed upon with much more care and precision.

Indeed, Ms. Weeks’s tip suggests a larger point. Given the foreclosure moratorium that some banks have put in place and the lengthy investigations and lawsuits that are sure to follow, there is no rush to buy as long as you don’t have to move or if renting is an option.

Take your time. Assemble a panel of experts and apprentice yourself to them. And watch the listings carefully. For better or for worse, foreclosed properties are going to be available for a very, very long time.

17 Responses

  1. People send to all Title insurers…


    Bill McCollum
    Florida Attorney General
    State of Florida
    The Capitol PL-01
    Tallahassee, FL 32399-1050

    New House Title LLC (a FDLC company)
    9119 Corporate Lake Dr
    Ste 300
    Tampa, FL 33634

    Old Republic National Title Insurance Company
    1410 N. West shore Blvd.
    Suite 800
    Tampa, FL 33607-4547

    Fidelity National Title Company
    150 S Pine Island, Suite 130
    Plantation, FL 33324

    First American Financial Corporation
    1 First American Way
    Santa Ana, California 92707

    America’s Servicing Criminals
    P.O. Box 10388
    Des Moines IA 50306

    Property address:

    Dear Title Insurer:

    This letter is to inform you that if you shall grant title insurance to above said property, a claim will be made under such policy in the amount of $495.000. As evidence shows, that Florida Default Law Group (Criminals), the law firm, , representing both the pretender-lender, Deutsche Bank and pretender-servicer America’s Servicing Criminals, criminally FABRICATED the documents necessary in order to fraudulently foreclose on above said property thus causing an irreparable cloud on the title.


  2. @ Anon,
    The fraud is in documents of properties NOT in default too……does that mean that the title insurers won’t cover all these fatal flaws in title??? Holy cow.

  3. Neil, or whoever is the moderator, please send me an email to explain why you won’t post my comment. If you look at this mess and examine the people involved, I think you would find that the vast majority of them are lawyers. These are the people who dreamed up this shit and are responsible for the result. This is going to kill the economy. I’m only shining the light where it needs to be< if that bothers you then let me know about it.

  4. Riddle me this Batman, or any of you brilliant lawyers, how is it that all of these professional people involved in the financial business can let all of this happen? I am talking about lawyers, judges, certified financial planners, accountants, notaries, etc. I can believe lawyers would lie,cheat,and steal, but what about everyone else. Has the entire system broken down from greed? How many of you would actually steal from your parents, or how many of you do? Do you remember when you actually crossed the line? Somebody educate me, please

  5. The $118,800 in funds was paid to these embezzlers from the Investors unbeknownst that the securitization happened by encumbering our property and making up a fraudulent fake Promissory Note and Deed of …

    This is a really bizarre distorion of nothing at all…..your not making any sense.

    By M.Soliman

    What you do not hear and what you really should be focused “here” before deciding to go to court.

    * Basis in assets and Mark to marketability
    * Transferring devalued assets for valuable
    * Consideration – homes appraised value
    * Debt collectors conducting repossessions
    * Collectors in a “staged” foreclosure under State rules and code
    * Mortgages are unsecured debts
    * Subrogation enforcement by Fed contractors
    * Agents claim they are substituted trustees
    * Foreclosure is mute procedure benefiting a right of judgment
    * Fee title is absolute to charges taken by securities holders
    * Securities holders are compensate with NOL –
    *NOL is Gov. Right to subrogate

    I’m getting a little tired here. We have another 20 or more arguments to support claims for the controversy and right to defend title. Well be back to share with you in a little while.

    So counsel, why are you pleading MERS and RESPA and what is it you think your courts are going to yield too given the preponderance of evidentiary your leaving on the table.


    By M.Soliman

    Folks here need to stay ahead of the press and use their advance notice to promulgate their case into an award before the masses jump on board. By that time we may have pre-emption which I am calling by year end. By January I believe the US government will take the preemptive strike to portray itself as a an elixir for the United States economy by now enforcing foreclosures under the Dept of Treasury for bank inventory under receivership through MERS system as a electronic beneficiary
    Remember the stock that was charged to zero lacks mark to marketability meaning your home is free and clear and the trustee sale is for re-establishing basis in assets (213-880-6288 for more info.)
    It’s called a condition precedent for lack of standing that is absent from every sale. Neil may want to comment further.
    As for BAC the problem of shuffling assets is not the issue here. As I said before the securitization process demands a robust market. If the market goes flat the lights come on and the roaches go running.
    When a securitization is proposed you have a series of events that begin with loans originations being transferred in to cash. Then the cash is used for capitalization or to purchase securities in a REMIC. The REMIC receives the cash it uses to purchase TRUST certificates.
    Thrust upon receiving cash sells stock to the REMIC use for the waterfall. The stock is issued by the Trust as a pass through for the loans it purchases from the purchaser; say Lehman bros. who bought the original loans from the lender.
    Now Lehman can pay cash to pay down the warehouse line used by the bank to fund the original loans it purchased.
    At any one moment in time the banks and investments will need to maintain their minimum thresholds of compliant ratio of stock to cash to loans outstanding.
    Thus BofA is not a victim of dirty deeds done dirt cheap. It’s not window dressing but shuffling of more and more assets to and from in order to keep FDIC and OTS regulators satisfied.
    What’s my point here…..think about it? Oh’ please think about it before you head into court. It’s the difference between a legal financial disaster compounding an already bad situation and receiving from a court of law the right to quiet title.

    Fight censorship of the press.


  8. Yes Karen – and bank attorney informed of this. Then I looked up – if you are aware of any possible fraud when you purchase the policy – the policy does not hold!!!
    Unless we are living under rocks – we are all aware of fraud!!

    Foreclosure home purchasers – beware!

  9. been fighting wells fargo. They have counsel in bankruptcy and a seperate firm in adversary. They have stepped on a rake and submitted two diferent notes. One is endorsed to wells fargo the other is blank, comments or suggestions

  10. After one one hour on the phone with Washington, our clients are especially pleased with our revelation for the FDIC involvement in the foreclosure mess nationwide.

    Now, we are submitting various files we selected for consideration by the FDIC to review for opening an investigation.There is nothing implied as for Washingtons FDIC member bank compliance dept. or any obligation to cure default issues. There is a great deal of interest however in Washington where we are representing we can demonstrate a fraudulent and conspiring, willful effort by transferring title in a “sham” sale.


    1. See 12 U.S.C. Section 1821 (c)(5).Regarding the introduction of alternative means to accelerate the appointment of receiver or conservator for failing institutions in FDICIA, Richard S. Camell notes that the intention originally was to “safeguard against forbearance,” but that Congress “ultimately adopted a weakened time limit” for forbearance with respect to critically undercapitalized institutions.”

    2. The number of problem banks, which hold $300 billion in assets, is the highest in 15 years, when the aftermath of the savings and loan crisis was in full effect. To deal with the spate of failures, the FDIC began assessing banks higher fees this year. The amount of the assessment depends on the size of the deposit base insured, meaning mega-banks like Sun Trust (STI) and includes Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM), Citigroup (C) stand to get slapped the hardest with bigger assessments. Large regional banks like U.S. Bancorp (USB), BB&T (BBT), Regions Financial (RF), and Capital One (COF) also face higher fees, as will trust banks like Bank of New York Mellon (BK), State Street (STT) and Northern Trust (NTRS), and Goldman Sachs (GS), Morgan Stanley (MS), which transferred to bank holding companies last year.

    3. Such assessments added $11.7 billion to the fund in the first half of this year, $9.1 billion of it last quarter. The FDIC has also received $8 billion in fees since the implementation last fall of a guarantee program for banks to issue debt at a lower cost. The FDIC received $1.1 billion in those fees last quarter.

    “ Loan Records ” means books, records, ledger cards, files, papers, documents, instruments, certificates, appraisal reports, journals, reports, correspondence, customer lists, information and data that describes, catalogs or lists such information or data, computer printouts, media (tapes, discs, cards, drives, flash memory or any other kind of physical, electronic or virtual data or information storage media or systems) and related data processing software (subject to any licensing restrictions) and similar items that at any time evidence or contain information relating to any of the Purchased Loans, and other information and data that is used or useful for managing and administering the Purchased Loans, together with the nonexclusive right to use (in common with the Seller and any repurchase agreement counterparty or secured party that has a valid and enforceable interest therein and that agrees that its interest is similarly nonexclusive) the Seller’s operating systems to manage and administer any of the Purchased Loans and any of the related data and information described above, or that otherwise relates to the Purchased Loans, together with the media on which the same are stored to the extent stored with material information or data that relates to property other than the Purchased Loans (tapes, discs, cards, drives, flash memory or any other kind of physical or virtual data or information storage media or systems), and the Seller’s rights to access the same, whether exclusive or nonexclusive, to the extent that such access rights may lawfully be transferred or used by the Seller’s permittees, and any computer programs that are owned by the Seller (or licensed to the Seller under licenses that may lawfully be transferred or used by the Seller’s permittees) and that are used or useful to access, organize, input, read, print or otherwise output and otherwise handle or use such information and data.

    6. Eligible Loans

    7. Under a warehouse line or purchase and sale agreement , the parties enter into transactions in which the Seller agrees to transfer to the Agent (A custodian) on behalf of the Buyers, Eligible Loans on a servicing released basis against the transfer of funds by the Buyers, with a simultaneous agreement by the Buyers to transfer to the Seller such Eligible Loans at a date certain or on demand in the event of termination pursuant to Section 18.2 hereof, or if no demand is sooner made, on the Termination Date, against the transfer of funds by the Seller. Each such transaction shall be referred to herein as a “Transaction” and shall be governed by this Agreement, as hereinafter defined.

    8. For example, U.S. Bank has agreed to provide a separate revolving swing line repurchase facility to initially and temporarily purchase Eligible Loans pending their purchase by all of the Buyers pursuant to this Agreement. Under that agreement are the following terms and conditions:

    9. Buyer ” means U.S. Bank and such other Person from time to time party to this Agreement as a “Buyer.” Persons who are currently Buyers on any day shall be listed as Buyers in Schedule BC in effect for that day.

    10. “ Buyer Affiliate ” means (a) with respect to any Buyer, (i) an Affiliate of such Buyer or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in securities and mortgage reverse repurchase agreements, bank loans and similar financial arrangements in the ordinary course of its business and is administered or managed by such Buyer or an Affiliate of such Buyer and (b) with respect to any Buyer that is a fund which invests in securities and mortgage reverse repurchase agreements, bank loans and similar financial arrangements, any other fund that invests in securities and mortgage reverse repurchase agreements, bank loans and similar financial arrangements and is managed by the same investment advisor as such Buyer or by an Affiliate of such investment advisor.

    11. by FDIC admission – Loans are negotiable instruments that are routinely sold in the financial markets. When a loan is sold, the borrower retains all the rights and obligations associated with the note. The borrower will be notified by the new holder of the note and given payment instructions.

    12. By FDIC admission – Disagreements arise as to what constitutes a legally binding commitment on the part of the Note holder or bank. Descriptive terminology alone, as used by the bank, might not always be the best guideline. For example, a loans acceleration clause may be referred to as one would consider in line with a revocable line of credit. Requests for a modification and other assistance, once the lender responds, at the same time may be a legally binding commitment to lend, especially if consideration has been given by the customer and if the terms of the agreement between the parties result in a contract.

    13. According to the FDIC “[It] is important to identify the extent of the bank’s legally binding to ensure that obligations are properly documented and legally defensible should the bank contemplate canceling a loan commitment”.

    14. FDIC notes –
    Assets (including loans) sold with recourse may qualify for sale treatment under FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities , if certain criteria are met. Under FAS 140, a transfer of financial assets is accounted for as a sale if the transferor surrenders control over those assets and receives consideration other than an interest in the transferred assets. Control is evaluated using three criteria: legal isolation of the financial assets from the transferor (purported seller); the ability of the transferee (investor) to pledge or sell the assets; and the absence of a right or obligation of the transferor to repurchase the financial assets.

    15. If the asset transfer (e.g., a loan sale) qualifies as a sale under FAS 140, the asset may be removed from the general ledger.

    *** However, if an asset transfer, which qualifies for sale treatment under GAAP, contains certain recourse provisions, the transaction would be treated as an asset sale with recourse for purposes of reporting risk-based capital information in Schedules RC-R and RC-S within the Call Report. In those circumstances, examiners need to consider the recourse attributes when calculating risk-based capital.

    *** When reviewing assets sold with recourse, examiners should refer to the Call Report Glossary under Sales of Assets for Risk-Based Capital Purposes, FAS 140, and Part 325 of the FDIC Rules and Regulations.

    16. Many, a majority of the properties are being foreclosed on by the FDIC under a subrogation claim. Remember the FDIC now reports to the Department of Treasury. The property belongs to a receiver until time of sale. Therein the transfer deed shows in proper accordance where the grantee is the beneficiary. Therefore no condition precedent is verifiable to bring a foreclosure. The FDIC is hidden from sight as a receiver thanks to MERS.

    17. Robo doc signers and foreclosure mills are contract FDIC lawyers, yet not necessarily an FDIC scheme but lawyer debt collector fraud. They opportunistically use MERS to stand in for the receiver brought by the FDIC to recover assets. The Department of Treasury is hidden behind the FDIC, so I guess they all are hiding behind MERS.

    18. The Mortgage Electronic Registration Systems MERS is an innovative accommodation that simplified the transfers of the beneficial interest and mortgage servicing rights. MERS property title database is deemed by Wall Street and Fannie Mae to serve as a repository that can track mortgage bonds were trades.

    Counsel K Kop

  11. This also brings up the idea that the title is a mess. The attorney on my closing went to prison for 3 years for wire fraud in a flipping house with two transactions scam. In my own home, there were two satisfactions of mortgage missing from the chain of title. Mortgages which may have been fraudulent. The seller told me to never bother him again with this issue. Needless to say, I contacted the title insurance company (Commonwealth) They hired an experienced attorney who was also a litigator. He went through the whole chain of title up to the time I purchased the house and resolved those issues. (Satisfactions of mortgage had to be filed). Now, the question is: how many times was my house sold after I bought it? Looking through the messy stuff (securitization trusts and what have you) of buying and selling, it seems that my house may have been bought and sold or changed hands to different entities as much as 7 times without proper documentation and recordation. American Brokers conduit went bankrupt and then the evil AHMSI popped its ugly head up as the servicer on my house. How can I sell this house?
    I am not the only one in this position. Thousands or even millions of houses are in this mess. It seems to me some heads must roll to resolve the problem. This whole fraudulent mess is going to continue until somebody has to pay a great deal of money or gets prosecuted and goes to jail.

  12. I would also add to purchase title insurance policy for the OWNER, not the bank! A personal insurance policy covering YOUR back.

    I personally witnessed a man buying a foreclosure at auction for $1.7M. I hope the original owner sues for quiet title. This would make me extremely happy.

  13. I work in an office with many bank owned and short sale listings.

    This article is spot on, although, many REO properties have a “First Look” period that allow only an opportunity for owner occupied buyers, usually for 14 days. If after that time period, no adequate bids were presented, the bank will take bids from investors.

    Many of these properties can not get traditional financing, although Fannie Mae has a Homepath Plus program, very similar to the 203k program, but more streamlined.

    The jury is out on what is going to happen to the listings that were pulled because of foreclosure fraud and missing assignments…they wont get title insurance.

    ….but no matter the bad press….buyers are still going to flock to anything “bank owned” because of the discounted price associated with it….wether its true or not.



    In May 2005 we deposited and invested $200,000 in Real Property, where we recently found out that $118,800 was embezzled out of our property from Mortgage Lenders and Trust Brokerage Companies, namely Goldman Sachs through an escrow Transaction. The $118,800 in funds was paid to these embezzlers from the Investors unbeknownst that the securitization happened by encumbering our property and making up a fraudulent fake Promissory Note and Deed of Trust.

    See the link for further information: https://fdaaccount.box.net/shared/a1pjz9sz5c

    Or visit my blog at http://bushnellcomplaint.blogspot.com/

  15. Imagine if when a home was foreclosed on, that no one stepped forward to purchase that home. It would bring the banks and their shenanigans to a grinding halt. We need to stop looking for ways to benefit from someone else’s misfortune and start thinking more about the long term effects of our actions and contributions to the perpetuation of the corrupt system

  16. Perhaps one of the side effects of this will be that owner occupied homes that are not in foreclosure will become more attractive…but of course they still have that issue of who is issuing the satisfaction of mortgage…

  17. I’m confused about the “file a title insurance claim” part. This is misleading, as with closings as I know them, the “lender” required the buyer to pay for title insurance to cover the “lender’s” so-called investment in the property (the loan amount). An owner’s policy covers the owner’s investment (down payment). It has been my experience that the “lender” policy does not include the buyer’s name. Neither would a title insurance policy cover any improvements the buyer might have made to the property. Am I right?

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