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There are a number of issues that came up at the seminar. To expand some of the issues, these are the main points and a strategy that I think will work. They will be covered in some depth at the workshop, which is going to be a real brainstorming session on strategies and tactics that work.


The title companies are trying to position themselves as not being the arbiters of the status of title. This is absurd in the absence of them saying that in a very public way — like “Don’t rely on us.”


What I think they inadvertently have done is to tell us what their lawyers told them — big trouble is looming on the horizon. There is no doubt that when people go to a title agency and get a commitment letter with exceptions and so forth, they are assuming that the title company has done its homework and that the parties are relying not only on the contract of title insurance but on the representation that the title underwriter, agent and carrier have done all the work necessary. To assure clear title at closing.


I never had any doubt that the underwriting of title was a s lax as the under writing of loans which was as lax as the underwriting of mortgage bonds and synthetic derivatives based upon the mortgages bonds that supposedly derived their value from the existence of valid mortgages, valid notes and valid obligations that could be transferred and presumably were transferred up through the securitization to the trusts or pools thus giving the investors what they thought they had paid for.


It is now clear that that there was a complete absence of adherence to any underwriting standards on any level and that the flack is coming in the direction of the title companies as well as the banks and investment banking firms. Like the false appraisals and false securities ratings, the false issuance of title insurance seduced the real parties in interest — the investor-lender and the borrower-homeowner — into thinking that they were involved in a standard real estate closing where all the usual I’s were dotted and all the usual t’s were crossed. Without lulling the real parties in interest into a false sense of security, these deals would never have occurred.


Now when David Krieger or anyone else goes into a title office and asks for a title commitment or a letter of declination ( a letter declining to do the title work) they can’t even get the calls answered. 


So the first moral of the story is that if you are going to sue somebody, the people to sue for both damages and title issues are ALL the underwriters —

1)   the loan originator, who was really a sham straw-man even if their name was BOA or Wells Fargo,

2)   the securities underwriter that sold the mortgage bonds, because they were crating terms and conditions of the loan and adding parties that the homeowner-borrower knew nothing about and

3)   the title insurance underwriter, who often also served as escrow agent and closing agent, and who knew, should have known or had the proof that can proffered in court hat the loans were table-funded and knew this was not being disclosed to the homeowner-borrower and knew that this was a violation of TILA and other laws and common law concerning deceptive lending practices.


The measure of damages is potentially the value of the home at the time of the original transaction since the title company makes such a big deal and the common law is full of decisions about how the title contract only covers things that were present at the time of the contract. The suit would be breach of contract or, in the alternative fraud in the inducement — the inducement being that the homeowner-borrower would never have gone into the transaction had they known there were any questions about whether they were getting clear title.


The impediments to clear title include but are not limited to


1)   whether the prior owner had a securitized loan and if so

  1. a.     whether the prior owner had clear title or defective title
  2. b.    whether the prior mortgage was ever satisfied in fact
  3. c.     whether the prior mortgage was subject to satisfaction by the parties who were executing the satisfaction or reconveyance
  4. d.    whether the title conveyed can be overturned because of actual notice of the parties that could be imputed to the new homeowner.

2)   Whether the new mortgage as recorded does anything but add a wild deed to the title record without anybody who can execute a corrective instrument removing it from the registry of title in the country in which the property is located.

3)   Whether the actual money transaction was between the parties described on the closing documents, or as seems to be the case in al most all securitized loans, if the transaction was funded by a source that was undisclosed — a classic case of a  predatory table funded loan — in which case the closing documents — all of them, violated TILA, which is why you need a forensic analysis, and created fatal title defects that c an ONLY be corrected by a successful quiet title action, at the expense of the title carrier, failing which the title carrier would be required to satisfy the alleged mortgage and note and/or provide some sort of indemnity in the event of a second foreclosure or collection by the real creditor.

All of which brings us to the real point of the mini-treatise: it has long been suggested by many property experts around the country that the proper strategy is to wait until the foreclosure sale is complete and then attack it.


I would add to that, based upon, the facts as they appear to be revealed in our title and securitization report, that being passive and lying in wait is good strategy but only if you do one thing that will seal the fate of the pretender lenders — go to the auction and bid or have someone else do it for you and make sure the bid you submit is subject to confirmation.


At the auction all bidders are expected to register in accordance with requirements of state law and local rules (check with local licensed attorney to make sure you get this right). All bidders must submit a cash bid, with a percentage — usually 30% — paid upon winning the bidding. The only exception is a creditor to whom you actually owe money and who either has a money judgment against you or who has a right to foreclose nonjudicial and exercise the power of sale provided in a deed of trust.  


Your objection is based on BOTH (a) that the party is not a creditor and must submit a cash bid and (b) the amount claimed as due is wrong — and is actually intentionally misstated and (c) that even if the party was a creditor, they owe you more money than you owe them because of the various claims, defense, affirmative defenses and counterclaims against them for fraud in the inducement etc.


Some states have economic tests as to whether a bid is subject to confirmation so a $100 bid would be deemed to be too low. Other states do not have that protection and thus a $r100 bid would be sufficient to take the property if nobody else submitted a valid bid.


THEN attack the sale on the basis that the credit bid was invalid, that the Trustee was in on the scam and that the bidder was not a creditor, thus allowing you uncontestable rights to discovery which will prove your point. 


In virtually all states I am told that if the first bid is invalidated, the next highest bid gets the property.  And the beauty is that you are using the same procedures that the pretender lenders are using so use their memorandums and their cases “on point” to prove your point.  


A creditor is someone to whom the money is actually due because you promised to pay them, or they are a party who actually bought the obligation from the party from whom you received the money and promised to pay, along with the documents of transfer and the original loan documents being in the possession of the successor (extremely rare in securitized loan scenarios — since the entire securitization scheme was, in practice, an illusion.


The following would not qualify as creditors and thus their credit bid would most likely be invalidated leaving your bid as the only one left, which, upon receiving the deed from the Trustee (who has no discretion in the matter) is the same as quieting title:


  1. A.    If the bidder was the servicer
  2. B.    If the bidder was a bank, unless the bank actually can prove they funded the loan out of their own funds or credit, and that the original documents on the loan were not defective or were corrected in accordance with law (extremely unlikely)
  3. C.    If the bidder was Reconstrust, or a similar foreclosure company
  4. D.    If the Bidder was a Trustee, unless the Trustee can show that the loan
  5. E.    If the Bidder was MERS
  6. F.    Any other party who submitted a bid without cash.

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