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EDITOR’S COMMENT: This is but one example of compounded title problems that will mushroom over the next few years. If you think that securitization, false though it was, is difficult to grasp, wait until you try to decipher the chain of title on your own house — regardless of whether you have made payments, all the payments or even over-paid.

This story is about a completely innocent third party purchaser buying a house from Wells Fargo who for reasons explained repeatedly on this blog probably never obtained legal title. Bank of America allegedly made the loan or at least originated it around 2 years ago, so that would be in 2009. Supposedly BOA sent the money to the closing agent and then the closing agent went belly-up, taking the money —- and the closing documents — with it. Wells Fargo said it never got the money — but knowing Wells, it is difficult to imagine how they would ever know.

What we know is that apparently the deed was never recorded from Wells Fargo and probably will never be found. Thus on its face, Wells Fargo is saying you never paid us for the property and even if you find the deed, you can’t record it because you never paid us. But the buyers have been paying BOA for the mortgage faithfully on time each month for two years. And theoretically at least BOA is out the money they say they used to fund the loan. That would be money apparently stolen or lost in the bankruptcy of the title agent that was closing the deal.

There is an old doctrine that might come into play here, called “laches” which is why did Wells sit on its hands so long doing nothing when they had sent out a deed and according to them, never received payment?  Since so many people relied upon the completion of the closing, it might be said that Wells waited too long to assert a claim. Now they are “foreclosing” on the Buyers and the “lender” BOA.

The Buyers relied upon both Wells and BOA to know what they were doing and used a Title Agent presumably picked by one of the banks. So as far as the buyers are concerned, they did everything they were supposed to do. And they are right. The closing agent’s insurance may or may not have been in force and the title carrier represented by the closing agent may or may not have some liability here, but the question is who gets the house and who loses money?

When you add the inherent title problems of homes that were subject to loans claimed to be securitized, where the foreclosure was accomplished through fabricated documents (which might be the case here) then you have Wells not able to offer title even though it was the designated Seller. And you have BOA accepting the title situation for what it was because they were supposedly doing real underwriting of the loan, in which these things are checked. And now, get this, Wells wants 20% MORE than the contract price from 2 years ago — a figure the Buyers can’t afford.

This is like a Bar Exam question but it far from unique. It is happening all over the country in one form or another. Ultimately someone must take the loss. Ultimately, someone must be deemed the owner of the house. Obviously this is material for a quiet title lawsuit or declaratory judgment which is essentially the same thing, procedurally. The conventional wisdom would be that if the deed was not recorded, the Buyers didn’t get title — but that is not true.

Failure to record does NOT invalidate a document as many borrowers are finding out when they go to court. The document is valid whether it is recorded or not, assuming it is signed, sealed and delivered, which presumably this was and BOA was very happy, thank you, to take payments since it had originated the loan. So if Wells delivered a signed deed, and a copy of that deed can be found, it can probably be recorded with an affidavit. The Buyers will need to check with a really good property lawyer in their area before they assume anything.

BOA obviously has no recorded mortgage lien, but it has the knowledge that the Buyers were the borrowers who signed for the loan and paid on it. So the obligation from the Buyers exists even though the mortgage was not recorded, much less the lien perfected. But the loan is, according to Wells unsecured because neither the Buyer nor BOA ever obtained title or rights to the land, according to Wells’ theory. If a court sides with Wells, then the Buyers have a huge unsecured obligation to BOA and no house. If a court sides with the Buyers, then presumably it will also side with BOA in which case the transaction will be deemed completed. But that means that the “seller” Wells received no money — or so they say.

If Wells proves its case that it never received the money there are several possibilities. One is that they are simply going to take a loss because the closing agent was their pick, if that is the case. Another is that BOA needs to pay Wells again because the closing agent was their pick, if that is the case. And third possibility is that the Buyer will end up with a double liability — one to BOA which may or may not be secured with a lien on the property, AND one to Wells which may or may not be secured with a lien on the property.

The nightmare continues. And it will continue until the taxpayers, consumers and homeowners of America are seen as victims rather than convenient patsies for big banks and big business.

The Huffington Post  

Under the best of circumstances, foreclosure is a painful process. But in Houston, Texas, one couple is now joining the unenviable ranks of those losing their home for reasons unrelated to payments.

Brian and Khanklink Pyron, as well as their 18-month-old daughter, may soon lose the family’s first home despite allegedly staying current on payments because they were never technically transferred the title of the house, MyFoxHouston reports (h/t The Consumerist).

In 2008, shortly after the Pyrons purchased their home but before the title to the estate was transferred, the responsible company went bankrupt. Never notified of the situation, the family continued for two years to make mortgage payments to their lender Bank of America, according to MyFoxHouston. Those payments, however, never reached Wells Fargo, the mortgage-holder previous to the Pyron’s purchase of the home.

“We did everything we were supposed to do,” Brian Pyron told MyFoxHouston. “Nobody has communicated with us, notified us. We had been paying our mortgage and everything.”

Stories like that of the Pyron’s have become familiar since the recession. In August, a senior couple in Florida faced foreclosure not for missing a payment, but for sending a check too early.

In June it was reported that a man in Massachusetts faced foreclosure over a $0.00 payment that Bank of America said he owed. More recently, a Florida resident nearly lost her condo over what had originally been a fee of $4.70.

Millions have dealt with foreclosures since the housing bust. In August, foreclosure sales accounted for six times more home purchases than they would in a healthy housing market, according to experts.

Now some homeowners are fighting back. AOL Real Estate reports that protests organized by The New Bottom Line, a coalition protesting big bank foreclosure practices, have already taken place in Seattle and Boston and are set to begin in New York, Chicago and Minneapolis this week.

A pending foreclosure settlement against major U.S. banks has recently lost steam, with California pulling out of discussions and Attorneys General from Massachusetts and New York having expressed concerns that the current settlement too easily lets banks off the hook.

28 Responses

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  2. to tnharry: thanks for referred article to ABA:

    Okay – just read the ABA article regarding Carol Asbury – she made a mistake – she is resentful and remorseful – and is trying to make amends by helping homeowners – so instead of putting her away – why don’t they sentence her to 4 years pro bono work on defending homeowners since she has the knowledge and understanding of the issues – she would serve the public in a much greater way by continuing her efforts to educate and help struggling homeowners who do not have or can’t get legal help – I personally would rather have her covering my back on these issues because she knows full well from both sides what is doing on and where the strengths and weaknesses are – let her ‘serve time’ by continuing to help homeowners – make her punishment continuing to serve homeowners – since the government and states are not doing anything then let her serve the greater public – let’s get a petition going to submit to the court in her case – she would better serve a sentence helping society rather than sitting in jail – right? I’m for getting Carol’s help – why should criminals be the only ones getting legal assistance in a state – you murder someone and we give them 3 meals a day – a roof over their heads – no obligations – and free legal – what about homeowners – who are suffering at the hands of corporate criminal actions – let Carol do time by helping society’s homeowners – that’s how she should be ‘punished’! Michael Redman and Lisa Epstein – start a campaign and you’ll have thousands of us in an hour in support . . .

  3. @cubed – i don’t really know how to interpret it either. i know it was meant to address the post-foreclosure 1099 problem, but of course the IRS made it harder to understand than it needed to be.

  4. tnharry.

    I know you didn’t write-it. You just posted it, so I asked the question. It says one thing, then it says another thing. There was no intent to fly off the handle at you for just that post. Maybe in another post or topic I might.

  5. @anon – i’m not aware of any atty networks that would fit your description for mortgages and i have a passing familiarity with several of the regional multistate groups. i know of several attys who purchase and collect unsecured accounts such as credit cards, medical bills, etc. through an intermediary company. i suppose it’s not beyond the realm of possibility, but the numbers you’d be dealing in, even at a discount, usually necessitate the involvement of institutional investors.

  6. tnharry

    I am interested in your link below — and, do you have any information about an attorney network that actually purchased subprime origination??? Of course, only collection rights that were “funded” — but, maybe you have this info too.
    Thanks.

  7. Speaking of Clear Title who transfers the title in MERS name? I know the MERS “officer” is usually the employee of the bank the properties being transferred to, at least in my 2 titles. The MERS VP is the same person as the bank employee.

    Does this violate MERS rules? Is the party transferring the property not supposed to be the lender on record?

    The reason I ask is my “Lender” has been closed since 2007 and he had no other employees. My loan officer/lender passed earlier this year. Nobody else can sign on his behalf and he was his own statutory agent.

    Would a transfer from him to another party violate MERS rules? Again his company has no assests and can transfer nothing since 2007. I wrote a FOIA request and they said they had no information about my loan. I’ve written the AZ Dept of financial institutions and they said they have no info about his company loans going into receivership. Kind of at a loss of what to do.

    Any thoughts? Wait for them to file something bogus and challenge it?

  8. This article is exactly what I am talking about… The title insurance company or closing agent’s liabilities. They do not check any docs after the house is close. Moreover, I found that during the peak of the housing boom, the title company uses unqualified title examiners to do search and miss on defects on title. This is really a problem also.

  9. Cubed–I love your posts! Keep it up!

  10. and 1099s were sent after foreclosures as well. i posted that from the IRS website in response to the first post requesting information on 1099s. cubed – i didn’t write it, don’t fly off the handle asking me to explain it. it’s the crazy IRS rules. basically though it stopped the nasty habit of getting hit with a tax liability following a foreclosure via a 1099.

  11. If you take out a line of credit on a credit card…did anyone “lend” or “fund” the loan?

  12. cubed2k,

    I am not far behind you: that jargon is nerve wrecking.

    Here is what I understand (and for anyone reading this, correct me if I’m wrong):

    Let’s say you buy a house for 100K. You stop paying and your loan gets restructured and both your principal and interests are lowered. Let’s say that the lender agrees to lower your principal to 50K. Some money was paid by someone to front your moving into the house and living in it until you have reimbursed it. You owe someone 100K, even if it is increasingly hard to figure out whom. Someone paid 100K to put you into that damn house and you promised to repay it. The lender acts on behalf of whatever entity that lent that 100K.

    From what I understand, technically, it is a 50K straight loss for the lender (please Carie, let’s make it very simple and not add “unsecured”. I am using this as an illustration only) The lender won’t go after you for it (it is “forgiven”) So, the lender declares that 50K as a loss to the IRS and gets a deduction for it. In the old days, that 50K was added to your income as a gain to you and you had to pay taxes on it. See, IRS takes taxes from somewhere because it considers that if someone lost, someone else gained from the transaction. If it doesn’t take it from the lender (who has lost 50K), it has to take it elsewhere. in that case, it is you since you obtained the loan and didn’t pay it back. The forgiveness of 50K is as if you were 50K richer than before, for what the IRS is concerned.

    What i understand is that, until 2007, you had to pay those taxes. You would get a 1099 and you would add that 50K to your income on April 15. Since 2007 and until 2012, if the lender “forgives” the debt in part or in totality, you don’t have to pay taxes on the amount forgiven if it is for your principal residence. It is called “relief”.

    However, if the lender decides to “forgive” 50K as a payment for work you did (advertizing, if you have an agency, or selling is you have real estate license or any other work for the lender), it doesn’t qualify as it becomes a payment for services rendered, hence it is an income. If the lender “forgives” the 50K because all the houses in your neighborhood have lost 50% of their value and so has yours, as a result, you don’t have to pay taxes on that 50K. If the lender “forgives” the 50K because you lost your job and can’t pay back the 100K, you don’t have to pay taxes.

    Does that help? The trick is that it is over in 2012…

  13. tnharry,,,,,,,,,,,,,,

    it’s total BS. And you know it. So please people, Occupy Wall St…………………………cuz it’s total BS.

  14. yes, I’m stupid,,,,,,,,,,,,,,,

    so please explain TNHARRY, what does it really mean?

  15. @tnharry…………..

    “The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.”

    —————————–

    ok, what does that mean? Really.

    Please convert the above statement in layman’s terms,,,,,,,,,like normal people trying to understand what it means…………

    Please

    “due to services performed for the lender” ———what does that mean?

    “or any other reason not directly related to a decline in the home’s value” – what does that mean, really?

    “or the taxpayer’s financial condition” —–ok, what does that mean????????????

  16. If the god damn 1% are so rich, why beyond rich, why on Earth can’t they just say, that’s it, we forgive all debt. Let’s start anew…………..?????????????????

    I mean they are rich………………right……………..

    I think most people would go COOOOOL. All debt forgiven, start anew……………..

    But, no, they must continue some game,,,,,,,,,,,,,,

    Well? What is that game????????????

    To make us all slaves to debt……………but we are there,,,,,,,,,,,,so why continue………….

    It’s crazy, and the definition of crazy is no understanding, meaning you can not understand it, there is no understanding………….there is nothing to understand because it doesn’t make sense,,,,,,,,,,,,how do you make sense out of something that doesn’t make sense,,,,,,,,,,,,there is no sense.

    DUhhhh!

  17. @tnharry

    you posted:

    “Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.
    This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.”

    ————————————–

    Dear tnharry.

    when you just read the above, and I mean just read it from a foreign viewpoint, like what does it really mean.?

    Here you post dome rules, and this and that applies for these years and so much amount of money, and taxpayers. and income. and debt…………….

    WTF.

    This is so stupid, it is really UNBELIEVABLE. WHAT ON EARTH are so called leaders and regulators thinking. It is so complicated it is so stupid it is really CRAZY. OH, they call it modern finance.

    When nobody knows who owes who and what and this group says this and that group says this, and the government says this, and the meadi says that,,,,,,,,,,,,,,,on and on,,,,,,,,,,,,and we all look to the details,,,,,,,,,,,,and no wonder nothing gets done…………..and no REAL Products are exchanged,,,,,,,,,,,,on and on………………

    WTF>>>>>>>>>>>>>>>>>>

    IT IS CRAZY……………

  18. […] Livinglies’s Weblog Filed Under: Foreclosure Law News, Foreclosure News Tagged With: crisis, foreclosure, […]

  19. this article has inconsistencies
    , it first says they bought the home from Wells Fargo, then it says Wells Fargo was the mortgage holder to the owners prior?
    was it a deed from a “real person” to them,or was it a deed from wells Fargo to them, that is lost?

  20. Bank of America Offering Cash for Keys
    Posted on October 11, 2011 by Mark Stopa
    http://www.stayinmyhome.com/blog/?p=1819Saturday’s St. Pete

    Times had an interesting article about how Bank of America is offering cash to homeowners who are delinquent on their mortgage payments. http://www.tampabay.com/news/business/realestate/article1195778.ece
    Instead of pushing for foreclosure, BOA is offering cash in exchange for the homeowners consenting to the home being sold to a third party for less than the amount owed, i.e. a short sale.

    In an industry littered with horror stories and negativity, this is good news. If you’re skeptical, don’t be – this is a natural consequence of foreclosure defense attorneys like Stopa Law Firm making it difficult for banks to foreclose through the court process. In other words, take a second look at my website, written in early 2008, including this sentence:

    If your bank cannot win its foreclosure lawsuit against you quickly (because you are fighting for yourself and defending your rights), it may be willing to negotiate with you in ways that it otherwise wouldn’t…

    I foresaw resolutions like this years ago. It only makes sense. If foreclosure defense attorneys are continuing to make it difficult for banks to win in court, and the court systems are so clogged that cases are moving slowly, it makes perfect sense for banks to try to find a way to avoid the court process and resolve these disputes in other ways. Giving homeowners facing foreclosure cash payments in exchange for them consenting to a short sale is an obvious solution for the banks. It’s a “win” for both sides – the bank gets the property sold and the homeowner gets money to move elsewhere.

    As the article suggests, I’m sure this solution won’t work for all homeowners. For instance, the article notes that BOA isn’t intending to waive a deficiency judgment in all cases. That’s ridiculous – it doesn’t help to put a few grand in your pocket if the bank can get a judgment against you far in excess of that amount. This why we all need to keep fighting. The more difficult we make it for the banks to foreclose, the more inclined they’ll be to give homeowners a fair resolution. And make no mistake, that’s what’s happening here – the banks don’t care about being fair to homeowners; they care only about avoiding the time and expense associated with foreclosure lawsuits.

    Here’s the article. …

    Bank of America is offering up to $20,000 to select Florida homeowners willing to agree to a short sale instead of entering foreclosure.

    To sweeten the deal further, the nation’s largest lender will consider waiving the deficiency on the loan, which allows homeowners to sell the house for less then they owe without having to make up the difference to the bank. It can save homeowners thousands of dollars.

    Not every Bank of America customer in Florida will be eligible for the program, which pays a minimum cash incentive of $5,000. It’s targeted toward home­owners who cannot afford their mortgages.

    To quality, the short sales must be submitted for bank approval by Nov. 30 and must close by Aug. 31. Sales already under contract are not eligible; neither are properties outside of Florida.

    This is a “test-and-learn” program being rolled out only in Florida because of the higher foreclosure rates than other parts of the country, said Christina Beyer Toth, a Tampa-based spokeswoman.

    Florida is seen as a viable market to gauge short-sale response when presenting home­owners with relocation assistance, she said. If successful, the plan could expand to other states.

    The bank notified select Florida real estate agents this week about the offer.

    “It will get a lot of people off the fence about wanting to sell their home,” said Steve Capen of Keller Williams Realty in St. Petersburg. “This makes sense.”

    What’s in it for Bank of America? It saves attorney fees, court costs and property taxes by avoiding foreclosure. It also speeds the process of getting bad loans off its books and gets the properties back on the market faster.

    Capen, who specializes in short sales, plans to heavily market the offer to clients. But he cautioned that homeowners shouldn’t get overly excited because many of these plans have restrictions.

    “It will only help a fraction of the people,” he said.

    Homeowners get the cash after the short-sale deal closes. A caveat: Homeowners might have to pay income taxes related to the deficiency waiver and the cash payout.

    The cash payouts give home­owners a reason not to trash their homes or strip them bare before moving out. When houses enter foreclosure, home­owners can essentially live for free until banks take possession at the end of the court process, which takes an average of nearly two years in Florida.

    Attorney Chris Boss of Yesner & Boss said the deficiency waiver will enable homeowners to buy a house without filing bankruptcy or waiting three years from when foreclosures become final.

    “It’s a chance to get away from the house with some money in your pocket,” Boss said. “This is good for the economy.”

    Other national lenders started similar programs.

    Late last year, JPMorgan Chase began giving homeowners $10,000 to $20,000 and waived losses on the mortgage. The bank still suffers a loss in the process, but generally speaking, sale prices on short-sale homes are higher than foreclosed homes.

    Real estate experts and economists have said the housing market cannot fully recover until the millions of distressed mortgages are removed from the system.

    Mark Stopa

    http://www.stayinmyhome.comThis entry was posted in Main. Bookmark the permalink.

  21. Enraged

    Yes. Look — more than title insurance involved —– multiple types of insurance involved — gee—bought false collection rights — for nothing — basically- on a wing and a prayer – insurance coverage — no problem. . Little funding necessary. Investors?? how the heck much money do you think they put up on subprime??? Next to nothing.

    And, how did it become false collection rights??? -out of the GSE domain??? Start with escrow — and home-insurance fraud. No notification — just done. Hey — homeowners were nothing more than a “target” for profit. And, no matter how that “profit” was achieved ===no one watching. Kept a nice false economy going for quite some time. A nice profit – to fraudsters — while it lasted. Profit — over.

    Pieces will take a LONG time to be picked up. Government workers??? Afraid to lose their job — play the game —- “no jurisdiction” — typical answer. Who the heck has jurisdiction??? And, when will they use it???

  22. Question… Maybe even dumb question…

    Isn’t that what Title insurance is for? And if the guy was provided with a HUD showing title insurance paid, he should be able to legally shotgun his way out of that one, shouldn’t he, including for every penny paid into it and then some? I mean, there are plenty of deep pockets to sue starting with Wells, the agent, the alleged title insurer if one was represented, etc.

    Am I right?

  23. tnharry

    Could be wrong — but believe that if the Relief Act is applied — the homeowner must adjust basis for this “tax forgiveness” — when they eventually sell the home.

    BofA — a servicer or lender here??? They say “lender” — but media never knows the difference. 2009??? Most loans GSE loans by this time. What was the loan amount???

    Title is so messed up — all over. Will take government — not courts — to fix in bulk.

  24. certainly a mess. title insurance should have covered it but it sounds like the closing company folded prior to disbursing the title premium as well as the prior payoff. i would think they could still maintain actions against the title insuror and come out okay. both BoA and the new homeowners should have good claims against the insuror

  25. that was a problem but shouldn’t be happening any longer. from the IRS website:

    Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

    This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

  26. Good Points made – good analysis ..

    Back in 2008 we said …Misjoinder of parties who bring unlawful Estoppel, and by “Lache” for purposes of recourse avoidance under Purchase and Sale agreements.

    expert.witness@live.com

    Any one go to sale and receive a 1099 ? Please write!

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