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U.S. home short sales surpass foreclosure deals for first time

Editor’s Comment: 

Well of course short sales will be higher than REO sales. REO sales of foreclosed property where the bank or its agent owns the property presents a virtually impossible situation with respect to title. The odds are rising every day that a homeowner is going to sue, reverse the eviction, reverse the foreclosure, get title free of the mortgage and note and have the right to exclusive possession. We are getting reports of this across the country. While the banks are trying to keep a stiff upper lip about it all they are in a state of panic (!) because of the loss of ill-gotten gains they thought they had in the bag and (2) because this loss must now be written down on their balance sheet which means that their capital reserves must be correspondingly increased. Where will they get the money?

 SO REO sales are going to be increasingly problematic.

But in a short sale it is the actual homeowner who signs the deed. That eliminates a wild card that is totally out of the control of the banks. The balance of the problem is that the satisfaction of the old mortgage is being executed by parties who have no ownership of the loan nor any agency authority to represent the true creditors (in most cases). But if the short-sale goes thorugh the new buyer can file a quiet title action for a few hundred dollars in fees and a couple of hundred dollars in court costs, and get a judge to sign off on all title claims. To paraphrase American Express’ “don’t leave home without it” It is the best interest of both the old homeowner who could be subject to liability a second time if the real creditor wakes up and in the interest of the new buyer who doesn’t want to lose his home to the claims of some creditor who can actually prove a case. So don’t leave or enter a short-sale home with quiet title — and a REAL title insurance policy that does not exclude claims arising from supposed securitization of the loan.

U.S. home short sales surpass foreclosure deals for first time                                        New Mexico Business Weekly

In a sign that banks are becoming more willing to sell houses for less than the amount that is owed on them, the number of U.S. home short sales surpassed foreclosure deals for the first time, Bloomberg reports, citing Lender Processing Services Inc.

Short sales accounted for 23.9 percent of home purchases in January, the most recent month available, compared with 19.7 percent for sales of foreclosed homes, data compiled by the company show. A year earlier, 16.3 percent of transactions were short sales and 24.9 percent involved foreclosures.

The three largest banks in New Mexico are Wells Fargo, Bank of America and U.S. Bancorp    , respectively.

23 Responses

  1. carie

    see: Bevilacqua v. Rodriguez, 10880, Supreme Judicial Court of Massachusetts (Boston).

    The judge said:

    “U.S. Bank’s lack of authority to foreclose at the time it purported to foreclose – is fatal to Bevilacqua’s claim to “own” the property.”

    Article:

    http://www.bloomberg.com/news/2011-10-18/buyer-can-t-bring-case-after-bad-foreclosure-sale-court-rules.html

    see aalso Google “Houston We’ve Got a Problem – Bevilacqua”

    I wasn’t able to post two links I guess.

  2. EXACTLY…

  3. I hope you’re right, Carie. If the foreclosure is ruled null, it never happened. IF I sell a stolen car I don’t get to keep the money and the new buyer doesn’t get to keep the car. Yeah, I know a car isn’t a house, but fraud is fraud, no?

  4. carie

    see Bevilacqua v. Rodriguez, 10880, Supreme Judicial Court of Massachusetts (Boston) October 18, 2011

    new “owner” developed condos and found out he didn’t “own” it because of illegal foreclosure by US Bank.

    http://www.bloomberg.com/news/2011-10-18/buyer-can-t-bring-case-after-bad-foreclosure-sale-court-rules.html

    From the judges ruling:

    “U.S. Bank’s lack of authority to foreclose at the time it purported to foreclose – is fatal to Bevilacqua’s claim to “own” the property.”

    Another article:

    http://amvona.com/blog/economics/28217-houston-weve-got-a-problem-bevilacqua.html

  5. Legal claim if foreclosure was eventually deemed illegal, for what ever reason…

  6. Wrong carie, just wrong. If a BFP buys without notice, and something of record in court and/or a lien lis pendent would constitute “notice to the world”, then he takes free and clear of all claims. Prior owner may still have claims worth money damages against lender, but the property’s gone.

  7. “legal claim” issue can be re-visited…

  8. Don’t know why I’m posting….never get any response ? But – what can one do about a short sale after 1+ yrs ? Is there any “fight” that can be put up to recover massive losses ?

  9. i would disagree on the title insurance issue, but it’s a red herring anyway. he probably can establish himself as a bone fide purchaser without any notice of matters impacting title

  10. I could not make the assumption that ANY title is fine or that the title insurance is worth the paper it’s written on. I have bought and sold a number of properties in the last 40 years. Title insurance had some value thought not much. Mostly is was an expensive “feel good”. I always bought it and, luckily, never had to rely on it. I have taken a good look at recent title insurance policies and they have changed since the old days. Most notably I find a small short clause that says the insurance company will defend against all “illegal” claims against the title (quotes mine). So what happens if there is a legal claim against your new(bogus) title? You’re on your own, pal. I haven’t read one title policy in the last two years that was worth the paper it’s written on.

  11. @carie – the title’s most likely fine. he probably has title insurance, and he’s also a bona fide purchaser. he’s golden.

  12. Enraged, on April 25, 2012 at 6:30 pm said:
    Deplete Savings? Or Own a House Outright?
    Posted on April 24th, 2012 by Mark Stopa

    But…how’s the title on that house he bought…?

  13. Just How Much Foreclosure Fraud Exists?
    Posted on April 24th, 2012 by Mark Stopa

    The Florida Supreme Court is currently deciding whether a plaintiff should be able to voluntarily dismiss a pending lawsuit when a defendant is seeking sanctions for fraud on the court. I’ve been following the arguments and the briefs being filed, and I’m struck by what I just read from The Mortgage Bankers Association.

    In the first issue of its brief, MBA argues (stay with me, it’s important, so I’m quoting it):

    Initiating radical change in the applications of Rule 1.420 and Rule 1.540(b) could convert the mortgage debacle, from which Florida is slowly recovering, into a widespread financial crisis. … [Not allowing a plaintiff to voluntarily dismiss a lawsuit in the face of a claim for sanctions for fraud on the court] would impact general credit and lending practices, just as the fragile real estate finance industry begins to rebound from a severe economic downturn. If the [banks] face potential revocation of voluntary dismissals, lending practices in Florida could come to a grinding halt. The threat of sanctions would force lenders either to prosecute technically infirm cases, rather than cure defects in a new proceeding, or risk being prohibited from re-filing, after faulty documents have been corrected. Such unduly harsh procedural impediments would deprive lenders of the ability to collect their loans or apply collateral to satisfy these obligations. Without the ability to collect on defaulted notes, lenders would be unable to make new loans and refinance indebtedness in this State. The economic impact could be devastating to the State of Florida.

    Let me get this straight. According to the MBA, not allowing banks to dismiss foreclosure cases when a defendant is claiming “fraud on the court” would cause a “widespread financial crisis,” cause lending to come to a “grinding halt,” prevent lenders from collecting their loans or making new loans, and be “devastating” to Florida.

    Those are some incredibly strong statements, so much so that I can’t help but wonder …

    If those would be the consequences, just how pervasive must the foreclosure fraud be?

    Think about it. If the fraud isn’t pervasive, there’s no way the Florida Supreme Court’s ruling (no matter which way it rules) could possibly have the consequences the MBA is suggesting. The fact that the MBA is this concerned should speak volumes about the magnitude of foreclosure fraud in Florida.

    If you doubt the existence or pervasiveness of foreclosure fraud in Florida, don’t listen to me or a consumer advocate. Simply read the MBA’s own brief.

    Mark Stopa

    http://www.stayinmyhome.com

  14. Deplete Savings? Or Own a House Outright?
    Posted on April 24th, 2012 by Mark Stopa

    I’m estatic. I just talked to a client who read this blog, followed my advice, and now owns a house outright. Sound too good to be true? I disagree. It’s been a while since I’ve discussed this issue, so let’s revisit the topic …

    Through my years as a foreclosure defense attorney, I’ve encountered countless homeowners who share the same type of story. Unemployment or underemployment led to financial problems and a mortgage default. Not wanting to go into foreclosure, these homeowners pulled monies out of a 401(k), IRA, or savings account to stay current on the mortgage. Eventually, though, the savings were gone, yet the monthly mortgage payments still kept coming. As a result, the homeowner had no money, yet was still facing foreclosure anyway.

    The client with whom I spoke today read this blog (which I wrote back in 2010), realized his savings were dwindling, and didn’t let himself fall into this trap. Instead, he took his remaining $50,000 in savings, saved money while he didn’t pay the mortgage on the house he was living in, and purchased a home, outright, for cash. He has now moved into that house and declared it his homestead. As a result, guess what? Even if the bank forecloses on his old house, and even if it gets a deficiency judgment, it can’t take his homestead, which he owns outright. In fact, even if he loses his job later on, and has to declare bankruptcy (to eliminate the deficiency), he can still keep his homestead, free and clear. All of the money remaining in his 401(k) and the college plans for his kids – that remains in place, too, safe from creditors.

    In my view, this is the perfect way to handle this type of situation. Instead of spending all of his savings, having nothing, and getting sued for foreclosure on the house in which he’s living … basically, winding up with nothing … he used his savings (and the money saved while not making payments on his old house), bought a new house outright, moved in, and declared it his homestead. Instead of nothing, he has a house that he owns, free and clear.

    Think about how much different this man’s financial future will be simply because he strategized in this manner. No matter what, he has a house. No matter what, he has money saved for retirement and his kids’ college. All it took was the realization that continuing to make monthly mortgage payments on a house he couldn’t afford was not a long-term solution.

    If there was one thing I wish more homeowners realized, it was that this approach is almost always better than depleting savings accounts to make monthly mortgage payments the homeowner simply can’t afford.

    Mark Stopa

    http://www.stayinmyhome.com

  15. http://www.lasvegassun.com/news/2012/apr/25/homebuying-grant-program-announced-las-vegas/

    Wells Fargo announces Las Vegas homebuyers grant program
    ‘Neighborhood LIFT’ program to be held May 4-5 at Riviera

  16. Hman,

    Personally, I would think it is extremely significant. From what I understand, you have nothing tying your refi to MERS and I nothing tying your broker to Chase. Did your note or mortgage agreement mention anything about the broker having the right to transfer to anyone? Is there any mention of who the servicer was going to be at the time of the refi? Was your refi on Fannie Mae doc? (you should find that at the bottom of your docs). Have you checked Fannie Mae site for your property?

    What does the country recorder’s office yield?

    You might have to start from scratch with the broker’s file and work your way up the chain to figure out who did what. Who were you paying? Did you ever receive any letter from anyone stating “From now on, pay such and such”? Did the payee change at any time during the past 7 years?

    I keep saying “follow the money” and that’s exactly what needs to be done in my views.

  17. I have kind of a sticky situation and I’ll explain it the best I can and hope someone out there reading is knowledgeable. I was researching my title. I purchase home in 2001 with a small broker. The DOT did not list MERS anywhere on DOT.

    I refinanced in 2005. At this time I had a first and a 2nd mortgage. I got a lien release for the 2nd prior to my refi closing.. I also got a lien release from MERS for the 1st.. Several red flags with this. First is that the release was done from Chase with MERS officers, not the original broker. Again, original DOT does not have MERS on it anywhere. The loan was sold to Chase? Anyway, no assignment on my title from broker to Chase. So did MERS/Chase have authority to release? I pulled up the MIN# on the release & it shows Fannie MAE as investor.

    2nd Red Flag is the release is dated 2 weeks after Refi closed in 2005. So in 2005 there was no lien release from the previous lender before my 2nd refi closed. My loan was closed without a lien release? So I’m not sure if the Title company caught this or if they would be liable for anything. I’m not sure if they get proof of payment another way?

    I’m wondering if the loan should have been even made having an outstanding liability of $175000 not being released?

    Does anybody know why this would happen? I’m wondering if this is significant? If I could somehow get info from Chase showing who paid off my mortgage with them I maybe able to show non-disclosure from my 2nd refi if a different party paid off the loan? or as some suggest bought the defaulted debt and sold it to me as a new loan.

  18. I met with 2 attorneys and both advised that I wasn’t a good candidate for BK. I had no debt & had to go a different route. BK was not above me, I’ve already got 2 foreclosures on my record so whats a BK on top of it. It doesn’t have the Stigma it once did and had I qualified I would have done it.

  19. “The odds are rising every day that a homeowner is going to sue, reverse the eviction, reverse the foreclosure, get title free of the mortgage and note and have the right to exclusive possession. We are getting reports of this across the country.” So, on what grounds are these foreclosure reversals occurring across the country? What is the action that results in reversal?

  20. what’s really tragic is not so much the filing of the bankruptcy but the timing of the filing. when i was representing debtors, so many people would come in after having depleted their savings and retirement accounts or after taking out 2nd mortgages to temporarily stave off what may very well be unsecured debt. if they’d come in before they pissed away what would have been exempt 401k accounts or before they converted credit card debt into secured debt, their situations could have been so much better.

    best advice : talk to an atty at the onset of the difficulty rather than at the end. of course, oftentimes these issues creep up on you, so identifying the “beginning” is unfortunately usually easiest in hindsight.

  21. @tnharry,

    So, what I have claimed for almost a year is the only way: people need to go on the attack. I ruffled a few feathers yesterday by suggesting that BK was pretty much the only way for those who can’t file anything else and that most wins happen there.

    The short sale, to me, is only a viable solution if all you want is get out from under the house but I have the feeling that many of those who go that route will still end up with deficiency judgments and in BK anyway. And it still doesn’t resolve the 2nd (if they have one) or the Heloc problem.

    I wish people would stop looking at BK as shameful. And i wish they wouldn’t wait until they have lost absolutely everything to finally take action. As far as i know, there is no shortge of BK attorneys anywhere.

  22. tnharry,

    I was wondering the same thing. in fact, i have a question about that…
    Suppose my servicer is WF. Suppose I sued WF on Tila, Respa, FDCPA, and any other statute applcable to my situation. Because I have all the documents proving artificial default (I paid but WF “lost” my payments, I was assessed fees as a result, I nearly went into foreclosure, etc.) WF decides that jury trial is too risky and decides to walk away, especially when it becomes more and more difficult for WF to prove any kind of relation with me or with my house.

    Keep supposing that, in order to walk away (since I attacked, they will have to negotiate to get out of that lawsuit. Only way for them at this point), they do agree to settle with me for a certain amount plus waive any claim against the house.

    Even though WF has not been able to prove it had anything to do with me, is there a language that would still cover me in the release? Would something along the lines of: “Defendant represents and insists that it is the servicer/assignee/transferree and the holder in due course of the note and therefore that it holds the authority to sign this present release. In that capacity and under that expressed representation, regardless whether it has been proven true, and for the purpose of being permanently dismissed from Plaintiff’s action against it, WF shall hold Plaintiff harmless and indemnify it against any and all past, present and future claim in connection with the house, whether asserted or potential.”

    Again, it is only a supposition but it may very well end up becoming reality (although my players are different).

  23. ok, i”ll bite – why is a quiet title complaint, a few hundred dollars in fees and a couple hundred in costs a slam dunk in this case where it’s far from a slam dunk in others? isn’t the issue the same as all these other QT cases, just reversed? if you’re convinced that the system is irreparably broken and no servicer/holder/investor/criminal has the authority to foreclose/collect/assign/etc., how do you intend to prove that the entity issuing a release of lien in a short sale transaction DOES have the authority to issue that release? Neil’s plan would actually put the short sale buyer/quiet title plaintiff in the odd position is needing to show that the releasing entity DID in fact have authority to release

    these theories cut both ways……

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