When Should County Recorders Refuse to Record Documents?

This question cuts both ways since homeowners have filed or tried to file various documents that cloud the title until a dispute is resolved. But the focus of today’s conference is on the filings by “new” beneficiaries and “new”substituted trustees” and deeds on foreclosures executed by “authorized signors” for the “Substituted trustees.”

County Recorders are clearly upset about the status of title chains in their records as a result of the dubious documents filed by banks, servicers and their attorneys and trustees.

Those include people like Helen Purcel, County recorder for Maricopa County in Arizona who stated publicly and directly that the MERS documentation alone raises serious questions about the clarity of title in hundreds of thousands of title chains. She says she doesn’t have the resources from the state to do a proper investigation and offers by private groups to fund or actually perform the investigation have been rebuffed. But she stands by her comments that title is in doubt, which creates uncertainty in the marketplace for anyone purchasing or refinancing a home.

The real question is whether the documents electronically filed in Maricopa county from “trusted sources” can be trusted at all. Many documents have been robo-signed, surrogate signed or signed without any apparent authorization. An “authorized signor” is a term used in banking to allow other people to sign checks and perform other functions on bank accounts but does not convey ownership of the account. Similarly “authorized signors” therefore by definition do not have ownership or authority to sign for an owner unless there is proper paperwork to back it up or it is specifically allowed by statutes.

The authorized paperwork that SHOULD accompany a valid document for recording should meet the same standards that the banks apply when accepting documents from consumers or borrowers. If you are signing on behalf of a corporate entity, it should show that the proper corporate resolution has been been passed by the proper people specifically allowing the signor to execute the document on behalf of the entity — whether it is a corporate entity, trust or anything else.

Many of the assignments or substitutions of trustee come to the recorder without any evidence of the actual authority to execute such a document. They  specifically refer to powers of attorney or authorizations or prior assignments that are not in the title record and not offered with the document offered to be recorded.

So for example if the substitution of trustee is signed by John Jones, authorized signor for ABC Corp., as attorney in fact for DEF Corp, as assignor from GHI Corp., as trustee for the the holders of mortgage backed securities, there are several open questions raised by the document itself.

A Bank would require that John Jones produce signed resolutions from the ABC Corp and probably require the presence of the the signers and proof that the ABC Corp exists and that the those who executed the resolution had the power to do so. Yet the Banks turn around and submit such documents without the authority being recited or shown or attached to the “Substitution of trustee” and without any affidavit from anyone saying that the resolution is correct.

A Bank would require that that if ABC Corp not only authorized John Jones to sign but would demand that the power of attorney from DEF Corp be produced and verified. And the Bank would most likely have the signatures on file of those people who maintain accounts as “owners” so they could be sure that they were getting the right instructions from the right person. And they still might demand, despite the presence of a notary stamp, that the persons produce identification of some sort. But this doesn’t stop them from recording documents without any of those assurances when it suits them.

A Bank would require that an assignment be recorded and that it be verified and authorized just as stated above along with an affidavit from appropriate people that the assignment took place and might even require proof of money exchanging hands. Otherwise they are just taking a piece of paper that is supported by consideration. But banks record such documents as “trusted sources” all the time.

All that said, the county recorder is put on the spot. If you go to the extreme, which is what the banks are saying, then even if the recorder was told directly by the person filing the bogus document that there was no authority, there were no resolutions, there was no power of attorney executed or authorized by whoever executed one, and that there was no trust that was funded or owned anything, the county recorder has no powers to reject the document for recording. But the same recorders are rejecting similar documents under one theory or another sent down from the County Attorney office — if they come from borrowers.

The County recorder is administrative agency and as such should provide some administrative remedies to at least hear the issues that might be presented by the borrower when challenging the previous recording or the attempted recording of a bogus or dubious document. The recorder is bound by statute by obviously there is lots of room for interpretation when it comes to filings by borrowers rather than the alleged “pretender lenders.”

In the end, the County recorder had best be prepared to be called into court and testify as to the integrity of the county recording system and whether they have an opinion as to whether title has been corrupted in their county and specifically whether a document should have been recorded after it is shown that the proper authority and ownership was not already in the title record and not presented at time of recording of a single document.

Either way they go, they are likely to be presented with a lawsuit from one side or the other. If they start looking at documents from all sources and asking questions about the authority of a person to sign a document, they will face the wrath of banks who are trying to slip by on theories that go against every standard in their own industry.

Some recorders have done the studies and all of them have concluded that large percentages of the filings were bogus or questionable. This will lead to future title litigation that might well be endless considering the number of transactions that supposedly occurred, albeit without any consideration “for value received”.

The deed on foreclosure executed after a supposed auction is often signed and submitted by someone without any knowledge of the transaction at all. The person is frequently a hired contractor who is there to say they have a bid from the “creditor” of X number of dollars, that the bid is accepted and the deed issues without payment of any actual money because it is presumed that the bidder was the authorized creditor, when in fact in most cases they are not.

This not only puts in doubt most of the foreclosure “sales” and future title transfers but also the eviction actions that often follows. The referee in all this is supposedly the county recorders’ offices. But they are genuinely confused about their powers and obligations in this unprecedented situation.

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