CONSUMER ACTION REQUIRED NOW!!! Banks Try for Amnesty at State level in Florida

Editor’s Note: Matt hits the nail on the head so there is no need to do a whole essay on the problem — just read his piece shown below. The Banks are getting itchy because like the economic crash they see a political crash coming. The Florida legislature is looking to “expedite” foreclosures. Republican controlled it is more likely that the banks will have their way with them — unless you do something NOW!

The whole premise, as Matt points out, is completely wrong. The problems with the pace of foreclosures is not that there are dilatory tactics being used by borrowers. In fact in many cases, it is the borrower who is more aggressive than the forecloser in pursuing an end to the case. The length of time it takes a process a foreclosure is caused by the illegal paperwork submitted by the banks. And the reason why they need to resort to doing something illegal is that they already did something illegal and are trying to cover it up.

If a borrower actually owes money on a loan, it should be clear in any setting how much money is owed to each stakeholder. The Florida legislation ignores this basic premise. AND if the paperwork was procured by fraud in the inducement, fraud in the execution or forgery followed by perjury of a “witness,” then nobody should be surprised why it takes so long. Requests for discovery are met with stonewalling. Before the mortgage meltdown, the lender would have been only too happy to lay down everything in their books and challenge the borrower to admit or deny it.

If it wasn’t for the deficient debts, notes and mortgages, the courts would not be clogged with foreclosures that should never have been initiated. Disclosure of the receipts and disbursements from an identified creditor (and their agents) who has proof of payment and proof of loss would end the foreclosure mess in a flash. But the banks refuse to do that because they can’t come up with a credible injured party with standing and they don’t want to reveal how much they took out of the flow of money advanced by investors in a PONZI scheme.

If you really want to stop foreclosures then pass a law that merely encapsulates what is already law in evidence, procedure, real estate and contracts — identify the creditor, show proof of payment, show proof of loss, proof of default to the CREDITOR and show documents that link up the borrower with the party who is injured.

Proof of loss and proof of payment can ONLY be established by producing a witness providing foundation for a copy of the wire transfer receipt or cancelled check. This is essential unless we are going to have two trials — one whether the foreclosure is valid on its face and the other whether the initiator of the foreclosure is a creditor (injured party) and the extent to which they were injured — or else they can’t submit a credit bid at the foreclosure auction.

If those conditions precedent to filing for foreclosure are required, either the borrower will drop out when those items are produced and alleged in the foreclosure complaint, or the case will not be filed at all. Case Over.

Send your email or letter now and by the way, send a copy to AG Bondi.

Posted by Matthew Weidner, Esq.

Every citizen who cares about justice, public policy and the rule of law should take an interest in what’s happening in Tallahassee.

The Florida House Subcommittee on Civil Justice will hear, and will likely pass, House Bill 87, a bill that aims to speed up foreclosures.  CALL THESE MEMBERS NOW AND URGE THEM NOT TO SUPPORT THIS BILL! This bill is wrong for many reasons, but let’s start first with the premise upon which it is founded….a premise which is totally false and misleading:

As a preliminary matter, public policy decisions should not be made relying upon data and information from industry sources, particularly when the methods and meaning of said data is not revealed.  In the house report on House Bill 87, they cite heavily to RealtyTrac data and other data which is not properly explained or put into proper context.  For instance, the report reads:

The average length of time between the first foreclosure filing and bank repossession is 853 days.

This statement ignores the fact that the primary reason for banks not completing foreclosures is the federal lawsuits into their crimes and wrongdoing and the related holds.

The banks, either because of the litigation or for their own business purposes are reviewing many more files for modification than before and many of the foreclosures that are “stalled” are not moving because the homeowner is in a long term modification.  A foreclosure case that has a loan that is in modification will just be “stalled” out, not moving at all in court, but this is not at all reflected in the case progress.

Current law provides for an alternative procedure that is designed to speed up the foreclosure process in uncontested cases or cases where there is no legitimate defense.

This is correct, there already exists an expedited procedure that the banks could use if they chose to….but they are choosing not to….and they cannot be forced to use this process.  Currently there are a significant portion of the foreclosure caseload for which the homeowner has not responded.  In these cases, a bank could move for judgment and get title in a matter of 60-90 days.  Before voting on this bad bill, members should consult with their chief judge and find out what percentage of cases currently pending could be quickly moved to judgment because it is investment or abandoned property or property for which no homeowner has responded to the lawsuit.

If the property is not residential real estate, the plaintiff may request a court order directing the defendant to show cause why an order to make payments during the pendency of the proceedings or an order to vacate the premises should not be entered.

This already exists in statute, but it is not being used.  Why add to a statute that the industry chooses not to use?  What percentage of current foreclosure filings in a circuit use this process currently and why has it not been used?  Why add a companion to this existing if the industry does not use it?

Provides finality of a mortgage foreclosure judgment for certain purchasers of a property at a foreclosure sale while allowing for damages in some instances.

The title insurance industry was more than willing to accept premiums knowing full well that many of their agents were engaging in improper conduct.  To allow the title insurance industry to evade their existing contracts and responsibilities to policy holders is misguided. And you cannot replace property which is unique, with any amount of money. This is a backdoor bailout to the title insurance industry and it rewards conduct that was either criminal, reckless or grossly  improper.
Amends the expedited foreclosure process to allow all lienholders to use the procedures, instead of just the mortgagee; reduces the number of hearings from 2 to 1; and prohibits service by publication when using the expedited process, unless the property is abandoned.

Only a party who initiates the litigation can make that litigation proceed.  There is no way that a junior lienholder can force the primary plaintiff to proceed with their case to judgment if they choose not to.  It is the Plaintiff’s case to proceed as it choose, and the existing law and court resources permit them to do so.
Allows any party to request a case management conference to expedite the lawsuit.

Any party to litigation may already demand that a court have case management, and the courts will do so…the court already has resources and the law gives them tools to move cases along.  And while a party cannot be forced to take a judgment, a judge can impose sanctions or enter orders that move cases toward resolution…..IF THAT’S WHAT THE PLAINTIFFS WANT!

Defines adequate protections where there is a lost, destroyed or stolen note.

The Uniform Commercial Code, adopted across the United States, and in Florida already provide protections.  This is totally unnecessary

Florida has the largest share of foreclosure inventory of any state in the nation, with 305,766 properties in some stage of foreclosure or bank-owned as of the end of 2012.1 Seven of the top 10 highest foreclosure markets in the nation are in Florida, with Palm-Bay-Melbourne-Titusville having the highest rate of foreclosure of any metro area in the nation.2
Foreclosing on a mortgage in Florida is an unusually long process. Florida trails only New York and New Jersey in terms of the length of time between the first foreclosure filing and bank repossession, at 853 days. The national average is less than half that, at 414 days.3.

Relying on all this data from RealtyTrac, which data is not adequately explained and which contains other factors and reasons should be disfavored.  Our state policy makers should only rely on data that comes from our judges and from Clerks of Courts.

Upon proper notice of default to the defendant, the mortgage servicer files a foreclosure complaint, which must allege that the plaintiff is the present owner and holder of the note and mortgage, [Editor’s Note: what happens if the allegation is made but the borrower denies it?]

Unfortunately, the underlined statement is wrong….the appellate courts across this state have made a disaster of the distinction between Owner and Holder such that it is not uniformly required anymore…this is a major problem….but this legislation does not address this….if the legislation were to change making that element a requirement would be positive

This bill is just wrong in so many ways, and making policy decisions based on flawed, and unclear data just makes no sense….call your representative and tell them to reject the bill.

ANALYSIS HERE

Email Them Here:

Larry…@myfloridahouse.govBill….@myfloridahouse.govCynthia….@myfloridahouse.govJim….@myfloridahouse.gov,Mike.Clelland@myfloridahouse.govDaniel.Davis@myfloridahouse.govTom.G…@myfloridahouse.govJose….@myfloridahouse.gov,Kathleen.Passidomo@myfloridahouse.govJose.Rodriguez@myfloridahouse.govRoss….@myfloridahouse.gov,Charlie.Stone@myfloridahouse.govJim.Waldman@myfloridahouse.gov

Another Ruse: Realtors Gleeful over Equator Short Sale Platform

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Editor’s Comment:

Banks have adopted a technology platform to process short sale applications. It is called Equator, presumably to imply that it equates one thing with another, and produces a result that either gives a pass or fail to the application. In theory it is a good thing for those people who want to save their homes, save their credit (up to a point) and move on. In practice it essentially licenses the real estate broker to take control over the negotiations and police the transactions so that the new “network” rules are not violated. This reminds me of VISA and MasterCard who control the payment processing business with the illusion of being a quasi governmental agency. Nothing could be further from the truth, but bankers react to net work threats as though the IRS was after them.

Equator is meant as another layer of illusion to the title problem that realtors and title companies are trying to cover up. The short sale is getting be the most popular form of real estate sale because it is a form of principal reduction where there is some face-saving by the banks and the borrowers. The problem is that while short sales are a legitimate form of workout,  they leave the elephant in the living room undisturbed — short sales approved by banks and servicers who have neither the authority nor the interest in the loan to even be involved except as an agent of Equator but NOT as an agent of the lenders,  if they even exist anymore.

So using the shortsale they get the signature of the borrower as seller which gives them a layer of protection if they are the bank or servicer approving the short-sale. But it fails to cure the title defect, especially in millions of transactions in which Nominees (like MERS and dummy originators) are in the chain of title. 

The true owner of the obligation is a group of investor lenders who appear to have only one thing in common— they all gave money to an investment bank or an affiliate of an investment bank, where it was divided up and put into various accounts, some of which were used to fund mortgages and others were used to pay fees and profits to the investment bank on the closing of the “deal” with the investor lenders. As far as the county recorder is concerned, those deposits and splits are nonexistent. 

The investor lenders were then told that their money was pooled in a “Trust” when no such entity ever existed or was registered to do business and no attempt was made to fund the trust. An unfunded trust is not a trust. This, the investor lenders were told was a REMIC entity.  While a REMIC could have been established it never happened  in the the real world because the only communications between participants in the securitization chain consisted of a spreadsheet describing “closed loans.” Such communications did not include transfer, assignment or even transmittal or delivery of the closing papers with the borrower. Thus as far as the county recorder’s office is concerned, they still knew nothing. Now in the shortsales, they want a stranger the transaction to take the money and run — with no requirement that they establish themselves as creditors and no credible documentation that they are the owner of the loan.

This is another end run around the requirements of basic law in property transactions. They are doing it because our government officials are letting them do it, thus implicitly ratifying the right to foreclose and submit a credit bid without any requirement of proof or even offer of proof.

It gets worse. So we have BOA agreeing to accept dollars in satisfaction of a loan that they have no record of owning. The shortsale seller might still be liable to someone if the banks and servicers continue to have their way with creating false chains of ownership. But the real tragedy is that the shortsale seller is probably getting the shaft on a false premise — I.e, that the mortgage or deed of trust had any validity to begin with. 

The shortsale Buyer is most probably buying a lawsuit along with the house. At some point, the huge gaps in the chain of title are going to cause lawyers in increasing numbers to object to title and demand that it be fixed or that the client be adequately covered by insurance arising from securitizatioin claims. Thus when the shortsale Buyer becomes a seller, that is when the problems will first start to surface.

Realtors understand this analysis whereas buyers from Canada and other places do not understand it. But realtors see shortsales as the salvation to their diminished incomes. Thus most realtors are incentivized to misrepresent the risk factors and the title issues in favor of controlling the buyer and the seller into accepting pre-established criteria published by the members of Equator. It is securitization all over again, it is MERS all over again, it is a further corruption of our title system and it is avoiding the main issue — making the victims of this fraud whole even if it takes every penny the banks have. Realtors who ignore this can expect that they and their insurance carriers will be part of the gang of targeted deep pockets when lawyers smell the blood on the floor and go after the perpetrators.

Latest Changes to The Bank of America Short Sale Process

by Melissa Zavala

When processing short sales, it’s important to know about how each of the lending institutions handles loss mitigation and paperwork processing. If you have done a few short sales in Equator with different lenders, you may see what while your same Equator account is used for all your short sales at all the lending institutions, each of the servicers uses the platforms in a different manner.

Using the Equator system

When processing short sales, it’s important to know about how each of the lending institutions handles loss mitigation and paperwork processing. Many folks already know that Equator is the online platform used by 5 major lenders (Bank of America, Wells Fargo, Nationstar, GMAC, and Service One). If you have done a few short sales in Equator with different lenders, you may see what while your same Equator account is used for all your short sales at all the lending institutions, each of the servicers uses the platforms in a different manner.

And, my hat goes off to Bank of America for really raising the bar when it comes to short sale processing online. And, believe me, after processing short sales with Bank of America in 2007, this change is much appreciated.

New Bank of America Short Sale Process

Effective April 13, 2012, Bank of America made a few major changes that may make our short sale processing times more efficient.  The goal of these changes is to make short sale processing through Equator (the Internet-based platform) at Bank of America so efficient that short sale approval can be received in less than one month.

First off, Bank of America now requires their new third party authorization for all short sales being processed through the Equator system. Additionally, the folks at Bank of America will be working to improve task flow for short sales in Equator by making some minor changes to the process.

According to the Bank of America website,

Now you are required to upload five documents (which you can obtain at www.bankofamerica.com/realestateagent) for short sales initiated with an offer:

  • Purchase Contract including Buyer’s Acknowledgment and Disclosure
  • HUD-1
  • IRS Form 4506-T
  • Bank of America Short Sale Addendum
  • Bank of America Third-Party Authorization Form

And, now, you will have only 5 days to submit a backup offer if your buyer has flown the coop.

The last change is a curious one, especially for short sale listing agents, since it often takes awhile to find a new buyer after you learn that the current buyer has changed his or her mind.

Short sale listings agents should be familiar with these changes in order to assure that they are providing their client with the most efficient short sale experience possible.


WHAT I LEARNED AT THE NBI ADVANCED TITLE ISSUES SEMINAR

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HERE ARE MY NOTES: NBI Advanced Title ISsues

 

I attended a seminar yesterday and came up with some interesting information, as well as receiving news that a guy I know won his UD action and in the process was restored to full ownership of his home free and clear of the mortgage. The case didn’t extinguish the debt, but ti is going to be hard for HSBC to come back into court unless they have ALL their ducks in a row. Amongst the things I picked up (see below) is that the issue securitization is avoided like the plague by the insurance carriers, the insurance agents, the attorneys who do the transactions, and the attorneys who litigate title issues. They treat securitization as an issue where all the facts or events occur AFTER the closing and thus AFTER the title policy was issued. This of course is a mistaken presumption.

I was surprised by the lack of knowledge regarding table-funded loans, the secondary markets and how they operate. But I did get corroboration of what Dave Krieger told me. The carriers definitely agree that that the mortgages are probably invalid for a number of reasons. So their position is that the elements of an insurable interest are not met (see below). SO if they were presented with claims from the banks, which they are NOT receiving on any case where the title issue is lost, the insurers will take position that there is no coverage because (a) there is no properly recorded instrument to insure — e.g.., Deed of Trust, Mortgage Deed etc. and (b) there was no economic interest to insure and thus no damages. The successors to the title policy, if any, do not acquire greater rights than the original insured, which is some party designated by the securitizing parties who orchestrated the table funded loan.

BUT neither the attorneys who make their living off these policies and closings and litigation regarding the policies nor the title companies are willing to come right out and say the mortgages are all unperfected security interests because the banks would hate them for that. And where do they get their business referrals? The Banks. So the securitizing banks are not submitting the claims on the title insurance and the insurance companies know that the old mortgages are not valid and potential void or wild deeds. But, as I thought about it after leaving the conference, that woudl mean that there are problems with any title policies they issue today on property that ever had a loan that was claimed as securitized but which is subject to being overturned or eliminated from the property records.

One of the main things is that the homeowner is relying upon the title company to do its job and is relying upon the title company’s representation of the status of title. But the title companies maintain that theirs is only a contract that states the risk they are willing to undertake and NOT a representation as tot he status of title. As a practical matter, when I brought it up, they conceded that if that position were upheld, the buyer of a piece of property would never know if he/she was really getting title unless they ordered a title abstract or otherwise ordered an extra service from the title company. The title agents do not offer this extra service, You must know about it and ask for it and pay for it.

BOTTOM LINE: Title examiners when presented with specific facts are universally applying the same standards and reaching the same conclusions: a mortgage that does not have the correct legal description, a foreclosure sale that is defective, a table funded loan in which the mortgagee or beneficiary is not the party who was the actual lender and therefore not possessed of an insurable interest.

Hence we have a left-handed statement that completely corroborates what we have been saying on these pages — that the pretenders are just that, pretending to be lenders, and that the original mortgage is a void wild deed that does not in fact create a security interest in the property but instead describes a transaction that occurred between people who were not made party to the signed documents. It is the same as a bad legal description of the property itself.

The documents do not describe the right parties or the right transaction. That leaves a potential obligation hanging out there, but not owed to any of the securitizers unless they can show they loaned the money, they didn’t get paid for it, or that they purchased the loan and didn’t get paid for it.

WHAT I LEARNED AT THE NBI ADVANCED TITLE ISSUES SEMINAR
MAIN TAKEAWAY ITEMS:

1. INSURABLE INTEREST (RELATES TO STANDING AND REAL PARTY IN INTEREST): Title insurance only applies if there is an insurable interest. It was universally accepted by the conference (including those who were there to protect the interests of the banks and pretenders), that an insurable interest includes two elements: (a) a recorded instrument naming that party and (b) an economic interest in the property. Thus if we take the position that an insurable interest is based upon law and not just policy, it can be argued that in the absence of an insurable interest, the title company will not issue the policy and the Court should not and may not validate the interest, since it is ipso facto, uninsurable.
2. DUTY TO INQUIRE: As the number of transfer of the “indebtedness” (the note) increases, the duty to inquire increases, and the more nervous the title examiner or transactional lawyer becomes.
3. PRODUCE THE NOTE: Producing the note is universally accepted as law despite some court decisions to the contrary. In Florida and other states the forecloser must produce and tender the original note to the court in order to obtain an order from a Judge to sell the property, and without the note, the forecloser cannot submit a credit bid. So even if the Judge lets the case go through, the sale can be attacked as being no sale (Void, not voidable) because the forecloser did not comply with the requirements of law to establish itself as the creditor.
4. PARTIES IN POSSESSION: Title insurance policies universally have an exception for the rights of the parties in possession. Presumably that means at the time of the transaction. So if the transaction was are financing (which accounts for more than half of all mortgage transactions, the party in possession is the homeowner. The argument can be made that the title carrier made the exception — and that assuming they are experts in title — that exclusion should be used in any litigation of the parties regardless of whether the issue involves the title policy. Thus the homeownerʼs rights include multiple affirmative defenses, counterclaims and cross claims which need to be heard in a hearing in which actual evidence is heard which means that actual COMPETENT witnesses must be heard to authenticate any documents proffered into evidence.
5. IDENTITY OF PARTIES: Any situation in which the named insured on the title policy is different than the instrument on record identifying the mortgagee or beneficiary results in an uninsurable interest which can be translated as non-marketable title. Hence the originated loan documents prove that the transaction was a table-funded loan in which the true lender was not disclosed. This means the original documents are fatally defective and cannot be cured without the signature of the borrower or a Court order which would require a hearing in which actual evidence is heard which means that actual COMPETENT witnesses must be heard to authenticate any documents proffered into evidence.
6. CREDIT BID AND CREDITOR: Only a creditor may submit a credit bid. If anyone else bids, the Trustee or clerk usually has no discretion but to issue a certificate of title (deed) which gives clear title to the grantee, which c an either be the borrower or someone standing in for the borrower.
7. Title insurance is not a magic bullet. It does not prove the status of title.
8. UNRECORDED INSTRUMENTS AND EXCEPTIONS: Generally unrecorded instruments are not covered by title insurance. In Arizona and other states there is general acceptance of the idea that based upon statute and ATLA standards successors in interest to the debt do not need a new title policy. BY inference this would mean that they are giving credence to the idea that the mortgage follows the note, whether the transfer was recorded or not. But upon questioning the experts who delivered the presentation agreed that as the number of transfers increased the transaction becomes suspicious and that the rule regarding successors was probably meant for single transfers.
9. REGISTRATION AND GOOD STANDING OF CORPORATE ENTITIES: A transfer by a corporation not in good standing in the state or states in which it is required to be registered may not transact business nor bring any judicial proceeding. Mere ownership of property is not considered doing business. But a pattern of conduct of transactions is all that is needed. If the entities (any of them) that are involved in the chain of title are either defunct or in bankruptcy, any assignment, allonge or other instrument is invalid. It can be cured but there are time limits on how long they have before they cure, and it may be that reinstatement may require a name change. After 6 months in Arizona the name of the entity that should have registered is up for grabs which means you can incorporate under that name. What you can do with that name is an interesting proposition that was not discussed.
10.CONFLICTS OF INTERESTS: Conflicts of interests apparent on the face of the document or otherwise known to the title examiner create a duty to inquire. Therefore, since the usual pattern is that these documents are created after notice of default and usually after the matter is in litigation and sometimes not until hours or days before a hearing in which the documents need to be produced, the matter is a question of fact that needs to be decided after hearing evidence which requires competent witnesses testifying from personal knowledge.
11.BOARD RESOLUTION REQUIRED: No officer may sign a deed without board resolution. It is possible that estoppel, waiver or apparent authority might apply in the situation where the complaining party is a bona fide third party arms length purchaser for value.
12. IMPUTATION OF KNOWLEDGE: In Arizona the knowledge of the Trustee is not imputed to the Lender, but there is no reference or prohibition against imputing the knowledge of the Lender tot he Trustee. The practice of ALWAYS substituting trustees instead of using the old one is a cover for the fact that the old trustee would probably ask some questions rather than simply follow orders and send the notice of default, notice of sale etc.

After Foreclosure, a Focus on Title Insurance

October 8, 2010

After Foreclosure, a Focus on Title Insurance

By RON LIEBER

When home buyers and people refinancing their mortgages first see the itemized estimate for all the closing costs and fees, the largest number is often for title insurance.

This moment is often profoundly irritating, mysterious and rushed — just like so much of the home-buying process. Lenders require buyers to have title insurance, but buyers are often not sure who picked the insurance company. And the buyers are so exhausted by the gauntlet they’ve already run that they’re not interested in spending any time learning more about the policies and shopping around for a better one.

Besides, does anyone actually know people who have had to collect on title insurance? It ultimately feels like a tax — an extortionate one at that — and not a protective measure.

But all of the sudden, the importance of title insurance is becoming crystal-clear. In recent weeks, big lenders like GMAC Mortgage, JPMorgan Chase and Bank of America have halted many or all of their foreclosure proceedings in the wake of allegations of sloppiness, shortcuts or worse. And a potential nightmare situation has emerged that has spooked not only homeowners but lawyers, title insurance companies and their investors.

What would happen if scores of people who had lost their homes to foreclosure somehow persuaded a judge to overturn the proceedings? Could they somehow win back the rights to their homes, free and clear of any mortgage? But they may not be able to simply move back into their home at that point. Banks, after all, have turned around and sold some of those foreclosed homes to nice young families reaching out for a bit of the American dream. Would they simply be put out on the street? And then what?

The answer to that last question may depend on whether those new homeowners have title insurance, because people who buy a home without a mortgage can choose to go without a policy.

Title insurance covers you in case people turn up months or years after you buy your home saying that they, in fact, are the rightful owners of the house or the land, or at least had a stake in the transaction. (The insurance may cover you in other instances as well, relating to easements and other matters, but we’ll leave those aside for now.)

The insurance companies or their agents begin any transaction by running a title search, sifting through government filings related to the property. They do this before you buy a home or refinance your mortgage to help sort out any problems ahead of time and to reduce the risk of your filing a claim later.

But sometimes they miss things, and new issues can arise later.

For instance, the person doing the title search may not notice that a home equity loan is still outstanding or that a contracting firm filed a lien against the owner years ago. That could create problems for you later, when you try to sell the home.

Then there are the psychodramas that can ensue. The previous owner’s long-lost heirs or a previously unknown love child could show up, saying that they never agreed to the sale of the property. Or perhaps there was fraud against a seller who was elderly or had a mental disability, or forgery of an estranged spouse’s signature. It’s rare, but it happens, and when it does, your title insurance company is supposed to provide legal counsel or settle with whomever is making a claim.

Title insurance companies would like you believe that they are the good guys standing behind you. After all, you are the customer who owns the policy.

In fact, many of the title insurance companies are more concerned about the real estate agents, lawyers and lenders who can steer business their way. The title insurance companies are well aware that most people do not shop around for title insurance, even though it’s possible to do so — say through a Web site like entitledirect.com.

While the title insurers are not supposed to kick back money directly to companies or brokers that send business their way, various government investigations over the years have turned up all sorts of cozy dealings that make you shake your head in disgust.

But since you have to buy the insurance if you need a mortgage, there is not much you can do except hold your nose.

That’s what John Kovalick did in January when he bought a foreclosed house in Deltona, Fla., for $102,000 from Deutsche Bank. But in recent weeks, he’s seen the headlines about other banks halting foreclosures and wondered whether something might have gone wrong with the foreclosure on his new house. A spokesman for Deutsche Bank declined comment.

Mr. Kovalick is not the only one pondering what could go wrong. While the banks were pressing the pause button on many foreclosures, some title insurers were growing concerned as well.

On Oct. 1, Old Republic National Title Insurance Company released a notice forbidding any agents or employees to issue new policies on homes that had been recently foreclosed by GMAC Mortgage or Chase.

Clearly, the title insurer was also worried about a situation in which untold numbers of former homeowners have their foreclosures overturned. At that point, those individuals might claim the right to take back their old homes, but they’d also be responsible for, say, a $400,000 loan on a home that is worth half that.

So what would happen next? The banks that foreclosed might start the process over again. At that point, lawyers for the people who had been foreclosed upon might take the next logical step and try to show that the banks never had the documents to prove ownership of the mortgage in the first place. The banks might settle at that point, writing checks to everyone who had gone through a disputed foreclosure in exchange for each of them giving up the title.

But if banks did not settle, or the evicted homeowners refused to settle and fought on and won, they might end up owning their homes once again and not owing the bank either.

Or banks might agree to slice a big chunk off the remaining balance in exchange for a release from any liability for the errors it made.

At that point — and again, this is what Old Republic and investors in other title insurers fear — those homeowners might actually want to move back in. But some foreclosed homes were sold by the banks to others who now live there. And those new residents would have big, fat title insurance claims if their predecessors ever turned up at their doorsteps, proclaimed them trespassers and told them to leave.

“All of these Joe Schmos who did everything legally would then be in the middle of it, too,” said Mr. Kovalick, who manages an auto repair shop and is now hoping not to be one of those Schmos.

“Now, you’d have two total disasters,” he said. “How would you like to be the judge to get that first case?”

While homeowners like Mr. Kovalick may have title insurance, it generally covers them only for the purchase price of the home. When you buy a home out of foreclosure, however, it often needs a lot of work. “If I bought it at $200,000 and it’s a steal but I had to gut it and sink $100,000 more in, my recovery is limited if there is a problem,” said Matthew Weidner, a lawyer in St. Petersburg, Fla.

Indeed, this possibility has occurred to Mr. Kovalick, who has plans to put an addition on his home and is asking how he could extract that investment if someone ever turned up on his doorstep and asked him to leave. “What do I do, take the paint off the walls and the custom blinds off the windows?”

Chances are, it will not come to that. After all, title insurers could settle with the previous residents, allowing them to walk away with a big check to restart their lives elsewhere.

Still, for anyone considering buying a bargain home out of foreclosure anytime soon, consider asking your title insurer if any special riders are available that can cover appreciation on your home in the event of a total loss.

That said, if you can possibly help it, stay away from foreclosed homes until the scene shakes out a little bit.

Some people will undoubtedly make a fortune investing in these properties in the next few months. But if your down payment represents most of what you have in the world, it’s hard to justify betting it all on a situation like this one.

Foreclosure Strategy: Beware those Short Sales — they might be the beginning rather than the end of legal problems.

The government’s role in this mess has been abdicated to people running agendas that are based on narrow self-interest. One could argue that if the Federal Reserve window was swung open for investment banks to borrow at Fed Funds rates using worthless securities based upon assets (residential real estate), that the same window should be open to the homeowners. But that is not necessary either.

Other than private loan situations and a few other rare exceptions, nearly 100% of all loans “secured” by residential real property were securitized, which means that these loans, false from in their inception, went on a journey to never never land where securities, also false from inception, were sold to investors to fund the transaction. Both sides were based upon fraud involving intentional representations of facts known to be false and upon which the victims at both ends relied most notably the false appraisal of the real estate value and the false appraisal of the ABS or CMO sold to an investor.

If authority is claimed but not real, then the nominal “lender” can execute a satisfaction of mortgage, an agreement to forgo deficiency, and allow the short payment — all to zero effect because the nominal “lender” lacked any right to execute any of those documents. Thus the lender, the “borrower” etc. could have their legal position virtually unchanged by the transaction, but the new buyer has a very substantial change of position, as does the new buyer’s lender both of whom might be taking title or recording a mortgage(s) subject to a mortgage that has not actually been been satisfied. This will produce trouble for title companies and closings.It might also produce claims of fraud against the nominal “lender” by new plaintiffs— the new buyer of the property and the new mortgage lender.

The same logic would also require the conclusion that a “lender” or other buyer who takes title to a residence at a foreclosure sale has received nothing in the way of marketable title and even if the argument is made that the mortgage and note were not extinguished, the “lender” takes title subject to claims of multiple third parties

Either the title company will state an exception in the title policy which basically will mean that the buyer is not insured if a third party enters the picture later, or that the new lender for the new buyer, doesn’t have a mortgage at all because the new mortgage lender did not get the signature of the new buyer.

IN THE BEGINNING (when the first buyer/”borrower” bought the property): We have a buyer, a seller (or developer), and a nominal mortgage lender. The “selling forward” (presale of the loan to a third party before closing) by the nominal “lender” negated the validity of the loan closing but not the real estate closing. So the buyer received good title to the property (all other things being equal) and the seller got paid. Since there was no valid mortgage transaction, rescission becomes unnecessary. However fact patterns may vary, as do state laws, so that rescission is probably a good idea as an alternative position to take.

The funding by an undisclosed third party means that the party posing as the lender at the loan closing was by definition part of a deceptive scheme. The statutes help us with that because of the disclosure requirements coming from Federal and state laws. Failure to disclose the real lender is in itself a fatal defect in teh transaction. Hence the New York Judge who ordered that the mortgage be removed from the county records, leaving the homeowner with title, free and clear of the mortgage encumbrance. Going further, he also invalidated all transfers of any interest in the mortgage because the mortgage and note had never really existed.

But even if the mortgage had come into existence, and even if the theory that this was in reality part of an elaborate scheme to trick people into creating negotiable instruments and to trick other people into buying them as “asset backed securities” the loan was paid in full and the mortgage satisfied or extinguished contemporaneously with the original loan transaction. Whether the third party paid the nominal “lender” before or after closing, the note had been paid in full. In order to “purchase” a negotiable instrument and security instrument (mortgage) involving real estate, the transaction would need to be recorded. This is arguably true even in the “notice” states (what’s left of them).

Thus the payment of money by the third party to the nominal lender can only be interpreted as payment (satisfaction) of the note. This is why the allegation that the payments are in default from the “borrower” should be denied. No payments are required, under the terms of the note itself, if the note has been prepaid — whether the prepayment was from the borrower, his mother, or a mortgage aggregator. The affirmative defense of payment obviously is supported by the same logic.

And the filing of a claim to quiet title by the homeowners serving the nominal lander as a defendant/respondent, and John Does 1-100 as people or entities who might claim an interest in the note, will most likely be successful. The “lender” must disclaim any interest in the note. The servicer of the mortgage must admit (and it should be alleged) that they have been receiving payments from the “borrower”, instructions from “lender” and making payments to some third party, none of which should have been demanded, accepted or processed.

The failure to deliver the note or the failure to be able to account for the note in a situation where the intention of a series of parties in a chain of transactions was to transfer the rights or interests in the original “loan” transaction ALWAYS indicates the potential for a third party claim against any one of the parties in the chain at a later time despite adjudication of rights between any two or three of them.

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Here is an article from one of our contributors

Welcome to Wall Street’s Masquerade Ball (every American was invited)

Securities Disguised as Residential Mortgages – and Why Short-Sales Don’t Work among Other Things

Let’s back into this so you can really understand why the reality of what has happened to nearly every American and every homeowner is so bad, the cause of most of our economic problems right now, and yes, most-likely fraudulent.

You lose your job, your job is outsourced to China, you are in a car accident, substantially injured, life happens,etc. All of a sudden, you can’t pay your monthly mortgage payment, along with other debts. You call the financial institution that you send your mortgage payments to. Oh, by the way, this institution is different than who actually lent you the money at closing – and this “servicer” of the loan has maybe changed twice or more since you closed on the loan.

So, you can’t make your payment. The “servicer” now starts calling you almost daily “harrassing” you to “pay up or else.” You indulge them in your perfectly legitimate and understandable situation and, yes, it falls on deaf ears. They tell you something like, “Miss, if you are having a hardship, we will mail you out a hardship package, please fill it out completely and include all the items requested and send back to us. We will see what we can do for you.

So you do just that, you spend about 3 hours of your precious time, diligently filling everything out and collecting all those “necessary” documents. You send it in. Hear nothing back for like 6 weeks. So you call, wait on hold for 40 minutes and finally get someone who barely speaks English… But it sure as hell is frustrating trying to communicate with someone who obviously doesn’t speak your language, not to mention that, in the back of your head, you wonder “how safe it is to be revealing your social security number and all sorts of sensitive, personal information to someone you’re sure is somewhere halfway around the globe and 10 hours ahead/behind us in time. Anyway, sorry for the rant again… back to the real story.

So, you finally get someone on the line and ask them if they received your fax of all the documents you most diligently put together and faxed to them at their request. You faxed everything in 6 weeks ago and haven’t heard a thing! The person politely tells you that for some reason, they have no record of receiving anything from you and “are you sure that you sent it to the right number?” – Now you’re head turns about 3 shades of red as your carotid artery starts to bulge and you consider popping a Nitro pill to stave off a sure-fire myocardial infarction. But that’s beside the point.

Anyway, back to the real story. So, you send it again, wait another 3 weeks, call again and, “MIRACLE!” They got it, thank God, now we can at least get a solution to our current challenges…right.  The foreigner on the other end politely tells you that it will be a few weeks before the “committee” can review it and come up with a decision on your “situation.” (You feel like telling them to go stick it but refrain since “good, polite Americans” don’t do that sort of thing). Son of a gun… I just went off on a quick rant again. Sorry.

Anyway, back to the real story. So, 4 weeks go by and you hear nothing. You think, “What the heck?” Does this company have their heads so far up their rear ends that they can’t even return a call and respond to my really dire “situation?” Then you remember that you were talking to some person who didn’t really care and by now, they might have taken your Social Security Number, borrowed another $100,000 (on your credit) to go shopping at their country’s version of Best Buy and they’re probably watching the CNN “Mortgage Meltdown” coverage on some 100 inch Big Screen Plasma on a brand new leather couch with a Universal Remote Control that even God would be jealous of. Shoot. Sorry for the rant right there.

Anyway, back to the real story… So, you call again, wait another 25 min. on hold and finally get someone on the line. You explain the whole nightmare and they tell you that “yes, we did receive your package and yes, it did come back from the committee, and “could you please wait for a supervisor?” – and yes, the wait on hold charade starts again… but I know, you can’t relate.

Anyway… supervisor comes on the phone like 10 minutes later and tells you that “unfortunately, there’s nothing we can do for you at this time. But if you’d like, you can go to our website and get the “I can’t make a friggin payment because I’m really out of a job” hardship form, fill it out and fax it in, we’ll see what we can do for you.”

Another rant and rave. Sorry. But really folks, this is the madness that everyday, hard-working AMERICANS are going through with their mortgage loans and the crazy lender/servicers can barely answer the phones much less speak intelligibly with a real solution or option!!!!

So, here’s the real story and WHY all those forms, short-sale efforts and all that work to modify your loan won’t do a bit of good. The company you’re calling is just the SERVICER! They don’t own your mortgage OR your note. They have no substantial right to do anything with the note/debt. The mortgage is still recorded in the name of the FIRST mortgage company that gave you the money at closing AND the note (the real evidence of the debt) was sold BEFORE you ever made a payment INTO a Securitization Trust which then SOLD that POOL of NOTES as a Security to 100’s or 1000’s of Investors ALL OVER THE COTTON-PICKIN’ WORLD.

So, the moral of the story is “THE SERVICER CAN’T MAKE A DECISION ON YOUR LOAN BECAUSE YOU REALLY GOT INTO A COMPLEX SECURITIZED INSTRUMENT SCHEME WHEN YOU SIGNED ALL THOSE CLOSING DOCUMENTS WHICH IS WHY THAT SAME DAMN SERVICER CAN’T APPROVE ANY REMEDY FOR ANY HARD-WORKING AMERICAN IN A REAL JAM!”

Want a little context to what I’m saying? Read below for some good ol’ fashioned 3rd party verification. Then, call me and we’ll try to help you a bit. I speak Indian, Chinese and Pig Latin by the way – just in case it’s needed to help you out on your loan.JK.

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