Many Canadians and U.S. investors are causing a buying “spike” that is creating the illusion that the market has hit bottom in some places and even going up. This illusion is self-perpetuating until it becomes clear that the buyers of these properties have bought into problems that they never knew existed. This is not the 1980′s. In a previous post I wrote about the 14 things Canadian buyers should know before committing to purchase property in the U.S. See 14 Things Canadians Need to Know Before Buying
The list is enlarging practically daily. In addition to to the items mentioned in that article, Forbes and the Wall Street Journal are advising buyers to get a complete title record and NOT rely on the title company. We offer such a service here at Loan Specific title Search and Commentary.
Starting with bad title at the start (origination) of the “loan” that was foreclosed, the banks and servicers are compounding the problem with the complicity of the title companies. The title companies when confronted with a claim for payment or to fix the title are pointing to language buried deep within the title policy that specifically excludes title issues arising from securitization, assignment or sale of the loan into the secondary markets which means that practically no title policy covers the most common title problem to be encountered today.
The list now has been enlarged. The revelation that Libor (London InterBank Offered rate) has been manipulated since 2005 for the trading profit and pleasure of the banks reporting to the index managers, means that the “former” homeowner was not presented with the correct amount for redemption or reinstatement. This alone might be grounds to overturn the eviction, the foreclosure, the notice of default and probably even the substitution of trustee in non-judicial states. The result is that the buyer gets nothing — he is dispossessed from title, right to possession and his tenant, who might now sue him, is kicked out as the homeowner is restored to ownership and possession.
But wait there is more! The cities and counties are getting closer and closer to saving their cities by use of the power of eminent domain in which the city seizes the mortgage, pays the fair market value of what it is worth and potentially ends up with the property as well. These risks to buyers have not as yet been quantified but are present and should be accounted for in the negotiations between the buyer and the title insurance company.
And add to that the fact that because the first “foreclosure” was illegal, and based upon debt that was not reported properly or possibly even paid by third parties, the junior lienholders — homeowner associations, HELOC lenders, and others have the power to foreclose on both the new “owner/buyer” and the bank that sold them the property.
During the break of an interview I had this morning with Saint Johns 103.5 they told me a story about a mortgage fraud up there where it is cool. The mortgage broker and lawyer involved conspired to put the property in their own names. The surprised borrower is in the process of being evicted from a home in which he did nothing wrong.
This might seem off-track but it isn’t. The banks deliberately put in the name of a third party as lender when it wasn’t the lender. There was no financial transaction between the named lender and the named borrower. The funds for closing came from an undisclosed third party.
This creates an immediate title problem for the mortgage. It secures a transaction between the named lender and the named borrower that never occurred. The note, being unenforceable is thus secured by a mortgage that is equally worthless. With no actual financial transaction between THOSE PARTIES, the mortgage secures nothing. Any foreclosure on that mortgage also results in nothing. Any buyer from such a pretender lender is getting the same — nothing.
Some of these issues can be ascertained through title analysis, but many required a title and securitization analysis. See Title and Securitization Analysis and Commentary. The extra cost is a pittance compared to the cost of defending your investment or defending a lawsuit from a tenant who feels misled about your ability to rent the property.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: LOAN SPECIFIC TITLE SEARCH AND ANALYSIS, Title and Securitization Analysis and Commentary, title search | 16 Comments »