TITLE ISSUES AND REO PROPERTIES

8/7/2019 TITLE ISSUES AND REO PROPERTIES

1/22

Or, how the Vampire Squids arerunning scared.


2/22

This is what you are checking in a preliminarytitle report.

Transfers of the property are recorded in theproper order, and all shares of the property aretransferred.

This eliminates later claims on title.


3/22

Mom and Dad make a living trust.

Mom and Dad transfer their house to theirliving trust.

Mom and Dad decide to refinance their 30 yearfixed rate mortgage to a 5 year negative amoption arm tied to LIBOR plus 6 so they can get

cash out for their RV. Their mortgage broker gets cash out for a new

Bentley.


4/22

Mom and dad quitclaim their house from thetrust back to themselves as joint tenants.

The refinance funds.

The mortgage broker is enjoying the newBentley and no longer returns their calls aboutmoving the property back to the trust.

Everyone forgets about the transfer.

Dad dies first, because he wants to. Mom dies.

5 Kids find the living trust.


5/22

Kids see probate lawyer.

Probate lawyer does a prelim title report.

House is not inT

rust. PROBATE! Ka-ching!

Kids decide to keep the property, and titlepasses to the 5 kids, tenants in common.

Two years later, the mortgage Resets, andhouse payment goes from $19.00 to $9700 permonth.


6/22

How many signatures are required on the deedto sell?

FIVE

Less than five, well, thats why you buy titleinsurance.


7/22

In the good old days, if a bank sold a mortgage,a document called an assignment of trust deedwas prepared and recorded.

In the good old days, this did not happen veryoften, so there were not many transfers.

But they were easy to track, since the bank paid

up the $20 fee to the recorder, who kept a copy.


8/22

In the 1990s, the Vampire Squids on WallStreet figured out selling mortgages to widows,orphans and charities was big money.

But every time they sold a mortgage, they hadto pay the recorders office $20.

Does not sound like much, but if you are

moving 10,000 mortgages a day, 5 days a week,$20 a pop really cuts into your cocaine and jetfuel budgets.


9/22

MERS was developed to avoid recording costsand improve cocaine and jet fuel budgets.

It created an electronic tracking system tomonitor and move mortgages.

Each mortgage was assigned aMERS numberand was moved around that way.

Worked like a charm.


10/22

The California legislature cannot pass a budgeton time, so how can they be expected to changethe law to allow for MERS transfers on a timely

basis? They cant, even with unlimited cash, hookers

and booze supplied by the banks.

So an old rule is still on the books.


11/22

2932.5. Where a power to sell real property isgiven to a mortgagee, or other encumbrancer,in an instrument intended to secure the

payment of money, the power is part of thesecurity and vests in any person who byassignment becomes entitled to payment of themoney secured by the instrument. The power

of sale may be exercised by the assignee if theassignment is duly acknowledged andrecorded.


12/22

California Banks are familiar with this law, anddo the paperwork before they foreclose.

The big east coast vampire squids, did not

Chase, JPMorgan, OCWEN, etc.

They have now cleaned up their act.

But their early foreclosures do not have the

required written assignment especially thosebefore 2009.


13/22

Moving piles of mortgages aroundelectronically does not create an assignmentthat is duly acknowledged and recorded.

If the power of sale was not exercised properly,this creates a problem.

Who actually foreclosed, and did they have the

right to do so.


14/22

Paragraph 18 of the Wells Fargo standardSellers addendum:

Title to the property will be conveyed via

special/limited warranty deed or such otherform of deed acceptable in jurisdiction whereproperty is located. Notwithstanding any legaldescription . . .


15/22

They are giving quitclaim deeds. Quitclaim deed: A quitclaim deed is a term used to describe a document by

which a person (the "grantor") disclaims any interest the

grantor may have in a piece of real property and passes thatclaim to another person (the grantee). By contrast, the deedsnormally used for real estate sales (called grant deeds orwarranty deeds, depending on the jurisdiction) containguarantees from the grantor to the grantee that the title isclear. The exact nature of the warranties varies fromjurisdiction to jurisdiction. Quitclaim deeds are sometimesused for transfers between family members, gifts, placingpersonal property into a business entity, to eliminate cloudson title, or in other special or unusual circumstances.


16/22

Paragraph 27

Waiver of Specific Performance: Buyer agreesthat the property is not unique, and in the

event of sellers default or material breach . . .Buyers sole remedy shall be a return ofBuyers earnest money deposit. Buyer herebywaives all rights of specific performanceagainst Seller, or actions against the property . ..


17/22

Somebody finally figures out the stagecoachbunch did not have the right to foreclose.

The sue to get the house back.

They win.

Now the sale is unwound.

The buyer, your client, gets a nice check from

title insurance. Right?


18/22

Now this little problem can be solved by titleinsurance, right? Well, guess what, some titleinsurers have exited the business, some others

are starting to write policies with meaningfulexceptions when they cant go to thecourthouse and find a clear chain of title. Oh,and Wells is trying to steer you towards their

title insurer. What do you think the odds arethat their title insurance policy doesnt haveexceptions?


19/22

The typical (unsophisticated) buyer thinks that because theyhave a lawyer at closing (no matter whose lawyer it is), atitle policy, etc.that they are all safe and sound. Theystruggle through one of these REO transactions for a monthor two, finally get in the house, something bad goes wrong,

and they find out that 1) the title policy wont cover themand 2) the land isnt unique (see the nasty provision inparagraph 27 on specific performance), so a refund is allyou get and you are out on your ear. Hopefully, with arefund and that may be the best outcome. But if somebodycomes in, and voids a foreclosure, your title policy doesnt

pay Wells Fargo has clearly disclosed that this was aforeclosure, so you only got what they had (nothing), andyou have no recourse, no insurance, and guess what, anunsecured loan for half a million bucks.


20/22

If buying an REO house for your client:

YOU push the title company.

Make sure your title policy does not excludeMERS issues.

DO NOT LINK title insurance issued by thevampire squids to an REO purchase a Wells

Fargo REO should NOT

have Wells Fargoissued title insurance.


21/22

DO YOUR OWN TITLE CHECK

If it is an REO house, check for the assignment.

Would be willing to take you to the countyrecorders office to show you what to look for.

READ THE PRELIM. There should be a solidchain of custody for the mortgage.


22/22

Have just spent $400,000 on one of thestagecoach bunchs REO houses, and are nowkicked out.

The stagecoach bunch has run for the hills. You are the last person standing.

TAKE PRECAUTIONS.

TITLE ISSUES AND REO PROPERTIES

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