Click on the above link for an article appearing today in MSNBC describing the horror story now going on between foreclosing Lenders and the Title Insurance Industry.
Earlier this month, I took up this problem with a major title insurer in our Fort Lauderdale market….who wishes all their cases were Bank of America, since that Lender gave Fidelity Title Insurance Company, his parent company, a blanket warranty of title for all properties they foreclose! He did not yet have an answer on what his company would do if the property was not foreclosed by Bank of America.
This could make all unsold REO’s non-saleable, except a sale to a less than knowledgeable Buyer that is willing to accept the risk of an invalid title, if that appears as an exception on Schedule B to Title Policies because
foreclosing Lenders deeding the property would not guarantee the insuring Title Insurance Company against this risk.
This MERS caused mess continues to be a tremendous problem; Lenders that developed and funded this MERS system, are apparently now having 2nd thoughts about its legality, because even they appear to be reluctant to
guarantee subsequent Title Insurers, and therefore REO Buyers, of good title.
In my view, the Title Insurers and the American Land Title Insurance Association, are correct in their believe there is a legal risk that the REO lender may not have acquired good title by foreclosure. The Uniform Land
Transactions laws, in my view, have been quite clear on this for centuries: Mortgages, and any subsequent Assignments thereof, must be recorded in the County’s land records, and notes setting forth the requirements for repaying that mortgage, must be endorsed to the mortgage assignee.
While this plays out, what will Lenders do with their foreclosures and their subsequent REOs? Are we, Tax Payers, to pick up that tab to bail out the banks for their deliberate screw-up?
I am not sure who is worse anymore: The Mafia’s bullyish scare tactics or the Lenders devious administrative practices?
All this could have been avoided if Lenders would have followed the laws of mortgage records and foreclosure procedures.