DO YOU DARE ISSUE A WARRANTY DEED OR ANY DEED WITHOUT LIABILITY?
Posted on September 19, 2011 by Neil Garfield
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The inescapable conclusion at this point, is that title on more than 100 million real estate transactions is at the very least in doubt and quite probably corrupted. In legalese that would be expressed as clouded, unmarketable (i.e., you can’t sell it or finance it, because nobody will take it), defective or fatally defective. The only exceptions I can think of are those deals where raw land has been purchased from a long-standing owner with no debt attached to the land or where a home is purchased or refinanced where the last transaction is twenty years ago. Most people are unaware that they are sitting on shifting sands instead of a solid foundation — where title is properly recorded in the recording office of the county in which the property is located.
Yet people and institutions are issuing instruments fraught with liability and the high probability that the transaction — and the representations contained in the instrument they signed —- will be the subject of litigation later when someone tries to clear title or collect damages. Here are some examples:
- A Warranty Deed, required in most transactions, requires the person signing to (a) attest and prove they are who they say they are (b) that they or the party whom they represent has title (usually fee simple absolute) and (c) that if they are signing as an agent, they have provided proof (usually recorded with the deed in properly recordable form) of their authority. The signor is promising, in exchange for the consideration paid, that if this Warranty Deed turns out to be challenged by anyone, they will defend the challenge and pay damages if they lose. Reliance on the title company, mortgage banker, mortgage lender or anyone else is not a defense although the signor could cross claim against those people and bring them into the lawsuit. The point is that the cost of litigating these cases could rise into tens of thousands of dollars. The cost of losing could rise into hundreds of thousands of dollars, or even millions of dollars.
- A “Special Warranty Deed” might have some language of limitations that SHOULD put the buyer on notice but most people rely upon the title or closing agent, or their lawyer (if they have one) to make sure that the deed gives them the title they thought they were getting. This too could give rise to litigation because of representations at closing, representations in the title commitment or policy etc.
- A Satisfaction of Mortgage requires the person signing to (a) attest and prove they are who they say they are (b) that they or the party whom they represent is the creditor and is the owner of the rights under the mortgage or deed of trust and (c) that if they are signing as an agent, they have provided proof (usually recorded with the Satisfaction in properly recordable form) of their authority. The signor is promising (unless someone played withe the wording), in exchange for the consideration paid, that if this Satisfaction turns out to be challenged by anyone, they will defend the challenge and pay damages if they lose. Reliance on the title company, mortgage banker, mortgage lender or anyone else is not a defense although the signor could cross claim against those people and bring them into the lawsuit. The point is that the cost of litigating these cases could rise into tens of thousands of dollars. The cost of losing could rise into hundreds of thousands of dollars, or even millions of dollars.
- A Release and Reconveyance is the same as a Satisfaction of Mortgage. So whether you received a satisfaction of mortgage or a release and reconveyance, your assumption that the prior lien was paid off and is now officially satisfied and removed from the records as encumbrance on the land may be, and I think, probably is wrong. We have seen several cases here at livinglies where the wrong party (Ocwen in one case) took the oney issued the Satisfaction and then refused to either give back the money or provide any additional information even though it is now apparent that they were not the creditor, not he owner of the mortgage and had no authority to issue the satisfaction.
- A Trustees Deed on Foreclosure is much the same as a Warranty Deed. Potential Trustee liability here is huge. It requires the person signing to (a) attest and prove they are who they say they are (b) that they or the party whom they represent is the Trustee or “substitute Trustee” (see below) and is the owner of the rights under the mortgage or deed of trust, (c) that if they are signing as an agent, they have provided proof (usually recorded with the Satisfaction in properly recordable form) of their authority and (d) that they are in fact the Trustee and that they have performed the statutory duties of due diligence that is required of a Trustee under a Deed of Trust. The signor is promising (unless someone played withe the wording), in exchange for the consideration paid, that if this Deed turns out to be challenged by anyone, they will defend the challenge and pay damages if they lose. Reliance on the “beneficiary” who usually comes out of nowhere, “lender” who also usually comes out of nowhere, title company, mortgage banker, mortgage lender or anyone else is not a defense although the signor could cross claim against those people and bring them into the lawsuit. The point is that the cost of litigating these cases could rise into tens of thousands of dollars. The cost of losing could rise into hundreds of thousands of dollars, or even millions of dollars. The banks don’t actually worry about this because most “Trustees” are “substitute Trustees” in which a substitution was filed given apparent authority to a new “Trustee” who is not an independent title agent or some similar entity but rather an agent that is in the foreclosure business with the bank that has inserted itself into the transaction as a “pretender lender.” Due diligence by the Trustee would have revealed most robosigning and other fraudulent practices, but due diligence, contrary to the requirements of statute, was never performed because they were no longer taking the orders from the legislature. They were skipping over their statutory duties and taking orders from a party who is merely alleged to be the lender even though it is not the same party as stated on the original note and mortgage ( deed of trust).
- Substitution of Trustee: Until securitization came into play it was a rare occurrence that the trustee would be substituted. The Trustee on teh Deed of Trfust would simply be given instructions by the payee on the note and the named secured party in the mortgage) deed of trust) to commence default and dforeclosure proceedigns. But now in virtually every foreclosure there is first a “substitution of trustee’probably because the original trustee would perform the due diligence required under statute and revealed potential problems which would have held up or cancelled the foreclosure. requires the person signing to (a) attest and prove they are who they say they are (b) that they or the party whom they represent is the creditor and is the owner of the rights under the mortgage or deed of trust and (c) that if they are signing as an agent, they have provided proof (usually recorded with the Satisfaction in properly recordable form) of their authority. The signor is promising (unless someone played withe the wording) that if this Substitution of Trustee turns out to be challenged by anyone, they will defend the challenge and pay damages if they lose. Reliance on the “beneficiary” who usually comes out of nowhere, “lender” who also usually comes out of nowhere, title company, mortgage banker, mortgage lender or anyone else is not a defense although the signor could cross claim against those people and bring them into the lawsuit. In many cases the substance of the substitution is that the “new” beneficiary is in effect appointing itself or its agents who promise to do their bidding instead of using the original Trustee or someone else who take their duties seriously. The point is that the cost of litigating these cases could rise into tens of thousands of dollars. The cost of losing could rise into hundreds of thousands of dollars, or even millions of dollars. The banks don’t actually worry about this because most “Trustees” are “substitute Trustees” in which a substitution was filed given apparent authority to a new “Trustee” who is not an independent title agent or some similar entity but rather an agent that is in the foreclosure business with the bank that has inserted itself into the transaction as a “pretender lender.” Due diligence by the Trustee would have revealed most robosigning and other fraudulent practices, but due diligence, contrary to the requirements of statute, was never performed because they were no longer taking the orders from the legislature. They were skipping over their statutory duties and taking orders from a party who is merely alleged to be the lender even though it is not the same party as stated on the original note and mortgage ( deed of trust).
There are many other documents that fall within the same level of analysis like the Notice of Default (which comes from the alleged authority of the Substitute Trustee, based upon information from what is probably an undisclosed source, the Notice of Sale (which appears right on its face, but is subject to the same analysis as to the signor, and other documents.
The Bottom Line is that homeowners and institutions alike are facing potential litigation and liability as the years roll on, with few if any witnesses to back them up and in the case of homeowners precious little in the way of resources to fight off the litigation.
Check with a real property and litigation attorney before you take any action based upon what you see here. They should be licensed in the county in which the property is located.
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Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor,Mortgage, securities fraud Tagged: | bankruptcy, beneficiary, borrower, countrywide, creditor,disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, quitclaim deed, release and reconveyance, rescission,RESPA, satisfaction of mortgage, securitization, special warranty deed, Substitution of Trustee,TILA audit, title insurance, trustee, warranty deed, WEISBAND
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