Are the title companies in trouble for insuring robo-signed REO sales, or MERS-related transactions?
Kingside said, “Not if the sellers are using grant deeds”.
Here’s the definition:
grant deed n. the document which transfers title to real property or a real property interest from one party (grantor) to another (grantee). It must describe the property by legal description of boundaries and/or parcel numbers, be signed by all people transferring the property, and be acknowledged before a notary public. The transfer is finalized by recording with the County Recorder or Recorder of Deeds. Importantly, a grant deed warrants that the grantor actually owned the title to transfer, which a quit claim deed would not, since it only transfers what the grantor owned, if anything.
A check of recently sold REO properties revealed that four major servicers – BofA, Wells Fargo, J.P.MorganChase, and IndyMac/FDIC – are all using grant deeds to convey ownership to the buyers. The grant deeds include the warranty, which should relieve the title insurers from responsibility (and put it on the servicers) for robo-signed deocuments fouling up the chain of title.
Click here for an Example of a Grant Deed used recently – remember the bank-owned house in Olivenhain listed for $999,000 that had 17 offers? It closed for $1,170,000, or 17% over list price. You can verify that sales price by taking the documentary transfer tax, $1,287 (at top of grant deed) and dividing by .0011.
Hey JTR, you might be quoting me slightly out of context. When we were discussing this issue earlier, I think I made the point that the buyer should not be worried if they are getting a grant deed in a normal REO transaction.
The title company might have more reason to worry about insuring the grant deed if a claim arises from a prior borrower making a claim that the grant deed was invalid due to Robo signing or MERS failure of chain of title issues. The standard CLTA residential title policy does generally cover forgery and fraud in connection with grant deeds, and coverage should kick in if it turns out that the seller’s warranty of title is invalid. I still think that this happening in California after trustee sales take place and the property is then sold to a bona fide purchaser for value will prove to be a very rare event.
Title claim issues can get complicated, but suffice it to say that if a title company has to pay or resolve a claim, they become “subrogated” to the buyer’s rights. This means that after paying or resolving the claim, they get to step into the buyers’ shoes and go after the seller who breached the warranty of title to the buyer for reimbursement.
Further reinforcement to not try and purchase something at the couthouse steps!
I heard something that in CA the foreclosureee has 60 days to file (something) to fight a foreclosure, after that I am not sure what recourse a former owner would have,
I would imagine (not being an expert at all) , that the burden of proof goes up dramatically after the above 60 days expires, also breaking locks and moving in (which there seems to have been a few cases) could get you into trouble.
the BIG question is not does the title company HAVE to pay but CAN the title company even make a payment. when the inner banking system starting coming undone and freezing in 2008, all the investments that the insurance companies use to pay claims collapsed…..most insurance companies are probably broke and only have money because the government went in and stated they would guarantee all claims.
the tarp bailouts were only the tip of the bailouts and guarantees. without the fed and the gov backing, there will be no insurance claims paid……
the next big shoe to drop will be the realization that the title companies cant pay claims.
Jiji – fraud has no statute of limitations.
Not an attorney, but if fraud is involved in the foreclosure, then I would think the 60 days to appeal wouldn’t apply.
What say you, Kingside?
OT – Jim, I’m in the middle of real estate negotiations (out-of-state). I’m about to counter. Why would two recent comps in the same subdivision show a $0 sale price on area sales?
We’re not talking celebrities in Montecito, Beverly Hills or Malibu here who might want to hide their purchase price after all.
And if the sale price shows $0 does the appraiser automatically skip those for comparison? My two cents is the developer of the subdivision wanted these two recent sale amounts (both in September) to be “hidden” as I surmise that they went for less than list price on new construction that had a couple list price decreases already (he didn’t build these two homes). The house I’m negotiating on is one he built. I’ve met the list price on the new construction but were haggling over closing costs.
With over 25 years experience, I’d appreciate your comments. I know you will tell me the truth. But I do remember your advice yesterday in one of your posts: (“…relentless pursuit for weeks or months…you’ll end up spending more than you want, but you get something you really like–and it will probably last you for ever.”
PS This will be my last house. Apologies for the long post and being off-topic.
~Breaking News~ Countrywide’s Mozillo in Talks to Settle SEC Charges
Full article: http://www.latimes.com/business/la-fi-mozilo-20101015,0,2944269.story
Kingsside is right, the title company will almost always go after the bank in these cases. The buyer will get paid regardless of whether it’s ultimately out of the title company’s pockets (unlikely) or the bank. The title company’s job is essentially a bill collector for the buyer.
aperian what does one have to do with the other. Of course title companies by and large can pay, but generally they won’t have to. Were you born yesterday or are you purposely being ignorant? See a lot of that lately in this country.
Easy now sdbri, you don’t have to go personal.
The title companies will fight all claims these days. You have to prove your claim thoroughly, and probably in court, to get paid.
Susie,
Get your realtor to figure out what the sales prices were.
Either check the documentary transfer tax like I described above, or have your realtor call customer service at the title company and ask for the non-disclosure desk. They have people who check these things.
I don’t know anything about any 60 day rule to challenge trustee sales. Fraud is generally a three year statute of limitations from date of discovery.
But I don’t see borrowers winning in setting aside trustee sales based on fraud where there are MERS and Robosigning issues. Fraud usually requires 1) a representation; 2) falsity of the representation; 3) reasonable reliance on the representation; and 4) damages or a change of position because of the reasonable reliance on the false representation. Irregularity in the foreclosure proceedings that do not prejudice or cause some injury to the borrower is not fraud.
There is a distinction in California law between “void” trustee sales and “voidable” trustee sales which is to complicated to get into in the comments section of a blog. There is a strong presumption in California supporting the validity of trustee sales. Borrowers in most cases are subject to a tender requirement that requires them to pay the secured debt or at least all the delinquencies as a condition precedent to maintaining an action to set aside a voidable trustee sale. As to a bona fide purchaser or encumbrancer for value and the foreclosed out borrower, the bona fide purchaser or encumbrancer for value will win against the borrower in an attempt to set aside a trustee sale.
One of the biggest benefits of title insurance is not just the amount of the coverage of the policy, it is the fact that the title company is the one who pays for an attorney to defend you if the prior borrower makes a covered claim.
Mahalo, Jim. You’re simply, absolutely the best!
Re #12 in the same sense that liability insurance also buys you legal representation at the insurance companies expense.
The Title Companies should of required that at all Closings that the Original Promissory Note be present.