Missouri Indictment Gives Notice of Title Defects to All Buyers

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“Defendant, acting knowingly in concert with its employees, with the purpose to defraud, used as genuine or transferred with the knowledge or belief that it would be used as genuine, a writing, namely Deed of Release number 2009020598, knowing that it had been made or authenticated so that it purported to have been made by another, or that it had been made so that it purported to have been made by authority of one who did not give such authority.”

“Defendant acting knowingly in concert with its employees, with the purpose to mislead the Boone County Recorder of Deeds, a public servant in the performance of her duty, submitted or invited reliance on a writing, namely Deed of Release number 2009020598, which Defendant knew to be lacking in authenticity, and which stated a fact material to the purposes for which the writing was offered.”

EDITOR’S ANALYSIS: The Missouri Indictment comes as a surprise to many who viewed AG Koster as just someone on the sidelines. It constitutes just one indictment from one County in the State of Missouri. Presumably, since Koster said the investigation was ongoing, there will be similar indictments from other Missouri counties and perhaps other states will be emboldened to do the right thing: set the record straight by establishing a pattern of fraudulent conduct by the Banks and servicers designed to cover up defective documentation arising from the origination of the mortgage loans all the way through eviction of homeowners by strangers (pretenders) to the transaction.

What strikes me as particularly interesting for the future of this ongoing saga, is the effect these indictments will have on title claims in warranty deeds, mortgage deeds, deeds of trust and satisfactions of mortgages. Specifically, anyone who buys or loans money on property needs to be very careful about what they are doing, because now they have actual notice of title defects. They are no longer a bona fide purchaser for value without notice.

The significance of this cannot be over-stated. Most of the recordings in county title registries relate to mortgages in which there was a claim (either on record or off-record through MERS) of some type of transfer, sale or securitization of the loan. It now appears as though most of those filings have at least some fabricated, forged or altered documentation that once upon a time had carried a presumption of validity.

That presumption is eviscerated, in my opinion, by the indictment and the various media reports, so much so that the burden is now on the banks and servicers to plead and prove their case that even if the documentation contains defects, the loan is still documented and the enforcement of the loan is permissible. Judges and lawyers would do well to reconsider the presumptions that are at work in the foreclosure arena and change their strategies accordingly — demanding that the the banks and servicers assume the burden of persuasion in all foreclosures — judicial and non-judicial.

Trustees on deeds of trust and the lawyers who represent pretender foreclosers have lost a key element of protection for their contributions to this mess. They have actual notice of the problem and while the indictments are not convictions, the combined total data that has emerged in media reports and civil and criminal actions by the chief law enforcement officers of each state puts NOTICE on the table, to wit: they know that there is a high probability that the documents upon which they rely in pursuing foreclosures are false declarations lacking in authority. 

Trustees on deeds of trust, who have never done the due diligence required under the statutes enabling their existence now have an added duty that they are ignoring — to demand proof of the veracity of the declarations, instructions and documentation they receive.

But the impact of the NOTICE factor is much broader. There are only a few million foreclosures. But there are tens of millions of transactions that were recorded in refinancing, sales, foreclosure sales, credit bids (from creditors who were not creditors), and other fatal flaws in the release, satisfaction or recording of new mortgages. All of those mortgage transaction need to be re-examined, which is why the regulatory agencies that told borrowers to pound salt just a year ago are now monitoring compliance with cease and desist orders against all the major banks and servicers.

The issue of title is one of notice and recordation. Even if the regulatory authorities miss something, or law enforcement misses something, the facts are now in the public domain that lead to a reasonable requirement of due diligence, which means insisting on proof of the truth of the declarations (and the authority to make those declarations) contained in the documents upon which the pretenders, the Courts and lawyers relied. In my opinion, that means there is a cloud on all titles for all residential transactions that were completed from 1996 through the present.

The enormity of that statement does not escape me. because it means that even innocent new buyers and lenders who loaned money on the purchase of a foreclosed home might have the security interest impaired, which is another way of saying they don’t have the collateral they thought they had. And the title companies, bracing for the onslaught of lawsuits for coverage that if, sustained, would bankrupt all of them, are not ready to lay down and die. The title companies have every intention of fighting liability, saying that they too were deceived by the fraud, and that they never intended to insure such a risk.

That pretty much leaves home buyers and lenders out in the cold. The buyers might not ever get clear title and the lender might not have a perfected lien securing the loan they made to the buyer — all through no fault of the buyer or the new lender (unless the lender is one of the securitization players in which case they knew, or had notice, of the actual defects in the chain of title.

The bottom line is that right now, many if not most properties in the country are under a cloud and, based upon the facts we know, are probably subject to breaks and defects in the chain of title that are not repairable without the signature of the homeowner(s) who were in the chain. That signature is getting very expensive to procure as more and more homeowners and prior homeowners realize that they might have a completely enforceable right to title and possession of properties long since foreclosed and from which they were long since evicted. This will leave the new ‘buyers’ without a house and with a debt and it will leave the new lenders with an unsecured debt from someone who must pay to live elsewhere.

The new brand of investors who are buying foreclosed properties together with the lenders who are financing these purchasers are relying upon taking title from someone who doesn’t have it and getting a satisfaction (release and reconveyance) from someone who never owned the loan. The dirty big secret here is that all the documents are tainted and most of them will be proven to be defective, most of which fatally defective.

That doesn’t mean that the obligation that the borrowers’ undertook is off the table. It just means that it is unsecured and not subject to foreclosure and that the asset (the home that was foreclosed or refinanced or re-sold) might still be an asset that belongs to them or in bankruptcy parlance, an asset of the bankruptcy estate.

On the other hand it doesn’t mean that the obligation is on the table either. If the investors, who are the only true lenders or creditors in those transactions, do not seek collection or enforcement against the homeowners because they have already been paid or because of any other reason, then as far as the mortgage obligation is concerned, there may be liability without enforcement.

That is where the fraud and  false declarations come in. Knowing that the investors would not even attempt to enforce the loans, the banks began this systematic fraudulent scheme to insert themselves into transactions in which they had no interest. They didn’t loan the money and they didn’t buy the loan, but they managed to persuade most of the American judiciary that being the “holder” of the note was sufficient. As the public records will attest, they were never acting for the investors. They were acting for themselves, because it was these interlopers (pretenders) who took title by submitting a “credit bid” to an auctioneer controlled by the banks.

The Missouri indictment and what follows will be a test of how much these banks and servicers have to pay the piper for their horrendous acts of fraud and chicanery that brought down world economies and our own economy in the name of naked greed.

Tags: 60 minutes, AHMSI, appraisal fraud, attorney general, auction fraud, Chris Koster, credit bids, DocX Indictment, foreclosure fraud, FORECLOSURE SETTLEMENT, foreclosures, forgery, housing market, housing prices, investors, linda green, LPS, Missouri, mortgage fruad, mortgages, notice, Robo-Signing, settlement, strategic default, title
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