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EDITOR’S COMMENT: This is but one example of compounded title problems that will mushroom over the next few years. If you think that securitization, false though it was, is difficult to grasp, wait until you try to decipher the chain of title on your own house — regardless of whether you have made payments, all the payments or even over-paid.

This story is about a completely innocent third party purchaser buying a house from Wells Fargo who for reasons explained repeatedly on this blog probably never obtained legal title. Bank of America allegedly made the loan or at least originated it around 2 years ago, so that would be in 2009. Supposedly BOA sent the money to the closing agent and then the closing agent went belly-up, taking the money —- and the closing documents — with it. Wells Fargo said it never got the money — but knowing Wells, it is difficult to imagine how they would ever know.

What we know is that apparently the deed was never recorded from Wells Fargo and probably will never be found. Thus on its face, Wells Fargo is saying you never paid us for the property and even if you find the deed, you can’t record it because you never paid us. But the buyers have been paying BOA for the mortgage faithfully on time each month for two years. And theoretically at least BOA is out the money they say they used to fund the loan. That would be money apparently stolen or lost in the bankruptcy of the title agent that was closing the deal.

There is an old doctrine that might come into play here, called “laches” which is why did Wells sit on its hands so long doing nothing when they had sent out a deed and according to them, never received payment?  Since so many people relied upon the completion of the closing, it might be said that Wells waited too long to assert a claim. Now they are “foreclosing” on the Buyers and the “lender” BOA.

The Buyers relied upon both Wells and BOA to know what they were doing and used a Title Agent presumably picked by one of the banks. So as far as the buyers are concerned, they did everything they were supposed to do. And they are right. The closing agent’s insurance may or may not have been in force and the title carrier represented by the closing agent may or may not have some liability here, but the question is who gets the house and who loses money?

When you add the inherent title problems of homes that were subject to loans claimed to be securitized, where the foreclosure was accomplished through fabricated documents (which might be the case here) then you have Wells not able to offer title even though it was the designated Seller. And you have BOA accepting the title situation for what it was because they were supposedly doing real underwriting of the loan, in which these things are checked. And now, get this, Wells wants 20% MORE than the contract price from 2 years ago — a figure the Buyers can’t afford.

This is like a Bar Exam question but it far from unique. It is happening all over the country in one form or another. Ultimately someone must take the loss. Ultimately, someone must be deemed the owner of the house. Obviously this is material for a quiet title lawsuit or declaratory judgment which is essentially the same thing, procedurally. The conventional wisdom would be that if the deed was not recorded, the Buyers didn’t get title — but that is not true.

Failure to record does NOT invalidate a document as many borrowers are finding out when they go to court. The document is valid whether it is recorded or not, assuming it is signed, sealed and delivered, which presumably this was and BOA was very happy, thank you, to take payments since it had originated the loan. So if Wells delivered a signed deed, and a copy of that deed can be found, it can probably be recorded with an affidavit. The Buyers will need to check with a really good property lawyer in their area before they assume anything.

BOA obviously has no recorded mortgage lien, but it has the knowledge that the Buyers were the borrowers who signed for the loan and paid on it. So the obligation from the Buyers exists even though the mortgage was not recorded, much less the lien perfected. But the loan is, according to Wells unsecured because neither the Buyer nor BOA ever obtained title or rights to the land, according to Wells’ theory. If a court sides with Wells, then the Buyers have a huge unsecured obligation to BOA and no house. If a court sides with the Buyers, then presumably it will also side with BOA in which case the transaction will be deemed completed. But that means that the “seller” Wells received no money — or so they say.

If Wells proves its case that it never received the money there are several possibilities. One is that they are simply going to take a loss because the closing agent was their pick, if that is the case. Another is that BOA needs to pay Wells again because the closing agent was their pick, if that is the case. And third possibility is that the Buyer will end up with a double liability — one to BOA which may or may not be secured with a lien on the property, AND one to Wells which may or may not be secured with a lien on the property.

The nightmare continues. And it will continue until the taxpayers, consumers and homeowners of America are seen as victims rather than convenient patsies for big banks and big business.

The Huffington Post   Harry Bradford

Under the best of circumstances, foreclosure is a painful process. But in Houston, Texas, one couple is now joining the unenviable ranks of those losing their home for reasons unrelated to payments.

Brian and Khanklink Pyron, as well as their 18-month-old daughter, may soon lose the family’s first home despite allegedly staying current on payments because they were never technically transferred the title of the house, MyFoxHouston reports (h/t The Consumerist).

In 2008, shortly after the Pyrons purchased their home but before the title to the estate was transferred, the responsible company went bankrupt. Never notified of the situation, the family continued for two years to make mortgage payments to their lender Bank of America, according to MyFoxHouston. Those payments, however, never reached Wells Fargo, the mortgage-holder previous to the Pyron’s purchase of the home.

“We did everything we were supposed to do,” Brian Pyron told MyFoxHouston. “Nobody has communicated with us, notified us. We had been paying our mortgage and everything.”

Stories like that of the Pyron’s have become familiar since the recession. In August, a senior couple in Florida faced foreclosure not for missing a payment, but for sending a check too early.

In June it was reported that a man in Massachusetts faced foreclosure over a $0.00 payment that Bank of America said he owed. More recently, a Florida resident nearly lost her condo over what had originally been a fee of $4.70.

Millions have dealt with foreclosures since the housing bust. In August, foreclosure sales accounted for six times more home purchases than they would in a healthy housing market, according to experts.

Now some homeowners are fighting back. AOL Real Estate reports that protests organized by The New Bottom Line, a coalition protesting big bank foreclosure practices, have already taken place in Seattle and Boston and are set to begin in New York, Chicago and Minneapolis this week.

A pending foreclosure settlement against major U.S. banks has recently lost steam, with California pulling out of discussions and Attorneys General from Massachusetts and New York having expressed concerns that the current settlement too easily lets banks off the hook.

Tags: bankruptcy, BOA, borrower, Bradford, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, Huffington Post, LOAN MODIFICATION, modification, Pyron, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND, Wells Fargo
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