I have had a busy week and am feeling a little like I am in "information overload". It seems that, at month end, if a file can go to hell, it certainly will; and this month has been no exception to that rule.
I have read several new bulletins from various underwriters and several news articles relating to the foreclosure debacle.
As always, I remind you that you need to INSIST that your buyer protect their assets by having their REO transaction handled by a title agent who is very well versed in transferring title out of REO and who has NO AFFILIATION with the seller in these transactions. There should be no actual or perceived conflict of interest between the agent insuring title on the REO property and the seller. As an example, the use of the seller's title agent, which is generally a title agent whose office is either owned by or controlled by the foreclosure mill, is an actual conflict of interest.
Now let's move on with the weekly roundup of articles and bulletins:
Fidelity National has issued bulletins to their agents advising that they have entered into indemnityagreements with B of A and that they are going to allow their agents to insure title on foreclosure sales where B of A or any of it's assignees have been identified as the foreclosing lender or servicer. The bulletin goes on to say that standard underwriting requirements must still be adhered to and that the indemnity does not act as a substitute for standard examination.
But, I had a case this week where B of A was the seller and the seller had pulled the property ON THE DATE OF SETTLEMENT out of active status and put it on UNABLE TO MARKET. So, despite the fact that there are agreements in place, there is still much uncertainty as to which files are actually being indemnified; and we can only venture a guess as as to why some are and some are not being indemnified. In the instant case, B of A was the note holder and there had been a corrective affidavit filed in the foreclosure by the foreclosure attorney admitting to "robo-signers" executing documents in the case. That was the reason for it having been pulled. Now why the seller waited until the date of closing to pull the case, I do not know. Their foreclosure firm was the firm that filed the original documents and then filed the corrective affidavits. They knew, or should have known, long before they marketed the property that these affidavits had been filed and should have cleared title BEFORE marketing.
The bulletin from FNF goes on to say that in cases where B of A is not the note holder, the company will not require an indemnity agreement as long as a review of the foreclosure dies not reveal any deficiencies. Another reason for you to advise your buyer to use the services of an INDEPENDENT TITLE AGENT to research these titles. Don't rely on the firms owned by or controlled by the foreclosure attorney to research DEFICIENCIES in the work done by the controlling interest.
The Attorney General for the District of Columbia mandates that a copy of the actual NOTE be filed in foreclosure caes.
While not relevant to Maryland YET, this is a very telling article about the use of MERS as a named party in foreclosure actions. Borrowers nationwide have questioned the validity of MERS ability to initiate a foreclosure in it's own name. MERS by its own definition does not OWN ANYTHING. Therefore, because they don't own the Note they cannot claim a default on the note. Very interesting reading. A short article worth your time.
WELLS FARGO COMES CLEAN!!
After insisting that it's foreclosure practices were not part of the robo-signing debacle, Wells Fargo finally admitted to the fact that they have uncovered, SO FAR, more than 55,000 cases in which defective affidavits have been filed and for which corrective affidavits will need to be filed.
Wells Fargo says it has identified instances where employees did not "strictly adhere" to the required legal procedures in conducting final reviews of the affidavits. The bank also says "some aspects of the notarization process" were not properly executed.
Wells says the issues "do not relate in any way to the quality of the customer and loan data; nor does the company believe that any of these instances led to foreclosures which should not have otherwise occurred."
The company says it has already begun submitting the supplemental affidavits to the court and expects to complete the process by mid-November.
Wells Fargo reaffirmed that it does not plan to institute a moratorium on foreclosures at this time.
This announcement comes as no surprise to those of us who have been and continue to follow this foreclosure debacle. I can only guess that this will mean more Indemnity Agreements being accepted by underwriters in an effort to PAPER OVER these affidavits.
We must wonder, as I did yesterday, whether or not the DEEDS in these foreclosure cases are in any way defective. Yesterday's debacle could have been avoided in total had the seller's title agent complied with my request and provided me a copy of the deed from the seller to my buyer in advance of an hour prior to settlement.
Upon my receipt of the deed I noticed that the deed had been signed by the title agent's processor. A little background is necessary here. The case was one in which the attorneys who own/manage/operate the foreclosure mill and who own/manage/operate the title agency are currently the named defendants in a class action law suit recently filed in Maryland relating specifically to "robo-signing". As such this file had to be reviewed in depth and approved by my underwriting counsel before we could proceed to closing. We got a clear to close prior to the delivery of the questionable Deed.
The Deed was signed by the title processor, stating her capacity as an authorized signatory. There is a Power of Attorney that has been granted from the seller to the LAW FIRM not to the TITLE AGENCY. Upon my receipt of the deed, I questioned the validity of the signature based on the fact that the person who signed the deed is employed by the TITLE AGENCY not the law firm. Round and round we went, underwriting counsel refused to allow me to insure and so a debate ensued. REMEMBER THIS WAS ONE HOUR BEFORE CLOSING!! After heated discussion we FINALLY received from the Title Agent's attorney, a document that stated that she had been granted "signing authority" by the LAW FIRM, who obtained signing authorty via Power of Attorney. (Gets a little complex here, but..) Now, had they given me that affidavit with the Deed, I would not have had to delay my closing, I would not have spent more than 3 hours going back and forth with counsel and the matter would have been much easier to resolve. Cooperation is not running rampant these days between the mills and those of us trying to insure the end consumer that they are getting as clean a title as we can possibly provide. Even now, after having closed this deal with the blessing of counsel, I don't know that I am comfortable with that Deed. Time will tell whether or not Deeds on these foreclosed properties will be challenged. I have a feeling that they will be.
OLD REPUBLIC TITLE continues to allow REO property to be insured by their agents, without additional premiums. To date I have not received any communication from ORT advising that there are any additional requirements to be met, except in cases where the foreclosure attorney in the subject of a class action law suit. They are advising that each file be underwritten on a case by case basis.
FIRST AMERICAN TITLE is not requiring their agents to get indemnity on most REO transfers. I need to review this bulletin in greater depth. It seems that they have take the same tack as FNF. More on this later.
It is with interest that I note on all bulletins that I have looked at this week they all state something along the lines of:
A proper examination is still required on all cases. I emphasis STILL because most of the title firms who represent the sellers in these transactions don't conduct independent review of the title. They rely instead on the title report prepared on behalf of the foreclosure at the time of the filing of the foreclosure. The foreclosure attorney is searching title from the date the defaulting party took title forward. Is that a proper title examination?
At the end of the day, YOU are the best advocate for your REO purchaser. Put your REO purchaser in the capable hands of an independant title agent in your area, one who is very well versed and up to date on transferring title out of foreclosure. It's the best defense you can offer your client in today's very uncertain time.
Copyright 2010- Charlene Perry