Hey.  Felt like writing in blue today because it's so nice out and only expected to get nicer.  

Just pondering the questions contained in my last blog regarding the recent Springfield MA foreclosure case.  Wells Fargo and U.S. Bank lot their contest of the validity of their forecolsures,  

Each bank was found to have violated a statute that a foreclosure is only valid under certain conditions:

To Guarantee clear and marketable title, only the true holder of a mortgage interest on a property can authorize a foreclosure auction.  Any assignment of the mortgage interest must occur prior to the property being sold and there must be documentable evidence that the assignment existed legally prior to the foreclosure proceeding. 

Judge Keith Long, presided over this case and found Wells Fargo and U.S. Bank NA were unable produce any written evidence of their assignments prior to the auction.   and rendered their foreclosures invalid. 

At first it just seems goofy that these two banks would mess up like that. But when you hear their argument that they had ownership interests as far back as 14 months and yet no evidence exists of it starts to make you  wonder what it means for all closings.  

It puts huge liability on the title examiners, and title insurance companies and attorneys involved.  

Who's going to pay for the re-foreclosure.  How quickly will they do it?  How much is it going to cost and how will that hold up all foreclosures moving forward.  No much you think until you broaden the scale of thought.   I'll make it personal.  I purchased a foreclosure 10 years ago.  When I go to sell it, will I be the legal owner?  Or will I find out my title examiner missed noticing the date of assignment of mortgage interest for the bank that sold it to me and have a cloud on my title because I never technically owned it.   Does my mortgage company have to pay me back all the payments I gave them because they illegally took my money since their mortgage wasn't with the true owner of the property? 

I purchased title insurance but what a hassle and expense for the title insurance companies, lawyers representing banks and buyers.   And what of future title insurance policy language, will it be revamped so that the insurance companies have lessened liability or will they just refuse to insure more titles. 

In the interest of the law I believe the judge ruled correctly but I can't help but think there must be thousands of other cases like this in this time of record foreclosures and if we have to start re-foreclosing it's going to cut the legs out from under our already stumbling real estate market.  

I just don't know if this country can withstand another widescale, national blow to it's economy by a retroactive re-foreclure market.  If anyone cares to contribute to this blog with their thoughts on this subject I welcome the discussion. 

This ruling could could halt the whole process of foreclosure before any new ones could occur.  Had their foreclosures gone unaudited the cloud of doubt over legal ownership of title would have been passed on to another title.   Who's to say there aren't hundreds, if not thousands of other properties with the same dispute of ownership. 

The title companies will need to reevaluate if they want to insure a title and that renders the property a high risk, and difficult to sell property.  And how deep will this go?  Will Realtors be held liable for selling properties that weren't owned by their clients?  And what will this do for our economy now?  The banks can't sell off their non-performing assets and remain legally responsible to maintain the property and pay the real estate taxes.  This massive depletion of funds will drive most lenders into the ground.  

Worse still is if the ruling stands retroactively there are immediately title insurance companies hit hard by the liability for the cost of re-foreclosing the property properly so that title can be cleared. Yet something must be done to insure titles are clear or what's the sense in buying them? 

And of current owners of foreclosure properties, whose titles shall be scrutinized years from now when they are sold, will they learn they never legally owned the property  t could influence the number of bidders at a foreclosure auction if it is known to the public who the true holder of title is.  If the named or unnamed legal holder of mortgage interest is found not to have gained it's right to foreclose on the property until after the foreclosure sale that creates a legal cloud on the title.  The only way to clear the potential problem is to re-foreclose the property properly which would halt the process going forward and retroactively hold every property's title in question. 

The consequences are staggering.  Because real estate must be held in public form ink about it.  If you bought a foreclosure 10 years ago like I did and when i go to sell it a title examiner runs the title and finds that the entity that sold it to me in foreclosure hadn't recorded properly, they may  

Obviously if a named or unnamed party is found to not be the legal holder of mortgage interest the   

If you’re like hundreds of thousands of homeowners and you’ve fallen behind on your mortgage payments you may be wondering how to save your home from foreclosure and destruction of your credit.

The recent changes made by the Obama administration require lenders to offer a variety of options to delinquent borrowers as an alternative to foreclosure. However these alternatives rarely fit into the borrowers financial capabilities.

In most cases a loan modification is necessary. A loan modification is the permanent restructuring of one or more terms of a loan to make it affordable for the borrower. Modifications are most often negotiated by attorneys and debt resolution specialists for a fee which usually runs between $1,500 and $3,000.

While loan modifications are extremely effective and can mean the difference between keeping or losing a home an obvious obstacle is the fee. Most borrowers in default don’t have the extra money to pay for the modification.

The good news, is that if you’re delinquent on our mortgage you can learn how to save your home from foreclosure on your own. With some basic instruction you can negotiate an affordable loan modification with your lender without paying a hefty fee.

You may be able to find information online in forums or e-seminars that will teach you what you some of what you need to know. You could also try arranging a free consultation with an attorney to get an idea of the process.

Another excellent resource is the Do-It-Yourself Loan Modification Kit. This comprehensive e-kit will teach you the same tactics attorneys and debt specialists use to negotiate a lower interest rate on your loan, eliminate past due balances and best of all keep your home. You don’t have to be an expert negotiator to arrange a loan modification. You just need to know that your lender would rather work out an arrangement with you than foreclose your mortgage. So why pay thousands when you can do it yourself for free?

Purchasing a bank owned property has long been considered to be one of the best ways to buy real estate. Typically, a below market value price can be obtained and because the foreclosure process wipes out all junior liens on the property, the title to a bank owned property is assumed to be guaranteed clear and marketable. 

But, we've all heard the proverb about what happens when we assume, and a recent court decision regarding foreclosed properties may prove to be further support.  On March 26, 2009, the honorable, Judge Keith Long, presided over cases involving three foreclosed properties in Springfield, Massachusetts in which the validity of the foreclosures were being challenged. 

After long, arduous arguments from the three banks, Lasalle Bank, Wells Fargo and U.S. Bank NA, he ruled that 2 out of the 3 foreclosures were in fact invalid.  View the entire court case.

In a nutshell, this case revealed that while Wells Fargo and U.S. Bank NA claimed to have legal mortgage interests in their respective properties by previous assignment, they both had failed to record their assigned interests in the properties before the dates of the foreclosure auctions. Furthermore, they each failed to disclose themselves as the holders of mortgage interest on their properties in the legal notices published prior to the auctions.

The law states unambiguously, that only the recorded owner of a mortgage interest in a property has the legal right to foreclose.  It also explicitly states that the legal owner of a mortgage interest must disclose itself as having such interest in a mortgagee's sale of real estate legal notice. 

Both Wells Fargo and U.S. Bank NA argued that it is not law that  assigned mortgage interests must be recorded prior to foreclosure auctions.  The judge conceded, but cited that it is the law that the foreclosing entity must at least hold documentable proof of mortgage interest if asked to provide the same prior to the auction.   Only LaSalle Bank was able to offer written proof that it held legally assigned mortgage interest in its property prior to the time of the foreclosure auction and only LaSalle Bank's foreclosure was found to be valid. 

While Wells Fargo and U.S. Bank NA each claimed they had been assigned their interests well before the foreclosure auctions, neither could produce written documentation, albeit unrecorded, of the same.  Further, neither could explain why they had waited over a year (and after the foreclosure auctions) to record their interests if they in fact held it.  

The judge claimed that each bank had ample time and compelling reasons to record their interests prior to the foreclosure auctions.   He claimed that the carrying costs  for the properties (real estate taxes, maintenance and security) and the declining real estate market, constituted very strong incentives to record their assignment interests if they held them prior to the  auctions.   In the end, it was the inability of Wells Fargo and U.S. Bank NA to prove to the judge they had any legal authority to initiate foreclosure that rendered their foreclosures invalid. 

The facts are very obvious in these two cases and the decision is now raising several questions in the legal community.  First and foremost, is this a result of mistakes being made by these banks or were these calculated acts of fraud?  Second, and so on, are the questions: Will this ruling effect foreclosure sales retroactively and how far back will it reach?  How many other properties have been foreclosed where assignments were recorded after the date of the foreclosure auction?   Are the current recorded owners of foreclosed properties, legally the owners?  Will title insurance companies suffer massive losses as a result of thousands of owners seeking indemnification?  Will all properties found to have similar clouds on their titles need to be "re-foreclosed" to clear them?

The real estate community is anxiously awaiting answers to these questions.   Suffice to say, if you've purchased a foreclosure property in the past and still own it,  you'll either be patting yourself on the back for purchasing an owners title insurance policy, or kicking yourself if you didn't.

Interested in topics other than real estate?  

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Essentially, a short sale is when a lender faced with the prospect of having to foreclose on a mortgage for non-payment, instead agrees to accept a payoff that is short of the full mortgage balance owed by the defaulting homeowner.
In doing so, the lender agrees to consider the short amount full satisfaction of the mortgage and releases its lien against the property so it can be sold to a third party in lieu of foreclosure. 

While short sales have always been possible, very few people, including real estate agents knew they were an option a lender would entertain when a homeowner could no longer afford to make their mortgage payments. Prior to their rise in popularity as a result of the declining real estate market and home values, they were isolated incidents occurring quietly behind the scenes. 
Their rise in popularity came about after the real estate bubble burst in 2005 and home prices began to fall sharply. Suddenly, those people who had purchased at the top of the market using sub-prime mortgages requiring little to no money down were in getting into trouble at an alarming rate. Their mortgages, many of which were adjustable rate mortgages (ARMs) were coming due for their first interest rate increase and owners could no longer afford the payments.

Simultaneously, the decline in home prices was creating another disaster situation. These distressed homeowners were suddenly "upside down" on their mortgages. Unable to sell their homes to get out from underneath their mortgage debt, the foreclosure rate across the nation began to spike.

As lenders began to accumulate increasing numbers of foreclosed, non-performing assets, the word began to circulate that lenders would consider "short payoffs" of mortgage balances as an alternative to foreclosure.

The primary beneficiaries of short sales are lenders. However, their rise in popularity are also due to the fact that they are distinctly different than foreclosure and they do offer advantages for homeowners in default and facing foreclosure as well. Foreclosures, destroy a homeowner's credit for as long as a decade and keeps them legally liable to pay back some, or all of the lender's loss.

A short sale, by contrast, does not. When a lender accepts a short sale, it is agreeing to report the settled account to the credit bureaus as "paid as agreed" which is much less damaging to a homeowner's credit. It also releases the homeowner of all past due amounts and future liability to pay back any loss incurred by the lender.

Of course, not all short sale offers are acceptable to lenders. The lender must anticipate that the loss it will suffer from a short sale will be smaller than if they foreclose. But, in most cases, if the offer is within an acceptable range of loss, lenders are quite likely to accept a short sale. 

To search for short sales, bank owned property or retail properties visit my website at http://www.homesforsaleinmetrowest.com   or http://www.homesforsaleinworcestercounty.com