Posted on 06/10/2011 12:41:30 PM PDT by Palter
How this plays out in the end, who knows. I suppose if the sale of the mortgage was improper, than the original mortgage holder still holds the rights to foreclose and I suppose ultimately they just unwind these transactions and then foreclose.
So, let me get this straight:
Bank A sold the mortgage to Bank B. Bank B then [tried] to file via MERS, but that does not comply with the law. Bank B then collected mortgage payments [if the homeowners made them], but ultimately tried to foreclose on a home that they DID NOT own.
Now, I have questions:
Given that Bank A sold the mortgage to Bank B and was paid for it, but Bank B DID NOT get the title legally transferred:
1. Does Bank A STILL own the original mortgage?
2. If Question 1 is true, does Bank A owe the money it was paid for the mortgage back to Bank B?
3. If Question 1 is true, does Bank B owe any money it collected in mortgage payments [prior to attempted foreclosure] back to Bank A?
4. If question 1 is true, is Bank A now due mortgage payments under the original mortgage?
MERS and the banks have a lot of unsecured debt floating around there because they failed to convey ownership properly.
And some homeowners essentially have houses free from foreclosure because of the above mistake.
As I said, Congress will probably have to intervene on part of the bankers (we all know bankers have their ear even if the people don’t) and retroactively make “MERS” (and the people who bought the MBS’) whole. The idea is that when they were sold the intent was to sell the whole kit and caboodle, that is what the buyers thought they were buying and what the sellers intended to sell... they just flubbed up the paperwork. It will be a tricky piece of legislation to make sure that the wrong stuff doesn’t get mixed in but there is really no other way. Otherwise nobody will invest in MBS, nobody will ever gain title to property they paid for, etc.etc...
I somehow doubt that will be the way this all plays out. If I sold you my car and you paid for it but I didn’t sign the pink slip, you are entitled to a refund. Or, you get me to sign the pink slip. The people who paid will get the bank to properly endorse the paperwork and then foreclose. Though I still see lots of trouble with it, esp in the case where the originators/lenders etc no longer exist. Ultimately I think Congress will put all this into place by giving the investors what they paid for, but it won’t be easy to resolve esp to make sure people who are 100% in compliance or even totally paid off don’t get trapped in the gears.
You are exactly correct. The only thing MERS did was to give the banks the ability to transfer the mortgages between themselves or other investors; it didn’t give them a legal interest that could be exercised in foreclosure. This doesn’t mean that the borrowers are Scott free. The banks now need to go back, obtain an assignment from the original lender, record it, and then proceed to foreclose. And yes, they will have to pay those annoying recording fees to the counties - but the counties will be happy to accept them I’m sure.
Wasn't that the original intent of TARP? At least until the Sec. of the Treasury realized what a hairbag it was and decided instead to just shovel money into the banks at 100 cents on the dollar without unwinding a single one.
And in case were the paperwork and the originial mortgage company doesn’t exsist like Coutrywide? And how many dollars and how man man hours and how much in legal fees will it take to get ‘Humpty’ put together again?
1. Does Bank A STILL own the original mortgage?
IMHO, yes they do. I used the car analogy up-thread. Say for example I sell you my car, you pay for my car, but I forget to sign the pink slip. Then you sell the car to Jim and Jim agrees to pay you $100 a month for 5 years. After a few months Jim realizes the pink slip you gave him did not have my signature on it. He can not take ownership of the car because you never really owned it. Technically speaking I still own the car. Even though we had an agreement and I got paid, I made a mistake. I didn't do it maliciously it was just a mistake. In the real world we would work this out. I would sign it. Or, you would sue me for the money you paid and I would probably lose in court. But Jim is right to stop paying you as agreed until you could honor your end of the agreement. HOWEVER, this does not mean that Jim gets the car for free!
2. If Question 1 is true, does Bank A owe the money it was paid for the mortgage back to Bank B?
IMHO, ultimately yes they could but really both parties knew what they wanted to do, agreed to do it, and executed the agreement. They just made a paperwork error. Bank A, imho, shouldn't have to pay Bank B back, and Bank B really doesn't want the money back. Both parties just want to close the agreement they made. So they should make another agreement to fix the paperwork to finalize the transaction both parties intended to make.
3. If Question 1 is true, does Bank B owe any money it collected in mortgage payments [prior to attempted foreclosure] back to Bank A?
IMHO, no, unless they unwind the entire transaction. Again, Bank A and Bank B both knew what they wanted to do, and both agreed to it, they just didn't do it the way the law requires them to do it.
4. If question 1 is true, is Bank A now due mortgage payments under the original mortgage?
Not sure what will happen, and again I am no expert and no lawyer - but IMHO no. I think what Bank A did was sell the right to collect payments to Bank B. So Bank B can collect the payments, they just cannot foreclose because Bank A did not give the right to foreclose to Bank B.
It would be like if I sold the car to Jim for 60 payments of $100, and I signed the pink slip and gave it to Jim with myself as the lien holder until the payments are all made in full. Jim owes me $6000 total. Then you come to me and offer me $5000 in cash right now for the right to collect Jim's 60 payments of $100. I agree and take your money. Now Jim owes you, but, you do not have the pink slip or the lien so if Jim stops paying you cannot do much about it. You'd have to ask me to do something. But as you imply, I have been made whole, sort of... Complicated, huh?
“First, In all states, a person who simply walks away from a mortgage will have a tax liability with the IRS for getting out from under the debt without going through BK.”
As far as I know that applies in most all forms of debt other than “non recourse” mortgages. There was even a provision added to the laws in 2007 to allow up to $1mil (single) - $2mil (married) of debt forgiveness as tax exempt, on mortgages that are not covered by the “non-recourse” condition, in which they are exempt anyway. That rule was set to expire in 2012 but most likely will not.
http://www.irs.gov/newsroom/article/0,,id=174034,00.html
However, I see by the list:
http://www.forecloseddreams.com/recourse_states
the number of “recourse” states has grown.
“Now, as to bankruptcy, which you have egregiously incorrect:”
The question was not whether or not there were different types of bankruptcy filings that were possible (I simply listed a few of the ways a business/business owners debts could be discharged when a business went bankrupt.
The question was whether or not the owners of a failed enterprise were less moral than someone who walks away from their home mortgage.
I do not think their moral fiber is less than someone who walks away from a non-recourse mortgage.
And, the IRS question is a separate question. The IRS might get something extra from someone who obtains debt cancellation of a mortgage that is not a non-recourse mortgage - but the mortgage holder does not. And the moral obligation is NOT to the IRS, it’s to whom lent the money to the home buyer.
So there’s three things: (1) the title, (2) the lien on the title, and (3) the installment loan.
Depending on the state’s title laws, the homeowner has the title, but it has a lien against it. That lien is still held by Bank A, the original mortgage holder. Bank has no action it can take against the homeowner based on the lien, because Bank A has been paid off. But the homeowner is still on the hook to Bank B for the payments due on the now-unsecured loan.
Bank B can take an action against Bank A to provide the lien. Or can it?
Bank B can take collection actions against the homeowner for the for the payments as they become due. Or can they?
Those collection actions do not include foreclosing on the house, as Bank B has no lien on it.
If the original lien was properly recorded, it will remain in effect until properly released. Although people residing in the homes in question may not be making payments and may indeed not actually know who to make payments to even if they wanted, they do not get a free house. As long as there is an unreleased lien, they do not have a clear title. Can you imagine making payments on a regular basis for 30 years only to find that the company you paid was not the legal owner of the note and can not release the lien. I am afraid the worry about some undeserving person receiving a free home is dwarfed by the prospect of untold numbers of clouded titles which will destroy the real estate market.
I dunno! Someone up-thread mentioned "non-recourse" states and things like that. Maybe they only have one shot at doing it right and if they screw up, game over. Not sure what happens in these cases.
Bank B can take collection actions against the homeowner for the for the payments as they become due. Or can they?
I think Bank B can take collection actions, but as you mentioned, foreclosure is NOT one of the actions they can take.
But I could be wrong, IANAL or Expert.
Your problem with the whole thing is, like mine, if you pay off your loan for your home (if you still have a loan), can the bank you are paying off the loan, give you clear title at the end. Apparently, in at least some cases, they cannot - so your in good faith payments, the bank thanks you for, be happy with that!
MERS did another thing, it dodged the recording and transfer fees that the local governments collect for such activities. Mr. County no like MERS.
The holders of mortgages through securitization may not have the right to foreclose on them. A homeowner who is behind owes somebody money, but it's not going to always be clear just who.
It appears the judge is of the opinion that the Banksters have to follow the same property laws that us peons do.
What a revolting development this must be to the high-flying banksters who thought they were above the law.
Nowadays, Chapter 11 isn't really that different from Chapter 13, so no biggie (it used to be an advantage to use Chapter 11, actually).
The 2005 amendments really closed Chapter 7 to most people because of the means test, and pushed everyone into Chapter 11 or 13, because then they could push the plan, which because of the 2005 amendments, gave unsecured creditors better protection, and, as time has shown, gave secured creditors much less (they get subject to the cramdown on a lot of things).
But anyway, enough for now. :P
Huh, I never knew it was that easy. I thought banks didn’t bother because it was usually too much trouble (person likely to declare bankruptcy, blood out of turnip, Al Sharpton protests, and that kind of thing).
But. The forgiven amount has to go on your income taxes. Can’t bankrupt out of that.
I’m surprised that big title-quieting services haven’t sprung up. If it can be done by hordes of paralegals at a cut rate, a sharp attorney could make a competitive killing opening a company just to do this.
“So, let me get this straight:”
Here what went down:
Bank A sold the mortgage to Bank B with the agreement to collect the payments and sent them to Bank B. Bank A and Bank B failed to notify the county that that Bank B are now holds a lien on the property and Bank A is no longer the lien holder. Deadbeat stops paying mortgage. Bank A tries to foreclose. Courts says Bank A you sold your interest and have no right to foreclose. Courts says to Bank B you are not on record with the county of having a lien on the property you can’t foreclose either. The Lie is Mortgage Back Securities had NO PROPERTY AS COLLATERAL TO BACK UP THE SECURITIES.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.