Seattle Bubble Forum Archive

In the growing number of cases where the owner of a home's mortgage is unclear (because records were not properly kept as the mortgage note changed hands) what happens when the borrower actually wants to sell the place?

Since there is no clear owner of the mortgage note, can borrowers petition the court to just have the mortgage vacated altogether? I can't see how a lender would be able to stop a sale, or take out a lien, if they can't even legally prove they own the mortgage.

There must be some legal way to unencumber a property from a mortgage when there is no longer any legal owner of the debt.

Title insurance?

My brother sometimes does work cleaning up titles. There is a way to make money there if you know what you are doing.

did you mean to say "quiet title?"

When a homeowner must sell, of course the mortgage holder can readily be found via the loan servicing company.

Title must be free and clear of all liens and encumbrances before title transfer can take place using a warranty deed. If there is a cloud on title, then a title insurance company can decide to "insure around" the cloud.

An example would be a person who is refinancing for the second time. Several years ago, when they first refinanced, they paid off Lender X in order to refinance. Lender X did not record a reconveyance of the deed of trust, so the original deed of trust looks like it was never paid off. If that homeowner can furnish proof of payment, then a title insurance company would take the risk of not showing the un-reconveyed deed of trust on the new preliminary title report. Low risk.

I give chances of a title insurance company "insuring around" an active deed of trust about a zero.

Sniglet asks, "So, what are the home-owners' options if no one can prove they own the mortgage note?"

Hi Sniglet,

For clarification, did you mean to ask "if no one can prove which mortgage company owns the note?"

Three scenarios.

1) The homeowner actually DID pay off the note/deed of trust.

In this case, with proof, title can be cleared.

2) The homeowner has not paid off the note/deed of trust and is trying to sell or refinance. In this case, the homeowner has been making payments....believe me, the bank who wants to be paid off can be found.

3) The homeowner has not been making payments and is headed toward foreclosure. The homeowner hires an attorney who does everything in his/her power to stall the foreclosure, including making sure the lender has all required documents. As to what happens if the lender can't provide proof, an attorney would have a better answer for the homeowner than me.

Moral of the story: Homeowners in foreclosure should always hire an attorney.

Scenario 3 can be further modified: Homeowner is heading toward foreclosure AND ALSO is trying to sell the home.

Hi Sniglet,

I followed that legal case as well and all I can say is that it is so important for homeowners facing foreclosure to hire an attorney.

Because what happened in that case was new, it might set a precident for other attorneys to research.

However, it would be unwise to recommend that any homeowner take any action in this area without first hiring an attorney.

You know, you were ahead of the game with the "youwalkaway.com" phenom. I remember reading a forum post where you were questioning whether this would become a factor way before it actually did. Maybe you're on to something here.

If this "proof of assignment" problem blooms into something tangible on a wide scale, then the servicers are the next meltdown we should all prepare for.