Weekly Twitter Digest (Link Roundup) for 2013-02-01

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.


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    My understanding is the SB 5191 is basically dead, replaced by 5535. There’s been a bit of discussion of them in the open thread, but both IMHO are amateurish pieces of crap written by people without even a basic understanding of the issues. It will hurt some consumers, won’t help others, and doesn’t really solve any of the problems. But it will generate recording fees!

  2. 2

    Kary, what are the supporters of 5535 trying to accomplish? Thanks.

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    RE: Jillayne Schlicke @ 2 – I really don’t know what they’re thinking. It just seems to be recording for recording’s sake. About all it does is generate recording fee revenues. Maybe they want to encourage the counties to keep the recording function open 5 days a week?

  4. 4

    To me it looks like they are trying to force lenders to prove a chain-of-title and then if a lender messes up, the homeowner has more time in the home before auction. I don’t see what more this accomplishes that the MERS decision itself didn’t already accomplish. Banks and lenders started backing away from MERS in early 2012 and transferring title back into the name of the beneficiary before initiating foreclosure.

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    RE: Jillayne Schlicke @ 4 – I think you’re right that 5191 attempts to do a lot which was already done by the Bain v. Mers decision. I even suspect it might have been originally drafted before that decision came down, and that might be why the more recent 5535 removed those needless provisions.

    I don’t see anything in either bill that requires proving a chain of title. For one thing, there’s no transition provisions, which means presumably that assignments prior to the effective date don’t need to be recorded. Beyond that though, except for the penalty on the assignee who does not record, there’s no impact to not recording. The second assignee can still record and then later proceed to foreclosure even if the first assignee didn’t record. (BTW, that would also be a loophole to the 6 month rule, because you could have a new assignee record within the time limit and then immediately foreclose.)

    We already have one recording which purports to show who the current owner is, and that recording is called the Notice of Trustee’s sale. Requiring an earlier recording that doesn’t accomplish anything more than what the Notice of Trustee’s sale already does, well I just don’t see what they think they’re accomplishing.

    The solution is much more complex, and I don’t think whoever is drafting these bills as a clue what the real issues are.

  6. 6

    RE: Jillayne Schlicke @ 4 – If you’re interested in this topic, you might want to read Freeborn v. Seattle Trust: http://www.leagle.com/xmlResult.aspx?xmldoc=198043094Wn2d336_1397.xml&docbase=CSLWAR1-1950-1985 That is a 1980 Washington Supreme Court case.

    That case involved the assignment of a vendor’s interest in two real estate contracts. Real estate contracts were commonly used back then, and still are in places, instead of a deed of trust. The holding of the case was that to perfect the transfer of a vendor’s interest, you should record a “UCC Financing Statement” with the secretary of state. In contrast, with a note and deed of trust you make the assignee the holder of the note, which outside deed of trust transactions is typically by endorsing the note to them and giving them possession. For the real estate side of real estate contract assignments the Freeborn court held you should also record with the county auditor (at least where the legal title was also purporting to be conveyed).

    The thing that hopefully will stick out with Freeborn is it was the vendors of the real estate contract that assigned their interest and then filed bankruptcy. Because neither assignee had filed a UCC Financing Statement, they both lost out to the bankruptcy trustee, which meant that the “owner” of those pieces of real property had to start paying the bankruptcy estate.

    To have an analogous situation with what we’re talking about, you would need to have the bank who is the grantee of a deed of trust assign its interest in the note and deed of trust, but not make their assignee the holder (and the assignee not record their assignment), and then have the assignor bank file bankruptcy. I don’t believe banks can file bankruptcy, but assuming they could, the lack of recording by the assignee bank would not impact the owner of the property at all, other than they would need to start paying the bankruptcy trustee rather than the assignee bank. The loss would fall on the assignee bank.

    I’ve mentioned that in the past without that detailed explanation, but that I why I believe recording is not really an issue for the average homeowner. What the average homeowner needs to know is who to pay, and if there is a foreclosure started, that the foreclosure is being conducted by the proper entity. Simply requiring these deed of trust assignment transactions to be recorded will not accomplish that in the simple form contemplated by either of the two bills. There is no remedy for the homeowner if the assignment was not recorded, other than a six month delay, and even then the homeowner is not really given any assurance that the assignee really has an interest.

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