Title Search

MERS

As the issue of the nominee trustee / MERS mortgage processing becomes more commonly known, many property owners are curious to discover if their mortgage is held by the electronic recording system. To figure out if you have a MERS mortgage the borrower can follow these steps.

First, don’t look for it on the deed to your home, MERS will not appear on the ownership record. Start by reviewing your mortgage documents. There will be two legal documents, a mortgage or deed of trust, and a mortgage note. The deed of trust / mortgage is the instrument which transfers rights to your property to the lender. The note is the loan itself, separate from property rights.

On the mortgage or deed of trust, you may discover that the lender is directly identified as “Mortgage Electronic Registration Systems.” This is MERS. Alternately, the mortgage/deed of trust might identify a traditional bank, such as Bank of America or Suntrust, but then list MERS as a trustee. Be sure to read all of the pages on the mortgage, as it might be mentioned farther in.

In some cases, MERS is not listed on the mortgage itself, in which case the loan might still be in MERS. If the loan was later transferred to MERS the original documentation would not reference that. In this case you would need to perform a mortgage assignment chain search in the official land records. What you would look for is a transfer from your original mortgage lender to “Mortgage Electronic Registration Systems.” The hard part of doing this is that in most counties, the land records are indexed by name (not address). This means you would have to do a name search for “Suntrust” or “Mortgage Electronic Registration Systems” and then find your mortgage in the list of resulting documents.

Depending upon the size of your county, there may be dozens or even hundreds of documents with those names as principle parties on other properties. One way to help narrow the list is to filter by date, and start the range after the time you executed the mortgage.

If you locate the mortgage assignment into MERS, you can then get the file number and inquire to the system as to the status of who holds your loan. Depending upon the nature of your inquiry, you may want to ask if they posses the actual note, and about the chain of assignments which has been completed and what banks have owned your mortgage.

2011 was an eventful year for AFX LLC, and AFX Search. The title document research business at AFX LLC included significant events such as providing expert witness testimony for the US Department of Justice. Two executives of the company, myself and Tiffanie Tedesco were qualified as National Certified Abstractors by the National Association of Land Title Examiners and Abstractors. This designation comes after years of documented experience and passing a rigorous exam testing the knowledge of complex title searching skills. There are only 54 title abstractors nationwide with this designation.

I was elected to an additional term on the board of directors for NALTEA and will continue to serve on the public relations committee for the organization. For the second year, I was a speaker at the NALTEA annual conference.
AFX and myself were featured and quoted in several important news articles, including The New York Times, Bloomberg News, and The Wall Street Journal. The issues of MERS assignment questions, foreclosure fraud, robo-signing and quiet title actions were hot topics in the past year. We were able to work with dozens of websites, blogs, newspapers, and trade associations to make sense of the turmoil in the property records industry. Our title course offered by the Title Training Institute was helpful to many abstractors in developing abstracting skills.

One of our favorite search projects this year was a complicated mineral rights search going back to the 1800′s. We had two seasoned abstractors poring over documents from handwritten deed books and indexes. There were legal descriptions using tree stumps as reference points, and bear traps as property markers. In the end, the client discovered that while mineral rights had been sold off from his property, the documentation for the transfer had information allowing him to reclaim those rights.

On the investigations side, 2011 was even more active. Early in the year, a landmark case was solved resulting in collection of a judgment of $1.2 million for our client. The client had won a lawsuit years ago, and the defendant in the suit had claimed to be insolvent and was hiding assets. The client had attempted locating assets for years with no success. WIthin weeks of taking the case, our investigative staff located a hidden bank account in another name with sufficient funds to cover the judgment. The client was paid within 30 days.
We credit our involvement in the International Association for Asset Recovery for helping developing the expertise to succeed in this case.

A case this summer had significant impact when an estranged ex-spouse was found to be gambling and drinking heavily during times dedicated to having visitation with their children. This case resulted in our client obtaining significant more security for their children, and the discovery of hidden income by the former spouse.

We were also featured on the nationwide podcast produced by acclaimed investigator Paul Jaeb. Paul is the former president of NALI and leads an audience of thousands of listeners to his show. AFX was featured for a third time, covering topics such as title document forensics, business development, and financial management.

We also began our involvement with ACEDS, the Association for Certified E-Discovery Specialists. Electronic records are becoming critical for investigations. Our involvement with the organization includes writing articles for members on techniques for using and analyzing Electronically Stored Information.

AFX Search was also issued an important “K” class firearms instructor license in FLorida, allowing us to train and qualify licensed security agents and bodyguards for them to obtain  special licenses to carry concealed and exposed handguns while on duty. Thanks to the superb coaching from David Aronow for helping obtain the high level skills to obtain this certification.

This week, I was honored to be elected as the Vice-President of the South Florida Investigators Association. This group is an elite group of investigators whose membership is carefully selected for quality professionals. Current and former Federal agents, high level investigators, and experts in specialized areas of investigations make up this association.
2011 was easily our most succesful year, and our new business development office just opened in California is on track to make 2012 even better. Offering high quality research and analysis, backed by the best customer support in the business makes AFX something we take pride in. We thank all of our valued long time clients for allowing us to assist you and solve your cases, and we are looking forward to showing you how we can impress you in the coming years.

In 2012 you will see development of enterprises in several fronts. Our asset recovery division will expand into new areas. Visibility in the investigations segment will help attorneys in corporate fraud and due diligence cases. David Mitchell in the business development office has strong title research growth tracking for ’12.  Our leadership teams in Florida, Georgia, Pennsylvania, and California have put together the best network of research professionals in all 50 states. We have extensive coverage in all 3800+ counties nationwide for fast and efficient turnaround of projects.

Keep an eye on this blog for regular articles on important industry events. We also request your input for subjects of interest for future posts, and feedback on published work. Our Twitter feeds are also featured on the sidebar of the blog.

Best wishes to all clients, colleagues, and readers for a very succesful 2012.

Dave Pelligrinelli

Robo-signing, MERS, and foreclosure defense are familiar terms to real estate professionals and the general public. News stories cover the missing assignment chain problem, borrowers using quiet title actions, and banks coming to foreclosure proceedings with missing MERS documents. While the housing market is in distress, the day-to-day market continues to be functional. So how serious is the problem and what will happen in future years?

The hard numbers and indications from analysts indicate he problem is critical. One financial analyst sees the mortgage documentation issue as a ticking time bomb lurking behind the scenes, which could destroy the financial system. According to Elizabeth Renuart,  the Ibanez ruling may have traction in other nonjudicial foreclosure states and the likelihood that clear title to foreclosed properties is jeopardized by shoddy handling of notes and mortgages. She notes that on one side of the contest are the integrity of the law and the related publicpolicy in favor of strict compliance with nonjudicial foreclosure procedures designed toensure that only the proper party ousts homeowners from their homes. Not only are defaulted borrowers at risk, but subsequent purchasers can inherit hidden title defects. “A purchaser who takes title without actual or constructive notice of adefect in the sale and pays value, nonetheless, may face challenges to title when theforeclosing party did not possess the authority to foreclose at the relevant time and couldnot grant the purchaser good title,” according to her research.

Some economists see the improper foreclosure activities as a crime scene. “Crime by mortgage servicers and their contractors is more than just the crime of these foreclosures themselves — it’s the residual tail end of a housing bubble based on fraud. The reason these bank servicers must now routinely employ notaries using false documentation is because they never established a clear chain of the property title upfront. In this environment, why bother getting your paperwork in order when the goal is to put someone into a predatory loan, reap fees and disappear tomorrow?”

Whether the consequences for the financial side of the issue will ever reach criminal levels is unknown. The financial consequences are not a matter of if, but a matter of when and who. The system has delayed the losses for half a decade already, and has attempted and somewhat succeeded in passing the losses to the public sector. Regardless, the wave of foreclosures and conflicts is not over.

A Nevada law now requires those foreclosing on a home to file an affidavit proving they have the right to bring the action — and it increases civil and criminal penalties for using fraudulent documents in a foreclosure. The Florida Supreme Court is ruling on a case involving fraudulent banking documents. At issue is whether the bank can still be held accountable for fraudulent documents if it voluntarily dismisses the foreclosure case when challenged.

There will be ups and downs in the rate of foreclosures as lenders deal with the effects of various laws and procedures. In the long run however there are still millions of homes who’s occupants are unable to maintain the contractual arrangement with lenders. All of these will be to be resolved somehow. ”Despite a seasonal slowdown similar to what we’ve seen in each of the past four years, November’s numbers suggest a new set of incoming foreclosure waves, many of which may roll into the market as REOs or short sales sometime early next year,” said James Saccacio, co-founder of RealtyTrac.

In the meantime many parties large and small are involved in disputes originated by the housing crash. The Federal Housing Finance Agency (FHFA) filed a lawsuit in federal court against the city of Chicago contesting a local ordinance that makes lenders liable for the upkeep of vacant homes before they take possession of the title. According to FHFA, Chicago’s new vacant property law would create additional risks and liabilities for the two mortgage financiers

The litigation, legal support, investigative analysis and research required for all of the conflicts will drag out for years.

No single section of the real estate industry has a monopoly on fraud. It seems that lenders, borrowers, agents, and attorneys are all represented in the long list of fraud schemes acted out in the market.

From the blatant to the complicated, the scams are numerous. One was simple; just make up fake deeds to houses. Two men from southern California pocketed more than $500,000 by filing grant deeds on vacant, foreclosed homes and sold the stolen homes to investors for cash. In Colorado, roving bands of squatters are using a similar scheme to take over homes from absentee owners. German Jasso, 42, and his wife Laura Guitierrez, 41, of Fraser, moved belongings into the home and conducted renovation work. According to assessor and trustee documents at the time, the home still belonged to someone else. The home, the finished construction of which had not been completed, was in pending foreclosure with Bank of America, according to the initial police report in court documents. In the course of a few months, Jasso conducted work on the home to try and obtain a certificate of occupancy, including installing a propane tank and changing locks on doors. He told police that he believed he had legal access to the home through a legal instrument called “adverse possession,” and said his real estate “consultant” was Carrillo.

Some of these schemes end up with serious consequences such as bribery, extortion, arson, and suicide. A group of fraudsters in Las Vegas manipulated their way onto a condo board so they could steer contracting work to an affiliated builder for kickbacks. The FBI is involved in this one. A Pennsylvania government official was arrested for using his ties with a title company to illegally profit, allegedly. The DA on the case said “His demeanor was one of a person who thought he was entitled to do whatever he wanted, that this was his government. It is not the chairman of the commissioners’ personal fiefdom to do with it what he pleases.”

And the winner is: Florida.

Florida retained its top ranking in the nation for mortgage fraud litigation through September as millions of dollars in bad boom-time loans continue to be discovered by law enforcement and lenders. A report released Tuesday by industry publication Mortgage Daily showed that Florida’s activity during the third quarter included more than $144 million in suspect loans that were questioned in court. Ken Thomas, a Miami-based independent banking analyst and economist, said mortgage fraud prosecutions will increase as defaulted loans undergo closer scrutiny. ”There is a lot of fraud in South Florida, and we will see heavy enforcement in the future,” Thomas said “It’s taking a lot of time to catch up, but there are paper trails for all of this and they will eventually get to most of it.”

Congratulations.

There are as many opinions on what caused the real estate crash as their are those with opinions. Depending upon who is asked, it could have been MERS, Wall Street banks, greedy Realtors, greedy home buyers, greedy home sellers, speculators, flippers, mortgage brokers, or Alan Greenspan.

For now, it matters less what caused the crash as it does what damage the crash is now causing. Besides higher unemployment for real estate agents, there are thousands of contractors our of business, and a difficult borrowing environment. Title search firms such as ours are seeing much more complex search files come in, especially on foreclosures where the prior history is complicated.

On a larger scale, the lower volume of real estate transactions and the reduced valuation of properties is creating a shortfall for government revenues in he billions. Most of the operating funds which local governments count on come from property taxes. These taxes are based on a percentage of value, which has declined. At the same time, distressed properties often have no revenue while the borrower is in default and paying no annual real estate tax.

The result is an extreme pressure on towns, cities, and counties to do more with less cash. Although the Wall Street Journal reported this week that city budgets were “about to be slammed”, this issue has been a concern for several years. Cuyahoga County, Ohio predicts Because Cleveland last appraised values in 2006, near the peak of the market, the coming adjustment in 2012 could mean that the county is in for a large correction likely a $1.1 billion reduction in valuation.

Los Angeles already has a $72 million deficit in their budget, with more cuts looming. The city manager called for reductions of $4 million to the Los Angeles Police Department, $1.7 million to the city attorney’s office and $1.3 million to the Bureau of Street Services, which is charged with maintaining the city’s 6,500-mile network of roads and highways. He also said he needs four more weeks to find an additional $20 million in potential cuts for this year’s budget, which covers the 12-month period ending June 30. The city attorney’s office described how cuts like these would affect their department by saying ”obviously, you can’t operate a prosecution and litigation office with part-time lawyers, and certainly not when our caseloads have stayed the same and in some cases, increased.”

Some municipalities may actually resort to bankruptcy. Several law firms are gearing up for a wave of government Chapter 9 bankruptcies. The article describes how several cities in California, Rhode Island, and Pennsylvania have used this provision, described as follows: “Chapter 9 of the Bankruptcy Code, a once obscure legal framework that allows an eligible municipality to “adjust” its debts by means of a “plan of adjustment” that is in many respects similar to the plan of reorganization which a debtor can devise in a chapter 11 case.”

Some economists are predicting the financial distress t expand beyond municipalities, and expand into what some call a “World Bankruptcy”  In housing, we haven’t seen the bottom in housing by a long shot. One report said they think the bottom won’t happen until 2020 here in the US. The banking system or the shallow banking system might have another ten or twenty trillion in bad debts they just found, they just discovered and they were back to a deflationary spiral again and this goes ad infinitum between pillar and post. The biggest bankruptcy in the world would be the loss of world reserve currency for the United States of America. The real problem is the debt and then beyond that the fraudulent debt, I mean correct the default swaps, you know, insurance, I mean the United States banks are exposed to this in a big way; some say more than a trillion dollars just with a few big US banks.

In the end the economic damage to municipalities may take on an appearance much like the depressing story of Livingston NJ. The mortgage crisis ravaged the housing market, which in turn destroyed the government budget, resulting in a damaged culture. In the story, local resident Rosa O’Neil watched as people she’s lived next to for decades, disappear one by one, until she lives nearly alone on her Irvington, New Jersey street.

As described in our prior article outlining the Top 6 Developments For The Title Industry in 2012, some news is already starting to appear on these issues.

I suspect that the MERS/ nominee trustee controversy will settle down, especially in he title records arena. A Supreme Court case in Connecticut demonstrates that trend, as they validated the right for MERS to foreclose. There still may be some legal and regulatory backlash for prior actions, but going forward most of this will follow this trend.

The fallout continues to hit municipal budgets, as seen in Los Angeles where they face a $72 million dollar deficit. The city is looking at for reductions of $4 million to the Los Angeles Police Department, $1.7 million to the city attorney’s office and $1.3 million to the Bureau of Street Services, which is charged with maintaining the city’s 6,500-mile network of roads and highways. The city attorney is worried about the cuts, ”Obviously, you can’t operate a prosecution and litigation office with part-time lawyers, and certainly not when our caseloads have stayed the same and in some cases, increased.”

The market is still in freefall, but some analysts are curiously bullish on the future. While Goldman Sachs sees a bottoming in the market and equilibrium in 2013, CNBC is skeptical, asking: “Are we just supposed to ignore the distressed market? What about the fact that in some cities more than half of the properties selling are distressed? And what about the fact that there are more distressed properties coming to market, as the banks ramp up the long-stalled foreclosure process? And how about appraisers using distressed properties as comps to non-distressed properties?

“Why, land is the only thing in the world worth workin’ for, worth fightin’ for, worth dyin’ for, because it’s the only thing that lasts. ” – Gerald O’hara Gone With The Wind

“Just as man can’t exist without his body, so no rights can exist without the right to translate one’s rights into reality, to think, to work and keep the results, which means: the right of property.”  ~Ayn Rand

“No man but feels more of a man in the world if he have a bit of ground that he can call his own.  However small it is on the surface, it is four thousand miles deep; and that is a very handsome property.”  ~Charles Dudley Warner

Ownership of a persons home is a foundation of human security. “Home ownership” is the face of what is often called the American Dream. The past 5 years have caused many to reevaluate the impact which ownership has on their lives, and whether the impact is always positive.

Home buyers have always recognized the possibility that prices will fluctuate, although until 2006 the idea that home values would drop was largely dismissed as improbable. In fact, the chief economist for the National Association of Realtors was so sure of future price growth that he stated “there is no risk of a national housing bubble” in 2002. Leaving aside the threat of price declines, an even less expected and potentially more dangerous risk has emerged for prperty ownership. The idea that the ownership of a property, or even a specific property claim is invalid was virtually unthinkable even 4 years ago. Today property interests from mortgage rights to outright ownership are being challenged in a multitude of ways.

Homeowners who have purchased properties in good faith are finding that their ownership may be in question if a prior foreclosure on the property may have been conducted improperly. Even if the foreclosure event occurred years in the past and several subsequent ownership transfers took place, the entire chain of title can be at risk. Foreclosed borrowers are using a multitude of mechanisms to challenge the loss of their homes, including quiet title actions, lawsuits, and title insurance claims.

Current foreclosures are being hampered by foreclosure defense efforts which cause lenders to spend a great deal of time and effort demonstrating a valid claim to the title. In fact, an entire state has foreclosures virtually on hold while waiting for a pivotal court case to be decided. The issue in the case causing lenders to pause is the question of whether a foreclosure notice is made invalid because the lender filed a notice of intent to foreclose with the servicer listed on the notice instead of the lender. The use of nominee trustee systems such as MERS to track mortgage ownership calls into question millions of mortgages issued by lenders, totaling trillions of dollars in property interests. Even if the lender side acted inappropriately in their lending process, invalidating trillions of dollars in property rights would be a security problem for property rights, and the economy in general.

Fraudsters are using the turmoil in the real estate market as cover for various schemes. Deed fraud is exploding in popularity, with groups moving through areas claiming squatters rights on vacant homes. Adverse possession rules were designed to allow good faith land users to be compensated for their efforts. Career criminals are grabbing homes to rent out to unsuspecting tenants. A rash of these actions in Texas is a good example of how this works. The schemes are hard to unravel because of a loophole in a state law that allows people to suddenly claim supposedly abandoned sections of property if no owner is on the spot to challenge such a claim. But the law doesn’t distinguish between a claim on a $27 section of sod and one on a $2.7 million mansion with an elevator, three master bedrooms, a five-car garage and a pond with fish in the back yard. “File the proper paperwork, pay a $16 filing fee, keep up with the property taxes and live in the house three years or more, and even the courts may not be able to evict you.”

If that isn’t enough to worry about, the “Occupy” movement is using foreclosure sales as a target for demonstrations, disrupting a process designed to ease the backlog of built up property inventory. Protesters interrupt the bidding process to guilt buyers into backing off purchases out of sympathy for evicted borrowers

The consequences may be playing out in the market itself. CNBC reports that ownership levels are sinking to levels below anything on record for decades. Even the most optimistic predictions don’t have ownership returning until 2025. Ownership and price woes make headlines, but negative equity adds to the problem as a hidden factor. As home prices refuse to stabilize, and in fact continue to fall, negative equity will only increase. The vast majority of the ten plus million people who are underwater are still paying their mortgages, but they are deeply underwater, 30 percent and higher. That will take a long time to correct, and will stagnate much of the market for years to come, as these owners are unable to sell.

“We take care of our health, we lay up money, we make our roof tight and our clothing sufficient, but who provides wisely that he shall not be wanting the best property of all – friends?”  ~Ralph Waldo Emerson

Even as recently as 5 years ago, foreclosure properties represented a relatively small portion of transactions. Consequently, the need for title search expertise on this type of property was not significant. Today foreclosures represent a large percentage of property activity, more than half in some areas. the foreclosures are also more complex, due to assignment chain issues and foreclosure defense methods.

Professional title abstractors recognize the increased skill level necessary when running a title search on a foreclosure property. In fact, some searchers do not do foreclosures because they are so much more difficult. Normal title search methods are often insufficient on complicated foreclosures. There can be questions about ownership of the mortgage, whether any prior lienholders have remaining claim to a property, and a necessity to search more deeply into releases of  liens and mortgages. For example, Wells Fargo recently discovered it had lost claims to a property due to a tax lien which wiped out its lien position. A title abstractor would need to be aware of this provision when running a search.

Getting the search results correct on a foreclosure requires a higher standard of care than on a “normal” property. For title abstractors in the industry today, it is important to keep search skills at a high level because foreclosures are not going away soon. In fact, the Federal Reserve reported today that the mortgage delinquency level rose again, meaning that more foreclosures are looming. In addition, cure rates of existing delinquencies are dropping, meaning more of those will end up in foreclosure.

This month Tiffanie Tedesco, AFX Title’s Director of Operations, gained the distinction of being only the 54^th Certified Title Abstractor by the National Association of Land Title Examiners and Abstractors (NALTEA). NALTEA is the largest organization within the Title Abstracting community. Tedesco becomes a member of an elite group of Title Abstractors that has successfully completed NALTEA’s highly regimented training and certification program.

AFX Title is committed to the ongoing education and training of its employees.  Tedesco has been with AFX for over 11 years and is the backbone of the company’s operation. Tedesco will be bringing this advanced training to the daily operations at AFX Title.  With Tedesco’s new title of Certified Title Abstractor, AFX Title’s customers can be confident that one of the most qualified Abstractors in the country is managing their Title Searches.

MSNBC –  ”The U.S. foreclosure rate has climbed to its highest level in seven months, suggesting that lenders are moving beyond a “robo-signing” scandal that had temporarily slowed bank takeovers, according to a private firm that tracks the activity. Foreclosure filings — including default notices, scheduled auctions, and bank repossessions — were issued on 230,678 homes in October, up 7 percent from September but 31 percent below the level of October 2010, according to the report issued by RealtyTrac Thursday.”

Reuters – Home prices won’t bottom out.  - “Myriad problems are going to weigh down the housing market for months to come. The lingering malaise in the economy has triggered a new wave of defaults and foreclosures. After five straight quarterly drops, foreclosures nationwide shot up 14 percent from the second to third quarter this year. Yet as the average 30-year mortgage rate has slipped below 4 percent, the combination of employment insecurity and unusually tight standards for lending are discouraging buyers en masse.”