DOES FANNIE MAE REALLY OWN THAT PROPERTY YOU CONTRACTED TO BUY?

04/13/2010 15:44

 

I realize that this is not Monday, but seriously it feels like it.  You know how Monday's can just aggravate the hell out of you? Well that is the kind of day I am having today.

The day started with a query from a listing agent on a property that was being "sold" by Fannie Mae and the buyers agreed to use the seller's title agent for closing services.   The property was to have gone to closing on Monday of next week, BUT, it turns out that the foreclosure attorney made a mistake in the foreclosure and ended up having to file a motion in the court to revise the report of sale to correct the file AND the trustee's deed is not on record yet.   This will cause a closing delay for at least 30 to 45 days. 

Needless to say the buyer and the buyer's agent were not happy to hear this and now the buyer wants to back out and the buyer's agent want her commission!  The question that was presented to me was relating to whether or not the "seller" in this instance actually had the right to sell the property in the first place given the fact that the foreclosure has a technical error and the foreclosure attorney did not file his trustee's deed into Fannie Mae.

I do foreclosure transactions every day and on 9 out of 10 of these transactions I end up having to record the trustee's deed simultaneously with the deed from the seller (the bank) to the new buyer.  So, I don't really think that that's the problem in this case.  The problem is that the foreclosure attorney erred in the actual foreclosure case as will sometimes happen,  BUT more importantly NOBODY looked until it was too late!!! 

It wasn't until the property went to sale to a third party that any one bothered to really check the status of the foreclosure and the trustee's deed.  At that point in time it's a little late to be finding out that there is a defect in the foreclosure or that the Trustee's deed remains unrecorded. 

I have stated many many times here in these blogs that it is never a good idea to use  the services of the seller's foreclosure mill title company to conduct the out sale of these properties.  You must remember that the foreclosure attorney is NOT doing a title search that is consistent with industry standards when they go to foreclosure, they are searching only from the date that the foreclosed party took title forward.  So, anything that occurred prior to that date will not be discovered by the foreclosure attorney.  AND, more importantly, the title agent that is tasked with performing the settlement for the new buyer is going to use the foreclosure attorney's title report, they are not going to spend any time or money researching the title other than to see if the trustee's deed is on record, and that can be done from the comfort of their lap-top on-line. 

So in the instant case the delay has caused the buyer harm, he has lost money he spent on a home appraisal, home inspection, termite report, location survey moving expenses, etc.  Can he be reimbursed, NO. His only recourse is to request a contract cancellation and his deposit refunded.  Can the Realtor be paid her commission?  NO.  So she is out too!!  No one wins in these situations.  

How many times does this have to happen before the big banks, including FANNIE MAE, FREDDIE MAC, HUD, VA, etc. see that the current way in which they are doing business, insisting on the use of their retained attorneys for outsales is just not helping the consumer or the real industry as a whole? 

Have you any idea the number of claims that have been filed related to the purchase of property that was was conveyed out of a foreclosure?  Do you have any idea how that affects us all?  Well, as the number of claims rise, the premiums for title insurance must rise as well, thus making it even more expensive for the consumer.   Do you know when these errors show up?   Usually not when the consumer makes that initial purchase, but after they have gone to settlement and want to re-sell or refinance their homes.  

And this was just one call that I took today

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