Buying 1st pos. NPN-- title issue question

[Bob Malecki]

I'm purchasing a first position NPN on a home located in North Carolina. I'm buying it through FCI Exchanges system, fyi. Seller has provided me the majority of the collateral files and I found that the address listed on the original note, DOT and subsequent assignments/allonges are incorrect. The parcel description is correct but the street address is 8 numbers off.

I called the county and they realized that they had the wrong street address listed in the records and have subsequently corrected this, but I'm looking for some guidance on what is the best process to have the title corrected to the the right address, should I ever have to foreclose. Any input is appreciated.

Bob

[Bob E.]

You need to file a "Scribbners Error" I am pretty sure I spelled that wrong but any attorney will know what I am talking about. Should not be a bid deal but you can make it part of the closing if it is. Seller should bay able to pay an attorney a small amour to get it done quickly.

[Dion DePaoli]

Bob was close with the spelling, it's "Scrivener's".

If the legal description in the security instrument (mortgage/dot) and title policy are correct that will be most of what matters. The Legal Description is how the real property is indexed within the county, it is static and it needs to be correct otherwise you have attached to the wrong property. (street addresses get messed up often)

If the street address is wrong and the legal address is correct, you most likely have nothing to really do. You could file an affidavit and attach it to the Subject Property to establish and cure the error. Street address are structured to be amendable. If you recall several years back as many cities built out their 911 call centers many cities had to redo their address systems to account for easier deployment of public services. All in all, street error is not really that big of a deal.

You should have pulled a report on the history of the real property title. That report should also index via the Legal Description and as such, it should show your instrument as a lien along with all intervening assignments. Those all line up based on the legal address as an index not the street address as a reference/location aide. You then would want to make sure the Warranty Deed (or similar) also contains the proper legal description back to the last conveyance. In other words, go back to the last sale and make sure its the right legal and property too. This ensures that what was given as collateral could be given and was given.

If there are errors with the legal description, then you would have to do a similar affidavit which is formally called a Scrivener's Affidavit which can be used to correct the typographical errors. Alternatively, you can usually cure this error in judicial proceedings. An error like that would most like cause a non-judicial preceding to become judicial depending on the state.

A Seller may not be interested in dealing with a Street Address error, as I mentioned they are not uncommon. The instrument is secured according to the legal address (description) and if it matches through all instruments and time, you have an enforceable instrument. I would imagine they will tell you to fix it when you own it yourself. Any real estate attorney can help you with it.

[Bob Malecki]

Outstanding, thanks Dion.

Bob

[Bob Malecki]

Ok, this one has another small snag: I had an Abstrax report done on this property/note and they found that the assignment from the original lender, Familycredit Connection to Deutsche Bank is not recorded or in the chain of title. There is an assignment from Deutsche to Ocwen and more down the line, but that initial assignment is no where to be found.

Doing some research of course Familycredit Connection looks to be out of business. Any thoughts on how to mitigate this potential problem?

Thanks,

Bob

[Dion DePaoli]

@Bob Malecki

Start by telling your Seller it is missing and asking them to provide evidence of it. If it is not recorded, they may simply stick the hard copy (which may or may not be the corrective) in file.

Has foreclosure ever been formally filed on this loan?

[Bob Malecki]

Yes, the seller has his FC attorney initiate FC in February and the seller is contacting his attorney to see why this is missing. I did get a pdf scan of the entire collateral file from FCI and that assignment is missing from that as well. Seller is trying to resolve it-- but he is a middle aggregator who is just reselling some notes from his pool, so his ability to control the documents is likely limited. If this cannot be found, is there anything I or the seller should do to mitigate?

Thanks

[Dion DePaoli]

In "some" cases, courts have been allowing standing via possession and if questioned general intent of the intervening sales. That is a risky bet, IMO. The FCL attorney would be able to comment on the idea in response to not having the AOM in file or of record.

Has there been a response to the complaint or is the borrower still occupying the property (or tenant)?

If uncontested, might not be an issue. If contested, could be an issue.

The company was a correspondent lender, looks like based out of Illinois. They likely do not have any POA. You could try and find them via their company filings in the state, look to IL first perhaps they did a name change or the principal owns a new company. If you can track him/her down, they can simply sign one but that too is an uphill battle.

There could be some other resolutions depending on the file contents and the big picture. More work and without looking at the file not sure they are viable.

Start with commentary from the FCL attorney and see where it takes you. (Maybe get a second opinion too)

[Bob Malecki]

The borrower is still in the home and wants to do a loan mod, and our intention is to resume the mod process with him and perhaps obtain compensation for the past 3 years of delinquent payments via NC hardest hit fund. So, I don't think the borrower will contest since we plan to ultimately not foreclose and do a workout with him. I guess my long term concern is-- will there be an issue when I decide to sell this loan once I get it reperforming?

[Bob Malecki]

Doing some light research it seems that there is an assignment recorded from Family Credit (the originator) to Bankers Trust , then an assignment from Deutsche Bank to Ocwen. So it looks like there is a missing assignment from Bankers Trust to Deutsche. Apparently Deutsche Bank was formerly known as Bankers Trust and changed its name in 2002. See the link below.

So, with that said, what do I need to do to correlate the chain of title? Do I need to have an assignment from Bankers Trust to Deutsche or should I require the seller of this note to obtain some kind of documentation showing the internal ownership change?

http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=2827228

[Bill Gulley]

If you're going to modify the obligation, you can correct your street address in new filings I'd not be concerned with that. A modification will be a reaffirmation of the debt secured, past issues will become irrelevant. To make it cleaner, refinance the old note with a new note and DOT, then everything goes away. :)

[Wayne Brooks]

Agreed, (of course) if you do a loan mod and new note, this all goes away. But if you don't, you wouldn't need an assignment from Bankers Trust to Deutsche since there was no assignment/transfer, just an entity name change.

[Bob Malecki]

Finally got this note purchased and chain of title resolved, thanks to all who contributed.

Now that I have the loan boarded with my servicer, the borrower has faxed in a short sale offer for $20K. I paid $13K for the loan and the BPO is $30K, UPB is $50K and there ar $20K in arrears fyi.

This offer is from him, not a broker, so I'm suspect that he has the funds to buy out his loan, but in the event that a family member is helping, is there anything I should require in addition to proof of funds to review/respond to his offer? I wouldn't mind liquidating the note to the borrower, but don't want to have him tie up the situation for many months only to find out he cannot perform. Also, fyi FC has been filed in Feb by the previous note owner and there is a June hearing to set the sale date.

[Dion DePaoli]

Bob,

The Servicer should have a short sale packet for the buyer to fill out which you then use to review the offer. Inside would be disclaimers to affirm arm's length transaction and other concepts. It sort of sounds like you are not sure if the funds are from the Borrower or a real third party or a straw third party. To that, I would say get a copy of the actual submitted contract for purchase and see who the Buyer is in contract. Owner can not buy the property from himself, he already owns it.

It is customary, prior to approving a short, the Borrower must disclose their financial position to the lender. As in this case, why would a Mortgagee take a short and allow the borrower to walk when the borrower has $20k sitting in the bank? They usually would not.

So, is there more material to collect to review the offer? Yes. The formal offer to buy, proof of funds from the buyer and disclosures agreed to by the Buyer and Seller. In addition, financial paperwork from the Seller/Borrower to ensure the short you agree to take make sense and does not let the borrower off scott free if they can cure some of the additional principal forgiveness, etc.

The disclosures really are not DIY, they need to include good legal language across various concepts. For instance, any forgiveness of principal may create a taxable event for the borrower, you really need to disclose and have the borrower sing off on it, amongst other things.

As I said, all of this really should be "plug & play" with your servicer. If it is not, you should get an attorney to help you draft a packet for these things so as to protect you against future liability.

.

[Bob Malecki]

Then I guess its not a short sale, the borrower faxed in a handwritten offer to pay off his loan for $20K. I'm thinking of countering him at $27K but need to determine if he really has the funds or just stalling.

[Dion DePaoli]

Originally posted by @Bob Malecki:
Then I guess its not a short sale, the borrower faxed in a handwritten offer to pay off his loan for $20K. I'm thinking of countering him at $27K but need to determine if he really has the funds or just stalling.

I see. I have some concerns about this inquiry being turned into a request for relief but I would probably just counter at $27k, if that is my number, and be done with it. If you offer to short at $27k, you really don't care whose money he uses to pay you off nor can it be a condition of yours.

The best method to sort that out is likely a simple phone call so you can keep the $20k offer live and inquire to see if he has more money so you don't have to take as much of a short. I would not get too worked up on collecting documents from him, that will likely serve as a barrier to moving this along.

Counter him and see if he counters you and simply settle on the phone call with an agreed number. All done. Don't fish for pennies, not worth your time really. Rinse and repeat.

[Account Closed]

Hey John, why 20k and not 15k or 25k?

I don't know if the investors will go for 20k since the value of the house is a lot higher. If you want I'll pitch it to them but where should I say the money is coming from?

Any offer like this they'll request proof of funds before they commit. Can you email or fax me a statement that shows you have the 20k?

[Bob E.]

I would recommend going for the Hardest Hit Funds first. Then negotiate a buyout.

I would suggest giving the buyer an incentive to do the HHF. Something like an agreed sale price of 30k less whatever you get from HHF. This gives them a vested interest in the process and makes it even more of a WIN WIN. The state should have a website where you can get an idea of what they are likely to pay and if they will all this given the homeowners cash position. If they won't allow it then negotiate for a better price. if you get 23k then you will have made a nice profit in a short period of time. Congratulations!!!

[Bob Malecki]

Yes, HHF was my main goal in the first place since the borrower already sent in a hardship letter for a proposed loan mod with the former lender. That lender filed FC in Feb. which is still to be scheduled, so that's another checkbox on the HHF qualification list.

The borrower has arrears a bit over $20K so I'll use that as my bargain chip to encourage him to apply for HHF. Heck I'm sure he'd be thrilled to get that liability paid by the state-- not to mention how happy it will make me ;^)

Thanks,

Bob