No Warranties?

Question

Are most REO's sold "with no warranties expressed or implied by seller?
I understand all banked owned properties are "as is" does no warranties mean the same thing?
Even so since this is a bank owned property, the title will be transferred to the buyer with clean title correct?

Rachel Zhang · Answer

I bought a property at trustee sale of a second lien and after a month's rehab, put in on the market for resell. 3 days after my buyer got into the contract, the 3rd lien hold (BofA) filed on NOS on the 3rd lien...I informed the trustee and the bank about the situation...and Bof A got back to me that "they are looking into the situation" They thought they are the 2nd position, since it was a HLOC, but the 2nd and 3nd recorded date were 14 days apart. By legal definition, the Bof A is the 3 rd, and wiped out. period. But they still take time to investigate. and the title company won't issue title insurance, even through they believe the 3rd is wiped out. I am thinking to rent it out and sue the bank..for loss, any specific recommendations? DO not want to pay lawyer until it is done...how long it would take? I think it is straight forward clear, why bank is dragging its feet?

J Scott · Answer

They didn't use the term "current transaction".

They used the term "the transaction vesting the Title as shown in Schedule A".

As you suspected, Schedule A is the description of the current transaction (I'm happy to post a copy of Schedule A if you have any doubts).

So, that's the more legal way of saying the "current transaction".

In other words, the policy only excludes fraudulent conveyance or fraudulent transfer when it is specifically related to the transaction at hand, not when it occurred during a foreclosure.  This title policy would cover a fraudulent foreclosure.

Also, if you read a whole page into the link I provided above, it says exactly what I'm saying here, though with a lot more authority.

Dale Osborn · Answer

I was unable to see any clarification from the above site. Here is the data from your closing document:

Any claim,  by reason  of the operation  of federal  bankruptcy, state
insolvency, or similar  creditors,  rights  laws, that the transaction
vesting the Title  as shown  in Schedule  A, is
(a) a fraudulent  conveyance  or fraudulent 
transter,  or
{b} a preferential 
transfer  for any  reason  not stated  in Covered
Risk 9 of this policy.

Any claim by the reason of the operation of federal bankruptcy; 
Any claim by the reason of state insolvency;
Any claim by the reason of similar creditors, rights laws that the transaction vesting the Title as shown in Schedule A, is
a fraudulent conveyance or a fraudulent transfer.

Note: WA court has ruled if MERS foreclosed - they were not the legal note holder so it would be a fraudulent conveyance in your chain of Title.

Did not see the term current in the info anywhere. Perhaps if we refer back to Schedule A, it will state the current transaction, but I do not see it here.

J Scott · Answer

Dale Osborn

First, that's completely different than what you claim above (that anything not in the public records isn't covered).

And second, that's *NOT* what #4 says.  You're misinterpreting it in two ways:

1.  This exclusion only covers claims that are a result of insolvency of a party to the secured transaction; and

2.  This exclusion only applies if there is a fraudulent conveyance in the *CURRENT* transaction, not if there was a fraudulent conveyance in a prior transaction, such as during the filing of the foreclosure deed.

For more information to support my interpretation see this reference:

http://books.google.com/books?id=QwIG8waPOXcC&pg=PA228&lpg=PA228&dq=any+claim,+by+reason+of+the+operation+of+federal+bankruptcy&source=bl&ots=XSWeeMFHW_&sig=0mw9XrWW1UKITcNztZKQrGFUsUE&hl=en#v=onepage&q=any%20claim%2C%20by%20reason%20of%20the%20operation%20of%20federal%20bankruptcy&f=false

Dale Osborn · Answer

On the second page under item #4: It states it is not covered if there was a "fraudulent conveyance" or a "fraudulent transfer". This is exactly what I am trying to open the eyes of all investors about.

Here in the state of WA - the court ruled that MERS was an agent for the banks and was not a not holder, yet many of the loans that were securitized and sold on the open market named MERS as note holder. They have foreclosed as note holder and now that has been ruled as being fraudulent foreclosure nullifying the foreclosure process and returning the property back to the individual. MERS has no idea of who the note holders are as they broke the notes down into partials and sold it however they could. 4 years after a sale to an investor the property was taken back as one of the note holders came forward and said - wait a minute - when the property was foreclosed on - I did not get paid. I want to be paid. This starts a snowball effect back through the chain of title after the foreclosure.

If you want to see the REI presenters website - it is www.MIRSnow.com. You can look at some of the court cases and there is a checklist for doing a chain of title assessment on your property. They are willing to do it for you if you pay them a $2500 fee. They are operational in 15 states currently - not sure if your state would be covered. You probably could do the checking yourself if you have a particular property you might not feel was foreclosed on properly.

Hope this helps you see things as I am trying to present them to all on the forums.

J Scott · Answer

Either you're not reading your policies carefully enough or it's time for you to get a new title insurance provider!

I've never seen this on a title policy, and just for fun, I just grabbed my two most recent title policy, and looked at the exclusions.  On both, there was an exclusion for things that were not in the public records, but *ONLY* if the insured knew about it prior to the policy starting and didn't disclose it the title agency.

Here is a link to the policy exclusions for both policies (one was First American Title and the other was Old Republic):

http://www.123flip.com/wp-content/uploads/titleexclusions.pdf

I'm guessing your policies say the same thing as these two, and you just misread them.

Jeremy M. · Answer

Thanks  for the info. I'll make sure to read the policies!

Dale Osborn · Answer

All policies I have ever read through exempt any claims that are not in the public records - and yes I do read the dinky print. Last refinance I did took 4.5 hours as the paper work was not provided before closing to read through. I took my magnifying glass to the closing and read through all of the paperwork before signing it.

J Scott · Answer

Where are you getting that information?

A title insurance policy will protect you from any legal claim against the property, other than what is specifically called out as an exception in the policy.

Read the policy, see what the exceptions are -- everything else should be covered.

Jeremy M. · Answer

O I see thanks