By Dave Krieger (Op-Ed) – September 10, 2012

When I was lecturing at the V. G. Young Institute’s annual Texas Clerks School in January, an interesting question was posed to me by one of the clerks (after having delivered a scathing presentation entitled MERS 101) regarding title insurance coverage.

“How is it that title companies can issue insurance policies when there are suspect issues with MERS and clouds on title?” she asked.

A great question, surprisingly. More surprisingly was my answer: “The title companies are merely ‘writing around’ the defects in the chain of title.”

I could see jaws dropping around the room. I continued with my answer:

“In virtually every title commitment issued there exists a ‘Schedule B: Exclusions’; under most every set of exclusions (generally under the 2nd or 3rd sentence), a title company can refuse coverage if the issue creating the problem isn’t recorded in the public records.”

More jaws dropped. They had put two and two together and things didn’t add up.

With the advent of the Bain v. MERS ruling (August 16, 2012) by the Washington Supreme Court, the landscape surrounding MERS’ ability to participate in non-judicial foreclosures has been vastly curtailed if not nullified with the ruling that MERS is not a valid beneficiary under the Washington Deed of Trust Act. The ramifications surrounding the yet-to-be-appealed decision are numerous and Stewart Title has now taken the liberty to introduce us to some of them … from a title company viewpoint as to insurability of title. Click here to download the .pdf version of that memo!

The “end game” for title companies appears to be on shaky ground and Stewart Title can now elect NOT to issue a commitment letter on REO (real estate owned) property that has been foreclosed on or is facing default, especially if MERS, Fannie Mae or Freddie Mac is involved!

That scenario in of itself creates a huge problem for the Washington real estate market, inevitably putting many REO and short sale transactions on hold. The Oregon Supreme Court may also uphold an appellate ruling that sticks it to MERS in much the same fashion as its neighbor to the north has. The Oregon real estate market is already feeling the ripple effect of that ruling. The shocking truth is however, is that if and when the litigation starts (and it will) regarding the fine points of this memo (regarding the legality of MERS to do anything and its subsequent involvement in any kind of improper foreclosure activity) Stewart Title and other major title companies that assisted in respective title searches and processing for these foreclosures on behalf of the major banks and their “trustees” could end up as defendants in costly and protracted litigation. Based on the inside track, Stewart and many of the other major title insurers have much to worry about.

The bigger problem is that despite the Washington Supremes’ ruling, MERS and its certifying officers are STILL FILING DOCUMENTS in the land records in Washington counties! Until the suits start flying and injunctions against this continued behavior start getting issued by the courts, things with MERS and the substitute trustees instituting these foreclosures will be status quo.

One can simply assume that the damages will be easy to prove; but robosigning, even though it still continues to this day despite the AG settlement, is not in of itself a crime. It’s what’s in the underlying meaning behind the act that is the real problem. Insurability of title is a real problem. It has been ever since MERS’ business model permeated the nation’s land records.

The title companies appear to be “in bed” (generally) with MERS. After all, the American Land Title Association was one of its founding members. Total irony, I know … a land title non-profit trying to tell MERS members and America’s rank and file clerks and recorders that their current system of records maintenance is too slow for securitization.

Couple the foregoing scenario with hordes of ignorant recorders, clerks, auditors and registers of deeds and you’ve got a recipe for disaster within the national land recording system on a massive scale!

It will take a century to clean up the mess that MERS and its minions created in 13 short years. No act of Congress can solve this problem. Give it 24 months … this issue will be in front of the U.S. Supreme Court. Once and for all I can say with a certainly, “Is that your final answer?”

This is an issue the courts largely choose to ignore … for now.


By Dave Krieger

A follow-up that is anything but finite …

An Associated Press report issued yesterday might have made for cause célèbre, in light of the anniversaries of Waco and Oklahoma City (and what some might make light of as a satanic holiday), however the end result is anything but complete.

Lee B. Farkas of Ocala, Florida, who this author had written about in his book CLOUDED TITLES, was convicted on all 14 counts in what amounted to nearly a $3-billion fraud scheme which helped, in part, take down Alabama-based Colonial Bank. Six of Farkas’s cohorts at Colonial and Taylor, Bean & Whitaker turned government witnesses in exchange for lesser sentences, all turned on the former chairman of the now-defunct and widely-publicized firm now in bankruptcy. At the time of this writing, Farkas is awaiting sentencing.

While it was discovered that there were “sweeping” practices (covering overdrafts on a daily basis to keep the accounts solvent) going on, evidence also came to light on the multiple pledging of residential and commercial mortgage loans in the securities markets. U.S. prosecutors alleged that over a billion dollars of these loans ended up at Colonial, who maintained they were legitimate assets on their books when they were anything but.

You may remember that during discovery in the TBW bankruptcy, Freddie Mac and Bank of America got into the proverbial “pissing contest” over who would get access to the discovery … at that time it was claimed that multiple pledging of mortgage loans was commonplace. This, my friends, is where this story stops and another begins.

Multiple pledging … Multiple investors … Multiple claimants …

Now we come to the part of this simple scenario that I hardly find amusing.

When you take the same promissory note, whether it be residential or commercial … and you use that note to entice investors to put a “stake” in it via their “retirement” or “investment” funds, knowing that someone else already put up money against that very note, you get multiple claimants. The claimants however, don’t know that each other has invested in the same note because each of the prospectuses offered to each individual claimant doesn’t quite spell out all of the assets that each investor was going to expect a return on and who’s comparing notes anyway?
While I’m not going to dawdle about what went on inside Wall Street brokerage houses, I do wish to point out that each one of these claimants represents what I consider a potential “intervening assignee” in a quiet title action, something that homeowners and their attorneys may wish to think about when putting together their pleadings. What I do find amusing is the way the banks’ attorneys occasionally poke fun at a given plaintiff’s allegations that there are “John Does 1-1000” that may be involved as unknown investors, when this whole time, the banks knew that this scenario was not only probable, it was more than likely true according to what the Farkas case shows us.
You see the things we learn … a note is a lien against the title to the property. If you hold the warranty deed, doesn’t that give you superior title to the property? After all, a lien is a lien, except when several lien holders come forward and all claim they have an interest. This has happened before (in Florida) where two lenders came forward and foreclosed on the same house. What do you think that does to title? Clouds it? Maybe?

If these interests were never recorded in the county land records … and MERS and LPS were involved in any known recorded assignments … doesn’t that bring in a whole host of new issues that one could seek to quiet title on? The Farkas case just cracked the lid on another whole host of properties that now face claimant issues that may only be resolved by quieting title.

And the banks? What we’re seeing now is a scramble by trustees to attempt to get out of these suits. They want no part of any allegations of breach of fiduciary duty (to the borrower and the real creditor) and negligence (for failing to exercise due diligence to determine whether the lender involved in the non-judicial foreclosure was really the party in interest). We’re also seeing banks removing these quiet title actions to federal court, where the jurisdictional issues of a federal court quieting title to property situated in state lands as the banks “hide” their real objectives, to stall as long as possible so they can keep bad case law off the books while they wait for their buddies inside the beltway to step in and “do something”. This certainly is something to watch for and protest against.

The calamity of wanton jurisdiction …

For the federal courts to think they can quiet title is at best, absurd. Every state has a statute and/or has given every homeowner the right to quiet title on their property, if in fact they can prove their title is superior to that of their known and unknown claimants, as well as defeating those challenges to claimed liens wherein the right to enforce does not exist. But for a federal court to step in and claim it has the right to quiet title on state property? 10th Amendment?

Mark Aspey, a federal district court judge in Arizona “gets it”. In the Forde case, he remanded what he stated were clearly state-sanctioned issues back to Maricopa County Superior Court. Other cases however, haven’t been as lucky. At least one other Maricopa County quiet title action that the author is aware of has been removed to federal court, where another judge asked the attorney why she listed the property as a Defendant in her quiet title action. Excuse me?

My answer to that … and this ain’t legal advice folks, just my researched opinion … is that you have indispensible parties and necessary parties. The Plaintiff in a quiet title action (or one who claims to own the property in title superior) is an indispensible party. The subject property is situated in the county and state that collect taxes from it. If the property owner doesn’t pay his property taxes, then the County becomes an indispensible party because of its claim by right of jurisdiction to seize and sell the property to someone who WILL pay the ad valorem property taxes. All equity flows from the subject property. Without the property and the Plaintiff, you wouldn’t have indispensible parties. Necessary parties are all known parties to the contracts and liens that come against the subject property. Mortgages and deeds of trust represent security interests against the indispensible subject property. When these “liens” are pledged multiple times, you have a real serious problem. Now you can point a finger at MERS and Wall Street.
If you have unknown investors, because from what we’ve seen, there are many ways to hide the chain of custody of the note (this becomes necessary for a judge to decide through declaratory judgment the rights and interests of the parties involved). Discovery may or may NOT uncover these glitches. This is why I do chain of title assessments for the attorneys who retain me.

The argument for chain of title assessments …

Chain of title assessments are kind of like an x-ray to a doctor. Generally, you see them order an x-ray right before surgery so they can see what they’re dealing with before they cut. A chain of title assessment kind of works the same way for an attorney. It tells him when and where gaps in the chain of title are suspect. It suggests possible strategies to defeat motions to dismiss wherein the lenders all claim the chain of title is clear up until the time they got ownership of the note.

It gives the attorney more information for the purposes of formulating discovery, something else I do as a paralegal. I can’t litigate it, but I sure can play “Devil’s Advocate” with counsel when it comes to ferreting out possible challenges from the other side. This is part of my consult work. The attorney has to argue what he feels best about arguing before the judge. That’s not my call. The attorney will go with what works in court … what a judge can get his head around.

There are very few paralegals (to my knowledge) that have grasped the entire concept of comparison of chain of title to chain of note custody; but it’s there … and so are the agency arguments to go with it. In time, many will have been trained into this procedure. This generally takes a couple of days and several sample sets of documents to grasp the concept in its entirety.

Your attorney can order a chain of title assessment for your case by emailing me directly at cloudedtitles@gmail.com. Assessments start at $750 and go up depending on the number of documents analyzed. There are NOT enough paralegals to handle the prospective number of upcoming quiet title actions, so it becomes necessary to effectuate seminars to accomplish that task. As a result, I have formed an LLC to take on that task.

I recommend you read CLOUDED TITLES first because I do not have the time to educate you over the phone and via email. You get up to speed first, then you fight.

Securitization and quiet title …

What does Wall Street have to do with your title to property, you ask? Multiple pledging of your loan to several investors? There’s a new quiet title action that was just filed in Lewis County, Washington that actually names two of the known investors (much to their chagrin) as Defendants.

“This is probably one of the most complex cases I’ve ever done,” says Seattle attorney Matthew Hale, who represents clients in quiet title and foreclosure defense actions in the Pacific Northwest. Mr. Hale can be reached through his website at www.sentinellawgrouppllc.com.

Armed with a declination letter and a very irate title company executive, Hale believes that the service of process could be a problem, “because we don’t know where all of these investors are”.
Still more problematic is the fact that it’s common knowledge that all of these investors, which run the gamut from 401(k) and retirement accounts for schoolteachers’ unions all the way to private source investors seeking to make a fair return, purchased non-recourse bonds. What the end result of this has caused is lawsuits brought against banks and brokerage houses and the trusts they represent in the Southern District of New York for fraud and misrepresentation, mostly on the prospectuses issued by these brokerage houses to entice investors to purchase these collateralized debt obligations.

The trust that is foreclosing on Hale’s client is one of those trusts being sued by investment groups. It will be interesting to see how the judge will react when these investors come to court and tell the court why they are suing this particular trust and the title company executive tells the court why Hale’s client’s property is uninsurable. This is sure to raise potential issues for summary judgment, something the lender doesn’t want to hear and will certainly have trouble arguing against.

Even though the investors in many cases have no direct claim to the Plaintiff’s property (because after all, they bought and held non-recourse bonds), if these investors were told that they suffered a loss because the trust was written down or written off as a loss, then any agency relationship tying the trust to any loan it attempts to foreclose on may be at issue because the trust as a party would then lack standing to pursue an action; an issue of course which will have to be determined by a court.

Still, the agency arguments may be defeated simply by the information contained in the front of the pooling and servicing agreement (“PSA”). Sorry, but I just don’t see the need for a full accounting of a trust that may have NOT gotten the promissory note tied to your mortgage or deed of trust. Who knows … it could have been bifurcated by MERS or some other entity with no known pecuniary interest. Agency relationships and contract law pretty much dictate the chain of custody of the note. Securitization is only the process by which the note was resold multiple times to different investors (or so we think). When you talk about securitization to a judge, they don’t get it. That’s what we’re seeing (“we’re” meaning my group of attorneys I work for) in the courts now.

The question still remains … if the investors bought non-recourse bonds, what makes them necessary parties to a quiet title action? They don’t hold an agency relationship with the table-funded lender, even though they may have contributed the funds that constituted your loan.

We still have clouds on title …

I spoke with Jeff Thigpen, the Register of Deeds for Guilford County, North Carolina, who quickly informed me of the search he’d done of all of his records after the 60 Minutes piece aired on LPS’s Linda Green.

“I found 1300 documents, mostly assignments, with Linda Green’s name on them,” he said. The issue then becomes HOW to deal with this problem. Can you imagine 1300 separate quiet title lawsuits being filed out of Guilford County, North Carolina alone against multiple parties, including MERS and Lender Processing Services, Inc.?


By Dave Krieger

This opinion is based on legal research only and cannot be construed as legal advice!


The point being here … if you didn’t learn anything about quieting titles in the book “Clouded Titles”, it would be best suited perhaps to espouse the deeds of U.S. Bank and Wells Fargo as they attempted to do what I call “a quiet title action in reverse”.

At first glance, this case involves procedural and agency relationship errors. For those of you in the Commonwealth of Massachusetts, you’ll note from the slip order issued by the Massachusetts Supreme Court that the actions preceding their ruling were brought “in the Land Court under G.L. c. 240 § 6, which authorizes actions to quiet or establish the title to land situated in the commonwealth or to remove a cloud from the title thereto.”

The analysis by the High Court points to the law firms experienced with studying quiet title actions, yet the attorneys missed the boat on proving agency, which is a fundamental element of quiet title actions. Proving standing to foreclose on a mortgage or deed of trust is one thing; proving how you got the note to enforce on the other hand is part of what makes up the chain of title. When those assignments are not recorded, because they happen to be in the MERS system, or simply sold willy-nilly several times over without perfected security interests being recorded in the land records in the county where the property lies, you’ve got a problem. In these cases, the banks created their own problems without them even knowing it.


By Dave Krieger

When you first glance at page 1 of this House Bill, initiated by Ohio Congresswoman Marcy Kaptor, it’s almost as if you’d think, “Yes, there is a God!”

However, the “Transparency and Security in Mortgage Registration Act”, while nailing MERS in regards to prohibiting Fannie Mae, Freddie Mac and Ginnie Mae from owning or guaranteeing any MERS mortgage where MERS is claiming to be the “mortgagee of record” (which is about 65,000,000 properties), also dabbles with the idea of a “federal land title system”, something this author thinks may shortchange our states’ rights to real property recordation. (more…)


By Dave Krieger

The case is Easton v. Bosco et al with a case number of CV2010-054748; filed four days after U.S. District Court Judge Mark E. Aspey remanded a quiet title action back to the State Superior Court for Maricopa County, previously removed by Defendants First Horizon Home Loan Corporation and others to federal court, which the author views as a typical move to hide from state court discovery actions. (more…)


By Dave Krieger

It was a telephone conference you would have just died to be on. It appears that county recorders are starting to take notice of the losses in revenue with MERS’s circumvention of their recordation systems. By best conservative projections out of this conference, John O’Brien, Essex County Massachusetts Register of Deeds head is foaming mad that MERS has skated off with (in the event of at least one recordation past the initial filing of the mortgage) with $1.95-million dollars a year that rightfully belongs to Essex County. (more…)


By Dave Krieger

The title insurance companies have shifted the blame … to the lenders. What did you expect? Just visit the county courthouse and examine the records of a given homeowner who has a MERS mortgage or deed of trust and you’ll still find problems in the chain of title.

On October 1, 2010, when Version 1.1 of the book was launched onto the Internet, the strategy was based on previous information (of the previous six months) that title companies were going to be “exposing” themselves to unnecessary risk by guaranteeing title insurance to properties whose titles were slandered or clouded. This meant that one could get a homeowner’s indemnity policy with conditions and exceptions and use it to potentially create prima facie evidence in a quiet title action. This method actually “stuck” in one case that appears to be headed for settlement soon. Insider information has revealed that a federal judge has seen this author’s work (as have some bank attorneys) and they were impressed with the clarity and understanding put forward in the author’s assessments. (more…)


By Dave Krieger

Not time for the “I told you so speech” … but the tell-tale signs that the title companies are starting to get nervous about insuring distressed properties is now starting to manifest itself. A Realtor for Keller-Williams in Kansas City had a $600,000 short sale cash buyer all ready to go. The house was worth over a million bucks and the bank agreed to let it go for substantially less and everyone (well almost everyone) was happy. Imagine the commission on a price tag like that … at 6% you’d be looking at splitting a $36,000 check 4 ways (generally) at $9,000 a pop. Now imagine the agony when you are told by Chicago Title that you are denied title insurance until the backlog of clouds on title gets cleared up. Chicago Title is one of many major players in the insurance game that is seeking to limit its exposure created by problems surrounding the broken chains of title that the securitization of residential mortgage-backed loans has created, especially with MERS dicing up the chains of title of over 62-million (or 60% of all current) mortgage loans electronically registered. (more…)