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.
Generally, as I’ve noticed, the propensity for foreclosed homeowners to hire counsel after-the-fact and sue their way back up the chain of title has the insurance carriers fretting. It only takes a few huge payouts to start stressing the accounts to the point where denials of homeowner indemnity policies will become commonplace. A recent article in the Seattle Times editorial section even trumpeted:
One has to wonder where the title-insurance business is in all this mess. Who indeed are the guarantors of clean titles? Sloppy foreclosure practices and the toxic legacy of casual record-keeping has to distress anyone looking to buy a distressed property.
And if you think that the banks can just toss a little PR out into the mainstream to calm an angry public claiming that “there aren’t any problems with our foreclosure procedures” hasn’t fixed the problems that lurk in thousands of public property records in county courthouses all across America. With the number of foreclosures expected to bash an already-stressed housing market in the next six months comes the tragic possibility that insurance companies that indemnify those foreclosed homeowners will pull the plug on underwriting foreclosures and short sales.
And the robosignor fraud continues with one case in Tacoma where a quiet title action was filed on behalf of a homeowner-investor and another one for the same Plaintiff on the way in short order. Both alleged fraudulent paperwork. One of them which was personally examined by me showed obvious fraud wherein a California notary swore a party under oath claiming to be a representative of a foreclosing trustee, a woman, signed her name “Chuck (last name illegible)”. They mailed it from San Diego to Tacoma, which if proven fraudulent, constitutes mail fraud and that’s a 95% slam-dunk for federal prosecutors! Given the fact the same documents were recorded in the courthouse electronically … add a wire fraud charge to the other one. That’s up to 5 years and $250,000 in fines for each count! When enough robosignors go to prison, maybe this will stop. The first case was filed in Pierce County Superior Court: 10-2-13490-1 (Nilson v. Quality Loan Service Corporation of Washington et al).