TITLE COMPANIES “NOT OUT OF THE WOODS” YET ON COVERAGE

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.

THE SHOCKWAVES OF THE IBANEZ-LaRACE CASE CREATE NATIONAL RIPPLE EFFECT; BANKS HAVE A REASON TO BE NERVOUS; E&O CARRIERS WATCH OUT!

By Dave Krieger

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

IT’S HOMEOWNER-PLAINTIFF QUIET TITLE ACTION IN REVERSE

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.
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H.R. 6460 IS A START; BUT ON THE RIGHT TRACK?

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…)

Dave Krieger appears on KVUE’s Midday newscast Consumervue segment.


Watch Dave Krieger on KVUE
Dave Krieger appears on KVUE’s Midday newscast Consumervue segment. Krieger speaks directly to homeowners who may be facing foreclosure through no fault of their own and the uncertain future our country faces as the plot “foreclosure mess” thickens. He reveals the motivation behind the book Clouded Titles and describes his personal experience dealing with quiet title action on two of his own properties. Dave address the subject of robo-signers and outlines a few examples of how his investigative efforts have turned up some unusual and questionable findings. He touches on the fact that Northwest Trustee Services is currently being investigated for wrongful disclosure. Anchor Olga Compos closes the interview by asking “how did we get into this foreclosure mess in the first place?” Krieger’s answer begins, “MERS …”

WHOSE SIDE ARE YOU ON ANYWAY?

By Dave Krieger

Stewart Title has erred on the side of caution in its stance against issuing title policies on foreclosed properties due to the “robosignor snafu” that may have effectively clouded those titles. Stewart joins Old Republic Title in its effort to “stop the bleeding” via limiting its exposure to claims by denying Ally Financial-GMAC Mortgage’s REO properties due to admissions by one of its robosignors, Jeffrey Stephan, that he signed thousands of documents without having personal knowledge as to their contents and then having them notarized to appear “official”. Later, Beth Ann Cottrell, working for Chase, made similar admissions under deposition.

Chicago Title has been issuing commitment letters with exclusions and conditions for quite some time in an effort to cover itself against illegitimate claims. However, in the wake of all of this, the CEO for American Land Title Association, Kurt Pfotenhauer is downplaying this whole “cautious” thing, saying (along with Rick Sharpa of RealtyTrac) that this is much ado about nothing. Of late, Steve Bartlett, former Dallas mayor, Congressman-turned Wall Street lobbyist, told Bloomberg News in effect that the 50 states attorneys general should effectively “butt out” of the investigations by Congress in determining the legality of the court and county-recorded filings created by these robosignors that played into the hands of the lenders.

While I take issue with ALTA’s and RealtyTrac’s stance on this whole affair, I have to stop and ask myself every time one of these “slanted” views comes forward, its like, “Whose side on you on here?”

Sharpa, like so many others, seems to believe that challenges to these document snafus are just another form of “prolonging the inevitable”. Inevitable for what? Losing your home so the real estate market can “right itself” and properly hit bottom? This is NOT all the consumers’ fault fellas. They may have come begging under the pretenses of the American Dream, but the lenders certainly didn’t have to cater to them … that is … unless there was some other underlying agenda in mind (uh, er, having to do with securitization of RMBS’s on Wall Street?).

Frank and Brian, the two fast-talking pontificators that drop YouTube videos through ThinkBigWorkSmall.com actually came out saying that MERS was a “good thing”? Geez. If Mortgage Electronic Registration Systems, Inc. (MERS) was such a good thing, then why did JPMorgan Chase jump ship? Why did MERS CEO R.K. Arnold post an apparent “damage control” press release espousing the value of MERS four days prior to JPMorgan CEO Jamie Dimon’s announcement? Is it because he knew that maybe more than just JPMorgan was going to say goodbye to their system of electronic recordation in the face of public and potential criminal scrutiny?

What sadly rears its ugly head (again) is the “business world of banking” taking issue with the “less than frivolous and foolish consumer”, who went out and bit off more than he could chew. Is it not only right that the 50 states AG’s should at least explore WHAT happened behind the scenes, even if this smacks seemingly of an “October surprise”?

Public suspicion also mounts because of the concerns over the bleak economic picture of America, considering the fact that real estate sales play an important role in the overall GNP picture. Everyone is affected by this mess, not just the foreclosed homeowners. Until we “clear the air”, every politician and every banker is going to get a sideways look from every consumer in America. We wait with baited breath to see what Congress won’t do next.

As for the title companies, let them err on the side of caution. It’s not only proper as a defense mechanism, it’s just smart business. I predict the insurance companies through the E&O carriers are next to get hit as the legal claims start flying in the face of clouded titles. Just remember there is a time when the title company could be your best friend instead of your worst enemy when it comes to legal pursuits.

As for ALTA, watch for membership in-fighting, because it’s coming!

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