clouded title mortgage help

[Nan]

I think my recent refi on mortgage may have clouded title. MERS involved, nothing recorded at registry, no transfers or assignments. Last i knew Freddie Mac had it in a mortgage pool. I'm tempted to file quiet title, as the Trustee may discover this and have mortgage avoided and declared unsecured loan - then he could take and sell house even though I am current and want to keep house. Just can't follow chain of title and can't afford lawyer. Anyone else have such a situation? Can Trustee and I together seek quiet title or proof of standing? Seems risky to bring it to the Trustee's attention, but may be my only hope. 341 next week - ch 7

[justbroke]

The Trustee will be checking the title. There is nothing that you can do now, since you do not currently control the property of your Bankruptcy estate. The Trustee controls all your property. These "quiet" title actions are not as simple as they appear. From the outset, I don't even know what you mean by "nothing recorded".

You should just sit on your hands and see what the Trustee wants to do. If the Trustee finds this through their normal title search, then they may pursue it. If the Trustee doesn't pursue, you may be able to after the Trustee abandons the property. Abandonment happens upon direct motion by the Trustee, an order compelling abandonment, or the case closing, whichever comes first.

If you can't afford an attorney for this action, it may be too difficult to overcome. There are all types of traps for the pro se filer in these matters. I've only read one case, nationwide, where a pro se foreclosure defendant was successful... and that wasn't even in a quiet title action.

If this property really has title issue, you should find the money to have a forensic examination of the records. However, and again, I would not take ANY action on this property during the pendancy of your bankruptcy!

[Nan]

Thanks so much- I agree that I best just sit on it for now and see what happens. By 'nothing recorded' I mean that the original mortgage was reorded at the registry of deeds, but then they sold the deed and note through MERS but MERS has not recorded the transfers/assignments that were made from the original loan. In NH these transfers are supposed to be recorded at the Registry so anyone and everyone can follow the chain of title - without doing that then one really doesn't know who is actually holding the note. MERS has no interest, the servicer (BAC) only receives payment so they may have no standing, Freddie Mac evidently then ended up with note and put it in a mortgage pool in securities so those investors actually own the note whoever they are. Wall street got bailed out and on it goes. A real mess for homeowners. Thank you!

[justbroke]

Thanks so much- I agree that I best just sit on it for now and see what happens. By 'nothing recorded' I mean that the original mortgage was reorded at the registry of deeds, but then they sold the deed and note through MERS but MERS has not recorded the transfers/assignments that were made from the original loan.

MERS has always done it this way and this is why anything with MERS on it, has become very litigious. The whole purpose of MERS was to avoid having to pay the "recording" fees when the mortgage is sold to the secondary/tertiary markets and lumped into large mortgage-backed securities (MBS). This is a standard practice.

What the lender usually does, is just before foreclosure, they actually record the assignment. An assignment is valid even if it is not recorded. In most States, a foreclosure requires that a valid assignment is recorded prior to commencement of the proceeding. This is why Florida has seen a rush to file these assignments before foreclosure. Prior to all the fuss about MBSs and MERS, foreclosures were pretty much un-challenged and everything was done by default "summary" judgment. Now, there are so many paperwork problems, that "some" courts are more cautious.

Just so that you know, and I think I'm trying to follow what you are writing, this "produce the note" thing doesn't work in 99.9999% of the cases. As one judge wrote in a motion to avoid lien, in a bankruptcy case... the fact that there is a chain of custody issue with the Promissory Note does not mean that there is no mortgage and that the debtor is entitled to a "free" house. The fact that the debtor signed the original mortgage and the fact that it was recorded without a "satisfaction of mortgage", is proof that the debtor owes someone. Much of the hoopla is over just "who" does the debtor owe and "who" has standing to bring forth a foreclosure action.

I have only read one "pro se" case in Florida (with over 1,000,000 foreclosures in the last 5 years), that was sucessful in stopping a foreclosure. The pro se defendant, however, never obtained a free house.

I am in no way saying that it can't be done. If you can prove that the security instrument and the promissory note (note) were "bifurcated", then you have a chance to have the debt deemed unsecured. There are very very few cases that were successful with this. I only remember reading 1 or 2 such cases.

In the end, the "produce the note" strategy only works to delay foreclosure. It never stops it. Almost all Promissory Notes since the 1990s were "endorsed in blank", making them bearer instruments. It is no different than a check written to someone and then "endorsed in blank" to the bearer. The problem with these foreclosures has been, and will continue to be, that these promissory notes are housed in warehouses and no one can find them! No note, no foreclosure. That's the "produce the note" strategy. (Also, in most States, there is a provision that allows a creditor to "re-establish" the note through a lost note affidavit process.)

As I stated before, eventually the paperwork issue is worked out in 99.9999% of the cases. Sometimes, you can use this as leverage to get a modification, forbearance or even principal reduction.

I know that I would be happy to read about your journey through this maze and see if you are successful.

justbroke's study guide: A recorded assignment is merely an instrument for assigning priority when there are multiple claims/liens against a property. In most cases, the physical possession of the Promissory Note is what proves ownership, not the assignment.

[Nan]

Thanks for the informative response, justbroke. I am going to just sit tight and see what happens. My only fear was that I found a case here in NH where the transer/assignment was not perfected at the time of debtor's filing Ch 7 and for that reason the judge determined it to be an unsecured loan. However what I don't know is how that effected the rest of the case......
I have some exempt equity and want to keep my house (I built it myself and have a small farm) and am current so I should be OK I guess. Just have to wait and see. If the trustee makes it an issue then I will see about converting to 13 if it helps.
The other issue is although I am below median,(and didn't have to do the whole Means Test) I do have a 403b deducted from my pay which I counted on sch. J. I know I can claim that in ch 13, but filed 7 in good faith as either way I have no other assets except the house. I'm nearing retirement so hopefully it will be considered necessary and reasonable. So much to think about and worry about . I have to just keep telling myself to take it one day at a time - for now that means just getting myself to the 341 next week

[justbroke]

You wouldn't happen to have a citation for that New Hampshire case, do you? I'm interested in reading the entire opinion and memorandum of law.

As for the 341, it will be a breeze. You should have no worries. The only thing will be if the Trustee brings up the mortgage on the property.

[df04527]

Nan -- know your not alone here. All of us got here for the same reason and I, for one, haven't left after I was done! It's a good group of folks with tons and tons of real life experience that you will hear. Let that comfort the unknown ahead for you.