Inquiring minds are reading even more on the sins of the mortgage industry in an article entitled, “Servicers Still Reeling From Missing Assignments“. This is an explosive expose of what caused this problem and why these mistakes are so important to understand:
Discrepancies between information contained in county records and information in servicers’ files or imaging systems; flimsy placeholders that vaguely indicate a mystery assignee exists; last beneficiaries of record that are no longer in business, let alone easy to locate and persuade to execute a document – these are only a handful of the considerations with which servicers must contend when trying to perfect their collateral files.
Although providing a clear chain of title has seemingly relinquished its position as servicers’ main document-management concern for the moment, remedying missing mortgage assignments remains a tedious aspect of the business. The number of missing assignments is huge, according to vendors that handle documents, and it is the result of rapidly changing loan ownership and lackluster due diligence.
Today, servicers are forced to confront their errors of yesterday caused by taking shortcuts. Some shops are, whether to raise capital or simply tidy up their portfolio, selling off their distressed assets – transactions in which the buying entities now understand these mistakes and accompanying coverup deceptions, and are being much more demanding about clear title. In other cases, companies that bought loans are using missing assignments to support repurchase requests.
Among the reasons for servicers to perfect collateral is the growing judicial requirement for files to be perfect:
“What’s becoming more and more prevalent is, when you go into a courtroom, it’s [the judge’s] courtroom, and they make rules on their interpretation and their personal opinion,” says Mike Wileman, president and CEO of Orion Financial. “We’ve seen it for years in bankruptcy. Anytime they’re holding the lender’s or servicer’s feet to the fire to get their documents in order, I think they’re justified, and there’s not much you can do.”
Increasingly, the note and the recorded deed are being viewed as a single legal instrument, despite the fact they are two separate documents, Wileman says. When failing to match for the judiciary the chain of title on the note with the chain of title on the land record, lenders run the risk of having their liens stripped.
Wow, who would have guessed that professionals would be expected to do their work correctly and follow the law. Why? Because:
“That chain, that proper ownership, has to be made clear at the county, or else [servicers] are not going to be able to do anything with it down the road,” Wilemen warns.
This is why MERS and the whole mortgage industry was soooo busy making money selling Neg Am loans that they just didn’t have the time to follow long-time practices:
Perfecting the chain of title can be a tedious process. Vendors tasked with preparing missing assignments often have to turn to lender-tracing, which, as the name suggests, involves finding the last lender on record and getting an officer who has signing authority to execute the document. Because the mortgage and banking industries have seen massive consolidation and a spree of closings in recent years, such officers can be hard to come by. Lost assignment affidavits might suffice in some counties, but the acceptance of such affidavits varies from jurisdiction to jurisdiction. Moreover, their rigor might be put to the test should a loan enter litigation.
But that has always been their job. That is what they are supposed to do. And this should have been taken into account during consolidation by the company doing the purchasing. Afterall, these were HIGHLY PAID EXECUTIVES. Haven’t they been defending their huge bonuses by saying they were so important and smart only they knew how to do this ‘complex’ work?
And attorney general offices are not buying the mortgage industry’s alibis anymore:
Assignment work has drawn the ire of at least one state attorney general – Florida’s Bill McCollum. Earlier this year, McCollum’s office launched an investigation into Docx LLC, a now-defunct subsidiary of Lender Processing Services (LPS), for using documents that “appear to be forged, incorrectly and illegally executed, false and misleading.” According to a statement issued by LPS at the time, the documents used terms “Bogus Assignee” and “Bad Bene” in place of actual assignees.
“These placeholders were used to flag the document to prevent further processing,” LPS said. “Unfortunately, on occasion, incomplete documents were inadvertently recorded before the missing information was obtained.”
Sorry LPS. That dog won’t hunt. These are legal documents and should have been treated as such by the vary real estate professionals (a big stretch of the word as we now see) handling them. What next…a real estate agent caught forging a purchase contract and defending the action by saying that is what the client wanted?
As stated before about this problem…It is going to be a dark ride.
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