- Real Estate
Mortgage Refinancing and Robo-Signing...A Homeowner's Nightmare
Illegal bank practices regarding wrongful foreclosures and robo-signing practices continue to be discovered on a daily basis. In the majority of cases up to this point, it has been found that the banks have been using fraudulent robo-signed documents in order to assign the mortgage just prior to commencing foreclosure proceedings, attempting to create a paper trail that was never there. These issues create their own sets of problems when a bank that does not have a legal standing to foreclose on a property, with the previous owner that was foreclosed and evicted still having legal ownership rights to their property.
There is also another secondary problem with these fraudulent robo-signed documents when they are used as a lien release or satisfaction of prior mortgage due to a homeowner refinancing their mortgage.
The homeowner does not actually "refinance" their mortgage. Instead, the homeowner takes out a new mortgage loan and the previous loan is paid off or "satisfied" via a lien release. This satisfaction of mortgage document needs to be recorded against the property in the County Recorder's Office where the property is located.
THE PAPERWORK WAS NOT COMPLETED WHEN THE MORTGAGE CHANGED HANDS VIA MORTGAGE ASSIGNMENT. THE PAPERWORK ALSO WAS NOT COMPLETED WHEN THE PREVIOUS MORTGAGE WAS SATISFIED THROUGH LIEN RELEASE. THE BANKS ARE NOW USING FRAUDULENT ROBO-SIGNED DOCUMENTS AS LIEN RELEASES TO CREATE THE PAPER TRAIL THAT WAS NEVER THERE. THE END RESULT IS THAT THE PREVIOUS MORTGAGE IS STILL A VALID LIEN AND WHICH CREATES A "CLOUD" ON THE TITLE OF THE PROPERTY. The homeowner has no clue that this is an issue until a title search is done on the property when the homeowner wishes to sell the property or refinance.
In what should come as no big surprise, these problems stem from sloppy recordkeeping during the housing boom. As the demand for these mortgages grew, along with the investors' appetite for risk and profit, crucial legal procedures regarding recording requirements for property ownership (which vary from state to state) were overlooked.
This could potentially correctable if the homeowner discovers the issue early enough, and the correct "bank" is actually still in business and is not defunct. An even better scenario for the homeowner would be if the mortgage was taken out from the local bank, and the mortgage was not sold off into the secondary market to be owned by global investors. In these instances, a new "corrective" lien release or satisfaction of mortgage would be drafted by the correct parties, using the correct signatures. Otherwise, it will could be difficult if not impossible to obtain the authorized signatures in order to correct the documents. In these instances, a court action to Quiet Title would be needed to obtain a court order to determine ownership rights.
It is HIGHLY recommended that any homeowner with a mortgage refinance in the past decade review ALL documentation regarding these transactions (preferably through an Attorney familiar with local property law in your state) to ensure that the previous mortgage was properly satisfied and released. It is better to find these issues now rather than later, and run the risk of not being able to sell the property due to a valid lien that is still on the title record.