- Real Estate
Quiet Title...The Ultimate Foreclosure Defense For Homeowners
In the context of home ownership, the term "title" refers to the homeowner's legal rights to possess, own, use, control and dispose of property. The title "record" goes way back to the beginning history of the property and accounts for ALL of the previous owners and transfers of the property. When property changes hands and is transferred, this transaction takes place with the current owner transferring the property to a new owner with a "deed" to the property.
A "defect" in the title can occur if there is an undisclosed heir or spouse from a previous owner that did not properly sign the deed over to a new owner, and still has legal ownership rights to the property. Other types of "defects" involves an encumbrance on the property that affects its value (any documents that are found to be forged and/or robo-signed, mistakes in recording any legal document, invalid use power of attorney, an outstanding mortgage that was not properly satisfied and released, unpaid property taxes, judgments against the homeowner, incorrect legal description of the property, and easements). When a homeowner purchases a property with a mortgage, a title search is completed to find and correct any defects in order to transfer clear title to the new buyer. Unfortunately, some of these issues can be overlooked and create future problems for an unsuspecting buyer. THESE ISSUES ARE BECOMING MORE COMMON DUE TO THE BANKS USING FRAUDULENT ROBO-SIGNED DOCUMENTS TO WRONGFULLY FORECLOSE. IN DOING SO, THE BANK CANNOT TRANSFER A CLEAR TITLE TO A NEW BUYER OF A FORECLOSED PROPERTY.
Perhaps the biggest "player" of the foreclosure fiasco is MERS, which stands for Mortgage Electronic Registration Systems. MERS was created by the banks to expedite the transfer of mortgage paper between the banks, without having to record each property transfer to document these ownership changes. The banks are finding that the missing paperwork that was never completed is now needed to foreclose, hence the use of the robo-signers and fraudulent documents.
Due to the title issues created by the banks and their missing documents, a new area of foreclosure defense involving actions to Quiet Title has evolved with some success in favor of homeowners. An action to Quiet TItle is a court action which "estopps" or halts the claims of the lender against the property. This then puts the lender on the "defensive" and they must "put up or shut up" with regards to their claims to the property. Depending upon state statutues with regards to Quiet Title, the lender will only have a certain amount of time (in some cases 30 days) to produce ALL documentation proving ownership rights to the property. One can see how this could be quite the problem for the banks who did not keep up on their paperwork!!
IN THE CASE OF A QUIET TITLE ACTION, THERE ARE NO "DO-OVERS" OR SECOND CHANCES TO GET THEIR PAPERWORK IN ORDER, LIKE THERE WOULD BE IN A FORECLOSURE ACTION IF THE LENDER WERE TO DISMISS THEIR OWN ACTION IN ORDER TO CLEAN UP THEIR PAPERWORK AND BEGIN A NEW FORECLOSURE.
There are also the more typical foreclosure defense strategies that involve demanding the lender to "show me the note" and associated documentation needed prove ownership in order to foreclose on the mortgage. If the bank used fraudulent and forged documents in the foreclosure and is found to have no legitimate claims against the property, the homeowner could also have claims for a "slander of title" in addition to the quiet title claims. Furthermore, if the homeowner has filed for bankruptcy protection and the foreclosure was conducted illegally after the bankruptcy, the homeowner could also have claims for a violation of the bankruptcy discharge.
It is difficult (though not impossible) for a homeowner to sue for Quiet Title without the use of a licensed Attorney who is familiar with the local laws where the property is located. A title search needs to be conducted on the property (often going back up to 40 years) in order to determine everyone with adverse claims to the ownership of the property. The actual "summons" or lawsuit naming all persons with an interest in the property will also be published in the local newspaper, in order to "serve" all parties with notice of the lawsuit. The lender with actual ownership rights to the property may or may not respond to the lawsuit.
If the homeowner is successful in this approach, the mortgage could be "wiped out" and potentially still be liable for the dollar amount of the "note", which would no longer be secured by the property and could be discharged in bankruptcy as an unsecured debt.
In summary, when the "bank" initiates a foreclosure against the homeowner, time is on the side of the lender. When a homeowner initiates an action to Quiet Title against the "bank", time is on the side of the homeowner. The clock starts ticking when the quiet title action is filed, and any party with claims to the property are required to present the correct paperwork in a certain amount of time, depending upon state statutes. If the lender uses fraudulent documentation which is found defective, they do not have the ability to re-do and resubmit the paperwork for a second time, as in a foreclosure case.
More importantly, when the bank gets "caught" using bogus documents, they will often take a "voluntary dismissal" of their case, meaning they dismiss their own lawsuit and refile the foreclosure with new paperwork, further screwing up the title record to the property. In the case of a quiet title lawsuit, the court will issue a "certificate of title" clearing all title defects against the property in favor of the current homeowner.