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Old 08-12-2010, 06:53 PM   #1
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I was recently looking into refinancing one of my properties when I discovered that the bank that made the original loan (Citibank) never filed their lien with the county. The property is listed as free and clear and owned by me.

The bank also can not come up with any paperwork. This is a perfect example of how crazy things got.

I have gotten various opinions on this from, "You just got a free house" to "you are free to take out another loan".

I think I'm just going to ignore this, but it is interesting. Ever happen to you?

boont
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Old 08-12-2010, 07:02 PM   #2
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Do you have the paperwork

Have you been making payments to them? Do they send you an annual statement with your interest and outstanding principal? Are they collecting for property taxes and insurance.

I don't think the fact that they failed to file the mortgage means that you aren't obligated to pay if off, but it may complicate the payoff because the next mortgage company won't have the paperwork they expect.

I am no lawyer but here is what I would do: send a certified letter requesting a payoff balance as of a date you choose and ask for the name of their representative in the loan payoff process. Their response will be what I would give the new mortgage company to work with. Calculate the outstanding balance so you know what the payoff should be because, obviously, your lender isn't capable of doing a good job.
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Old 08-12-2010, 07:13 PM   #3
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Yes, I have the paperwork, they don't. They were in such a frenzy to scoop up money they lost all business logic.

Since the loan was sold off, the question becomes, who is entitled to the payments?

If I walked into a bank and said, "I own old accounts here but I have no paperwork", how far do you think I would get?

Yes, I have made all payments electronically to some clearing house somewhere. There is probably some Wall Street derivative owner somewhere, good luck finding him.
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Old 08-12-2010, 07:26 PM   #4
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In general, recording the mortgage is designed solely to protect the lender against subsequent liens on the property (i.e. - in a bankruptcy or foreclosure, the first creditor to file is first in line for payment). The lender's failure to file the mortgage does not let you off the hook for the debt, and they still have an enforceable mortgage that they can use to foreclose your interest in the property. They won't have priority against subsequent, filed liens, but they can still take the house from you.

Brat's suggestion is a good one.
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Old 08-12-2010, 08:03 PM   #5
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I would be asking for a release of mortgage or mortgage clearance as it is sometime called. Unless you have this, you are still on the hook. Things could surface several years down the road so you need that document releasing you from the mortgage.
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Old 08-12-2010, 08:56 PM   #6
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I would be asking for a release of mortgage or mortgage clearance as it is sometime called. Unless you have this, you are still on the hook. Things could surface several years down the road so you need that document releasing you from the mortgage.
Actually, if he had paid in full, he would have a defense of payment in any foreclosure action that might be brought and he would win any quiet title action.

But that is a hassle you don't want to deal with. So you really should get a mortgage release. I'm sure the new lender will insist on it.
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Old 08-12-2010, 09:33 PM   #7
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I have no dog in this hunt, I did work for a bank. We kept all the original load doc's in a special room with multiple fire systems and security. A loan officer told me it is because if the bank's originals were to be destroyed it would be very difficult to enforce their position. Not a lawyer, and have no idea what who would prevail. My guess the lawyers would make big bucks before it is over.
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Old 08-12-2010, 10:09 PM   #8
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Getting a release is very important as you will need title insurance to protect the next mortgage holder.
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Old 08-12-2010, 11:29 PM   #9
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I guess the thing that bothers me is, how do I know, for sure, that the people that I am about to payoff, actually hold the loan.

They have produced no documents, they have no records, I don't even know who they are.

Yes, I owe someone money, that is for sure, but, is this my problem to sort out a series of blunders by a major bank? They have sold and resold bundles of mortgages at huge profit, and now they want someone else to make them whole.

Do they hold any responsibility or is it all on me?

I have read of similar cases where judges have thrown out banks claims when they had no paperwork. They would certainly throw out my claim with no paperwork.

To me this is a "dog ate my homework" argument by banks with billions in assets and floors of lawyers who trashed themselves. I have little sympathy.

At the same time, I don't want the stress and am about to dump the whole thing.
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Old 08-13-2010, 07:59 AM   #10
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I guess the thing that bothers me is, how do I know, for sure, that the people that I am about to payoff, actually hold the loan.

They have produced no documents, they have no records, I don't even know who they are.

Yes, I owe someone money, that is for sure, but, is this my problem to sort out a series of blunders by a major bank? They have sold and resold bundles of mortgages at huge profit, and now they want someone else to make them whole.

Do they hold any responsibility or is it all on me?

I have read of similar cases where judges have thrown out banks claims when they had no paperwork. They would certainly throw out my claim with no paperwork.

To me this is a "dog ate my homework" argument by banks with billions in assets and floors of lawyers who trashed themselves. I have little sympathy.

At the same time, I don't want the stress and am about to dump the whole thing.
I am aware of a large, messy court case/class action where homeowners being foreclosed are chalenging the ability of the lenders (or their agents) to foreclose. The homeowners demanded that the lenders produce documentation and they in turn requested such from the outourcing company that was doing the lien filings and managing the paperwork. The outsourcer simply provided some sort of sworn attestation to the court that the liens were properly filed and they had the paperwork somewhere. This was insufficient for the court and the homeowners, upon which it turned out that the outsourcing company was making sht up and did not in fact have the paperwork or evidence of liens properly filed (oops). I don't know where this suit is going, but I bet it is messy, expensive and will take a long time.

You might want to consult a competent RE lawyer in your state to find out how best to protect yourself.
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Old 08-13-2010, 08:16 AM   #11
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If they can't produce a note marked paid in full when you pay off the loan, one thing to consider is to ask them for an indemnity agreement in writing when they agree to indemnify you from any claim from anyone that you still owe money on the loan.

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Old 08-13-2010, 08:27 AM   #12
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Let's say a homeowner stopped paying on an unregistered lien. How could the lien holder foreclose?

The bank would have to produce the document and register them BEFORE begining the foreclosure. Anything else is heresay (on the bank's part).
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Old 08-13-2010, 11:16 AM   #13
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Martha is (was?) a lawyer... so she is probably more right... but I will add a few comments here...


You do NOT have to file a lien to still have a valid loan. The lien protects the lender, but does not in and of itself make it a loan.

Rustic is correct in that a bank holds the paper in a safe place (I used to have my own vault for mortgages when I had them in a trust)... but if the mortgage is filed with the county with the lien, losing that paperwork is not the end of the world. You just get a copy and move on. If it is not filed and no paperwork, it becomes a bit more tricky... some lawyer might give better info, but I think you can still prove that a loan existed based on the history of payments etc.... that is, if you still have that info..


As to the question of if I go into a bank without paperwork and say you have an account there.... well, if the bank has the paperwork they will usually find it.... and you can get your money etc.. that is one place where banks are much better at paperwork.



You last question on who should you pay. I would expect that the bank who you used to send your payments sent you a letter when they sold their servicing rights. If not, then I would contact THEM and have them send me something. I would want to make sure that I got a paid in full notice on any loan, preferrable on the original loan docs... A question would be... is the firm you are dealing with a major bank If so, you might not have as much to worry about... if not, I would be more skeptical...
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Old 08-13-2010, 11:17 AM   #14
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Martha is (was?) a lawyer...
Once a lawyer, always a lawyer...
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Old 08-13-2010, 11:20 AM   #15
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Let's say a homeowner stopped paying on an unregistered lien. How could the lien holder foreclose?

The bank would have to produce the document and register them BEFORE begining the foreclosure. Anything else is heresay (on the bank's part).

They could not until they perfected their lien... but that is pretty easy..

The problem comes IF the person goes and gets another loan and they put their lien on first.... and of course they will have first rights to the proceeds...
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Old 08-13-2010, 02:48 PM   #16
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It's my understanding that a bank or any lending agency that can not produce paperwork documenting ownership of a loan can not foreclose. First defense in foreclosure is to ask the lending agency to provide documentation of the loan. A lot of loans are in the same shape as yours, and those foreclosure proceedings are now in the "pending forever" file.

Search the internet. There was a lawyer in Florida a while back that was teaching seminars to other lawyers on how to shut down all the foreclosures.

Just because a lending agency says you owe them, they still have to prove it in court. The Florida lawyer found a lot of lending agencies weren't filing the correct paperwork to transfer the loans they sold to the trust that holds them when they are diced up. For not doing the paperwork, the lender can either be fined, or charged, I forget which. So, the lender files for foreclosure, but can't prove they have a loan. The case just sits forever then.

This is not a gimmick like the folks squatting in vacant houses and claiming homestead rights or something. Do the internet search and you should be able to find the Florida lawyer who started this defense. I believe she was a lawyer helping low income folks originally.

I don't know what you would do if you wanted to sell your house. But at least the people discussed in the article were living for free and no longer paying their mortgages.
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Old 08-13-2010, 05:37 PM   #17
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They could not until they perfected their lien... but that is pretty easy..
Actually you can commence a foreclosure action on an unfiled mortgage; you just cannot extinguish the interests of anyone but the borrower. (at least in my state).
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Old 08-13-2010, 06:35 PM   #18
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Actually you can commence a foreclosure action on an unfiled mortgage; you just cannot extinguish the interests of anyone but the borrower. (at least in my state).
Same here.
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Old 08-13-2010, 06:49 PM   #19
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If you were intending to re-fi with Citibank I would gather my paperwork on the existing mortgage and make an appointment with their mortgage officer. Sit down with the person, first ask them what they could do for you in the way of a re-finance. Sign the papers, tell them that the current mortgage is theirs, lay out your paperwork and comment that the existing mortgage is not on file with the county (assuming that is the practice in your state). The rest is their problem, IMHO.

Alternately you could apply for a mortgage with PenFed and see what they can do to resolve this mess.

I don't really think you want to play chicken with the current loan, it just isn't worth the trouble.
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Old 08-14-2010, 08:00 AM   #20
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In all fairness the OP may want to stop making payments. There is obvious confusion as to who the legitimate owner of the mortgage is. He could be sending money to the wrong group. For something as important as a house, the paperwork must be in order. Just like in a murder trial, your evidence must be solid to convict someone. There is no excuse otherwise.

Taking it a step further, the OP (or OP's family) may want to file a lien on the property for its full value to get first position. Then sit back, relax, and let the court system sort it out.
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