REO nightmare If the link did not work you can find a discussion of the audit commissioned by Phil Ting at “Credit Slips” or “Naked Capitalism. The SF chronicle covered this story and according to their reporter there were some paperwork problems with foreclosures done over the last few years in SF, no big deal, move along. I read it and disagree. This was a random sampling of 382 foreclosures and 84% had serious flaws, in 46% of the cases possession of the property was taken by someone who was a stranger to the title. Think about that for a minute. The study describes those 46% as void foreclosures meaning they had no legal effect. And those houses were resold. There were more than 3,000 foreclosures completed during the time period this study covers….For simplicities sake call the void foreclosures 50% of the total, the number of foreclosures 3,000 exactly and assume every sale was $500k. $750 Million down a black hole. People who “Bought” these homes did not get valid title because they bought from someone who did not own or have a right to sell them. Can they sue the banks and lenders who “Sold” them these homes? It depends on the language of the contract the buyer signed, if there was a “Hold Harmless” agreement in there tough luck. How about the title insurance company ? The language in title policies changed a couple of years ago and as I understand it you are not covered (I am not a Lawyer, have a competent attorney review the policy). How about suing your agent? that probably won’t fly either, the language was in a contract you voluntarily signed and claiming you did not understand it…..good luck. Would I personally buy an REO? Yes, if it was from a portfolio lender, maybe even one that had been taken back by a major bank if it did not have a “Hold Harmless” agreement. What about those roughly 1500 people in SF who bought homes from someone who had no right to sell them?? No clue, it’s a mess. They might try filing an action to quiet title, spend $10-$15k and 6 months. It’s worth a shot if you put $100k down and borrowed $400k to buy a home you don’t have clean title to. Think about the nightmare if someone comes along who DOES have a legal right to the home and tries to enforce it. Oh, this is the FIRST audit of an assessor’s files to be done in California. For some reason none of the county DA’s have had the resources to look into this little problem and neither has the State Attorney General Kamala Harris. It may be a coincidence that Kamala Harris became comfortable signing the Mortgage Fraud Settlement without doing any investigation shortly before she became a frontrunner to be appointed to the Supreme Court.

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About Tom Stone

I am a Broker Associate with Creative Property services (CPS) in Sebastopol Ca. My father was an Appraiser and expert witness based in Oakland Ca for many years and I grew up having the basics drilled into me. I enjoy what I do and I am good at it. I managed income property in Oakland for a number of years and was licensed to run a collection agency for more than a decade. I have also worked as a credit manager and as the senior collector at the test center of a Bank . I have been commenting for years at "Calculated Risk" and on other Real estate Blogs including the defunct "Sonoma Housing Bubble" Blog. The best job title I ever had was "Chief Garbler". My Email Address is "" and my cell # is (707) 364-2477, please don't call before 7 AM or after 8 PM unless we have a deal in progress.

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2 thoughts on “REO nightmare

  1. Abby in CA

    Well–so what else is new? One person has discovered that one of the most notorious subprime lenders in the world, New Century Mortgage and it’s subsidiary Home123 Corp, had its own set of notary-employees and they were all instructed by their superiors to NOT follow California notary laws when they notarized assignments. These invalid and illegal assignments are recorded in county recorder offices across the nation.

    Sign this petition please:

  2. Tom Stone

    Abby, what’s new is the publicity. It happened here! I expect some people who “Purchased a Home” and later find out they paid good money for bad title will sue. We are talking about SF here and San Franciscans are special. They will make a lot of noise and may actually spur some action. We’ll see. And thanks for the link to the petition, I have sent Kammie a few emails over the last year but she seems preoccupied with other things, like choosing the right earrings to wear when she is sworn in to SCOTUS as her reward for backing the mortgage settlement.

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