ALTA Counsel Discusses Recourse for Homeowners in Foreclosure Scandal
Many homeowners who lost their homes over the past few years are wondering what the robo-signing scandal means for them. Steve Gottheim, ALTA’s Legislative Counsel, tells a reporter at NBC News that homeowners who purchased a house at a foreclosure sale should have obtained an Owner’s Title Insurance Policy.
The statements by Steve Gottheim, ALTA’s Legislative Counsel, are not doubt the last thing the four surviving major commercial members of the title insurance industry wanted publicly stated by a major player in that industry. In prior correspondence with the group and others we have expressed the potential affect and concerns the ongoing mortgage fraud foreclosure crisis has had upon the title insurance industry. The issue first appeared in a DIRT discussion relating to “insuring title to foreclosed properties in the face of litigation” back in mid-May of this year. It confirms what we had previously then stated. To which Ms. Charney replied (i) “the knowledge of the defects are open, notorious and obvious to all, the defect may be fatally defective . . . so egregious as to render the title serving as the underlying security for the debt to be defective and pass no insurable interest whatsoever along to the alleged assignee.” Professor Whitman then chimed in stating: “Bill – actually, I think you are right on target. There have been many questionable foreclosures, and in some cases the defects are doubtless sufficient to make the foreclosure either void or voidable (the latter meaning that the sale won’t be set aside if the property has passed to a BFP). Moreover, since the defects in many cases are a matter of public record, it could be very difficult for a buyer to satisfy a court that he is a BFP. To which he added (iii) “In time many of these sales are going to come back and bite the title insurers who insured them. Obviously, the industry would rather not call attention to this likelihood, but it is there all the same.” And again, (iv) “if the defect is curable, it is important the curing documents be placed of record for the benefit of future title examiners”. To which both I and the recent Report of the ACS concluded (v) “the burden of proving the right to foreclose must be placed on the foreclosing party; i.e., if a remote assignee or securitization trustee claims the right to foreclose, it must prove the legal basis for that claim. It cannot be the case that a remote party can claim the right to foreclose, with the property owner then forced to disprove its entitlement to that action.”
The statements of the ALTA Legislative Counsel only confirm our prior warning. They
may be found at Questions for Homeowners in Foreclosure Scandal, NBC News | November 17, 2011.
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