In the last few weeks I’ve seen two nice properties up for trustee sale where the prior owner had failed on their attempt to short sale and rather than wait out the eventual foreclosure, they quit claimed the property over to a third party for $0.00 consideration (a gift).
In Case A (a once $1.6 million property in a resort community) the new “owners” were quick to set up vacation rental sites and for approximately 2 years they managed to skim (albeit legally it seems?) rents on this property before the lender got serious about foreclosing on the non-reconveyed DOT in the name of the original owner. The property was also foreclosed on by the HOA but the new owners quickly redeemed (regained ownership) as it seems the rental income stream was too substantial to give up. Some vacationers apparently had been burned by the new owners and a private detective got involved and he set up websites warning vacationeers not to rent the house as a BK judge had determined that the so-called owners were not operating legally. When the last trustee sale date came up the new owners succumbed to pressure and gave the lender a deed in lieu. So it never when to sale.
In Case B (just today) I met the now “ex” owner of the property down at the recorder’s office. He was having difficulty determining whether his house had been sold at a trustee sale. I showed him how to find the necessary docs (NOD/NTS + DOT and the TDUS which showed the new owners). I quickly recognized the property as I attended that particular trustee sale and observed the bidding action (I did not participate). Opened at $1 million and sold “third and final bid” @ $1.2 million. Just as in Case A, this so-called “owner” had gained tentative “ownership” by way of a quit-claim deed granted by a seriously underwater owner … and like in Case A, this was for zero ($0.00) consideration … a gift. This newly “ex”-owner (steps investors’ TDUS was recorded 8/2/12) was adamant that he would be able to regain ownership and continue to benefit from rental income. Like Case A, this “ex”-owner was also renting out the house to unsuspecting tenants (but on a 1 year lease vs vacation rental). Complicating matters, the “ex”-owner was also living at the property in a guest unit. This ex-owner had hired up an attorney and was convinced (in his own mind) that the house was some how illegally taken from him by virtue of an illegal trustee sale. We had a good discussion about the lender’s right to foreclose on the non-reconveyed, deeply in arrears outstanding DOT. He was also preparing to battle an unlawful detainer suit that would no doubt soon be filed (by the investors) to extricate him. The investors will have to negotiate with his tenants or may have to honor their lease. What was most galling to me was this ‘ex"-owners righteous indignation over losing a $1.3+ million property for which he never paid a single penny. His lawyer had convinced him that the MERS improper assignments (multiple) to different institutions/trustees would somehow invalidate the lender’s right to foreclose on the DOT. While we all know about robo-signing abuses and courts’ disdain towards many lenders slipshod paperwork (failure to properly record/document/supervise assignments), I don’t think the courts have ever intended that owners … and certainly not those who received quit-claim gifts … should get their house for “free” (invalidating the underlying DOTs).
My guess is that this “ex”-home owner will lose his forthcoming UD battle to the investor group, and after some 6 moths to 1 year (after spending $10K to $50K on attorney fees), he will come to realize that you don’t get a house for “free.” But his lawyer *will* get paid ;).
Yes, these are the new scams by losers that call themselves attorneys.
I’ve NEVER seen a bank foreclose on someone that did not
deserve it. It fact, 99% of those in foreclosure have made money
on the situation. Look it up. Do your homework and you’ll see
Everyone is the victim. No victims just scammers
Since you’ve stirred to pot … Many, perhaps even most, of those facing foreclosure have pulled (net, net) more money out of their house versus a heavy loss due to foreclosure. Sometimes it is easy/obvious to see (4 open loans exceeding property value by 500% – i.e. mortgage fraud). But that said, IMO, your statement “99% made money on the situation” is *not* right. There are plenty of examples of people who bought at exactly the wrong time (2003 - 2006) with respectable down payments (15% to 20%). Some even put all or most of their subsequent HELOC $ (2nds 3rds) back into the house via improvements/upgrades. Then in 2007/8 the bubble popped, housing prices tanked, and equity quickly evaporated. Many of these homeowners are now seriously underwater and clearly have “net, net” lost big. Are they blameless for the circumstances they face? Some yes, many no, and plenty both yes/no. Then there are the "D"s which can quickly change anyone’s (or family’s) circumstances:
* Disease (serious illness or injury)
Just my 2 cents worth … but I think it’s unfair to prejudge any distressed homeowner’s circumstances.
OK, there is no way to prove that 99% of the people who have lost their homes to foreclosure have “made money”. And, I do think there are plenty of people who bought at the wrong time and experienced the “Ds”. There are clearly those who used their homes as an ATM to pay credit card debts, etc and they got a lot of cash. Based on my experience, most people have had the opportunity to make money. At a minimum, they have been able to have housing without any cost. For me, that would be at least $30K per year in savings. So, one to two years, no housing cost, seems like they made money to me. The danger here is that we are beginning to accept the idea that free housing is a right.
I fully disagree that there are no victims. The scams go both ways. In 2007 interest rates were dropping. History in the industry shows that when one buys a property they usually have an exit strategy. 1) refi 2) sell. . Our single family , non subdividable parcel of 50 acres became un-lendable. Despite our income , income to debt ratios and excellent credit scores they would not allow a refi on the property. The property was appraised at 2.1 mil, the refi amount was 486K. We could not sell because no one could get a loan, even through the farmers programs. The horse barns including indoor riding arena and house literally could not be lent on due to the changes in the bank lending criteria. So the question in business is it feasable to continue to pay a 12% rate in a 3 % economy and is it feasable to continue putting in 950K over the next 10 years (in addition to the 900K already put into the propberty for a property that due to lending changes has a new appraised value at less than 400K due to other local farms that were sold at auction for less than 150K because they had to be cash (no one to lend on them)(. . So yes, there are victims. Our house was condemned by underwriting. Much of our savings and investment was in the farm and land,. To continue to pay when banks refuse to refi something they already financed because now its not in the criteria that THEY changed without consent is totally wrong!
Hi, I could have written your post back in 1990 when we lost our horse facility. The truth of the matter is that income producing, agricultural, and commercial loans are always harder to get. Underwriting guidelines changed for everyone in the last 45 years. Self employed and credit challenged people that were easily given home loans found themselves in the same position. I agree that there are victims. It was the people that didn’t fully understand the credit game. There were loans that were made to people that could not afford the properties that they were buying and an unsustainable increase in values had to eventually stop which ultimately caused the “crisis”. Make no mistake this was not a housing crisis but a credit crisis. The “victims” did nothing wrong other than play by the “flawed” rules and when the rules changed they were stuck. I spent years being really angry about the loss of our horse facility and I know that nothing I say is going to make you feel any better about your loss. Lenders look solely at risk and when they tighten their underwriting guidelines unique situations like yours do not fit inside their bubble of what is acceptable. I finally learned this lesson when I went to work for a wholesale lender. I watched people that were refused financing that had executive, beautiful 5,000 square foot log homes. Although the home was superior in every way to the surrounding properties because there were not any “log homes” to comp it to then they did not meet the “risk” profile. The same is true for round homes, modular homes or anything that is not like everything else in the area. I always tell people when it comes to financing you have to “know the game you are in”. Anything remotely unique becomes a red flag and income property is a big one. I know it doesn’t make it any better but this is not anything new. In my case, our family should have never been given the chance to get into this financial mess. Now that over 20 years have passed I question whether or not I am angry that we were allowed to dig the hole or if I am angry that there was no options to get out of the hole. The value of the property is significantly impacted by the availability of lenders or the credit worthiness of the property. Something to consider before purchasing.