Refinancing after purchase at trustee sale


#1

Sean,
Thank you for educating us all.

I purchased a property at trustee sale about 10 mths ago. Have rented the property since. I purchased title insurance right after the sale with a binder. When I had a chat with a knowledgeable title officer , he had mentioned something regarding if I were to refinance the property, there was an extra protection of the title by doing the refinance.

What is the benefit on refinancing after purchasing a property at auction besides being able to get some of the money out (i.e. better title protection)? I am concerned given all the recent robo-signing. I am just afraid that if someone were to claim this property, title insurance would not cover it using there exceptions.

Also, is it difficult to refinance a property at auction and how much cash out LTV (70%) for rental property?

Thank you,
Quinn


#2

Quinn – A negative to refinancing out some cash after auction might be the loan might set flipping limits. For instance, they may require you to own home for 90 days or more before reselling home.


#3

I’m not sure what the title officer is referring to. Getting a loan would require a lenders policy… but that protects the lender from losses, not you. I suppose having a lender on the hook as well would give the insurer more incentive to fight any challenge to title.

One thing you might do is review who the original lender was on the loan you purchased, and who the servicer was at the time of foreclosure. If it did not involve a bank with known problems, and was not recorded under MERS then I simply wouldn’t worry about it.

I personally don’t think this robo-gate issue will amount to much, but I commend you for thinking ahead and protecting your assets. Certainly can’t hurt.


#4

Thank you, Sean.

The servicer at the time of foreclosure was BAC Home Loan (b of a), and if recall MERs was involved. ( MERs was involved in most of the homes that I had researched. Is there another name of a company or system besides MERS?)

At any rate, if I do refinance now will there be a good chance I can do a cash-out refi with excellent credit on this home I bought at trustee sale with owner’s eagle policy? (ie. Is it more diffiucult to get financing on a home purchased at the court steps ever since the robo-signing?)

And, since it has been more than 10 mths since the purchase of this home which was 3 mths vacant prior to being sold, does the prior owner still have any right of redemption even if it were ‘fraudulent’ robo-signing? Is there a right of redemption in California and what time frame is it?

In addition, does paying the property taxes since the purchase at the court steps gives more protection to claim that it is my property?

Thank you.


#5

No right of redemption in CA, you don’t need to worry about that. I personally can’t imagine your actually losing the home. You are a bonafide purchaser for value and were not a party to any issues that occurred prior to your purchase. The theory there being that the prior owner may have a case against the lender, but that should not impact you. The fact that they lost the house can be considered in the damages against the lender, but you are an innocent third party. Title insurance won’t insure you get to keep the home. The most valuable thing it would do is cover legal fees should someone bring a case, and losses should you lose. These are crazy days so I won’t say it is impossible, but I really think you are worrying about a very, very, unlikely event. Finally, I really don’t believe “robo-signing” meets the criteria necessary to be considered “fraud”. The following is from a Bloomberg story that quotes a federal judge who has thrown out multiple homeowner suits on the MERS issue: ---- "Dozens of lawsuits claiming MERS itself is a fraud have been consolidated for pretrial proceedings in federal court in Phoenix. The homeowners haven?t fared well there. In September 2009, U.S. District Judge James Teilborg threw out an earlier case with similar accusations. On Sept. 30, he tossed six proposed class-action, or group, lawsuits. Teilborg found the defaulting homeowners failed to sufficiently allege that MERS and its members conspired to commit fraud because it?s not a true beneficiary under the trust deed. They also fail to explain how MERS, as a ??sham? beneficiary,? diminishes their need to pay back the money they borrowed, the judge said. ?At most, plaintiffs find the MERS system to be disagreeable and inconvenient to them as consumers,? Teilborg wrote. " ---- I think that pretty much sums up my view on this issue. While I totally get why homeowners are angry at banks, I don’t think they ultimately have a case.