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Comment by redleggedfrog | Hacker News Reader

I have personal experience with this back before the 2008 crash.

I owned a house along with someone else, an okay house, bought it for $115,000, held onto it for 5 years, until it appreciated to $350,000 in those hurly-burly days.

At some point, and I forgot why it came up, we needed to figure out who owned the loan. And we never did. It the morass of paper work and nearly fraudulent claims by various people who claimed to own the loan, we stopped paying on the loan. We literally had more than one company claim to own it at one point. What was weird is it was kind of a slow burn, even after we stopped paying. No one really seemed to care as much as you'd think $900 a month would make you care.

In the end, we sold the house, never paid off the remaining debt, and split the cash. I told my lawyer I'd hold onto savings to cover the debt if they ever came back and could legally claim it.. It's been 11 years. Nothing yet.

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> In the end, we sold the house,

How did the bank lien from the mortgage get handled in the sale?

I am also interested in hearing about this. I guess they guaranteed good title, but kept money (earning enough interest?) in case the bank comes knocking?

Yes, I just talked to the person who I owned it with, and this is their recollection. We could transfer the title, but we were on the hook for the the mortgage. I'm pretty sure there wasn't a lien on the property.

Pretty funny you mentioned the interest. In the 11 years it's been like $50.00, since I keep it in just a regular account (instead of CDs or whatever).

>I'm pretty sure there wasn't a lien on the property

Which country was this in? Banks don't typically hand people hundreds of thousands of dollars without making sure that they'll get their pound of flesh when things go south. Not having any kind of collateral is a pretty big mistake on the bank's side.

If a bank sues you, they will be making claims for various damages. One of those damages will probably be projected interest they would have made from re-lending the money that wasn't being paid.

The debt could also be subject to a state of limitations, and you could potentially be clear. If its been 11 years, I would ask a lawyer about it. You may be able to safely use the money you've left set aside.

IIRC liens can stick to the property in some cases, rather than the owner. The purchaser would see that there is a lien and it would discount the price of the house.

Holy crap, that blew up. Sorry, I posted this over morning espresso and then went to work and didn't look again until now. jpmattia, I'm just replying to your post, but it really applies to all the replies.

I'll be 100% honest here, and I don't know the finest of the details. I worked through a local realtor I've used for everything I've ever done, a local financial advisor, and my lawyer. User user5994461 is expressing the same fear I had in that I was afraid of doing something illegal. I've always kept a chunk of cash on hand equal to what I would owe just in case someone came after me.

At some point the service provider got confusing. I actually paid two different providers in one month in a panic about missing a payment. You cannot believe the paperwork I got. One of them was like "Uh, we don't know what to do with this," and the other took the money, but then that's when the issue of who owned the loan came up.

So as we were starting to sort out actually who to pay, and who actually was getting the money, that's when I stopped paying. At the time it didn't seem so much like stopping payment but instead of just not paying until we sorted it out.

The actual sale of the house was to a Korean family who wanted to house for their children who were going to go to college in our town. The realtor handled the sale, the lawyer checked everything out, and the only loose end was I accidentally left the gas in my name and bought the students a years worth of gas ($1000).

I do know that after they sale we were still trying to resolve what I owed and to who on the original mortgage. I guess technically that is still going on.

My subject take away from this was, "this is an avalanche of paperwork." We wanted to sell the house. Under the circumstance, we did whatever it took to sell it even if we didn't know who I owed the money to.

Also, up until this event, I didn't have a lawyer, or a realtor, or a financial advisor. When there is six figures, it's a big boys game, and you pay to play.

Edit for typo.

So no one contacted you again after you stopped paying?

It seems like one of the mortgage owners probably removed the lien when they sold the mortgage and the buyer never put their own lien on.

No, I have yet to be contacted (or my lawyer, either).

I don't know the machinations involved with mortgages, but it seems to me like I'd like that to have been the case.

If you own property, open a HELIC on it, and invest the cash you have. Then if you urgently need the money, take it out of the HELOC.

Doesn't really surprise me. Bank debt trading is messed up. Everything is mostly done by fax. Things don't happen quickly. Time is measured in months.

Source: I was IT support (among other hats I wore) for the band debt team at a hedge fund for 7 years at a previous job. We held about $20B in notional debt running up to the 2008 crash. Was not a fun time to be in the industry.

Can confirm; my wife has worked the past five years in the foreclosure department at Suntrust Mortgage and every case she told me about took months to resolve. Finding the “true” owner of the loan routinely involved tracing the sale through 7+ other investors, each time faxing back and forth tons of documents, resulting in reams of paperwork for lawyers and courts to sift through. It’s quite a mess :/

That is interesting, but isn't there a point in the house selling process where they look for every party that might have an interest in the house and such? I mean I think that is part of the chunk of paperwork that realtors / title search companies or whatever do, right? What happened then?

The paperwork that realtors and title companies do is a joke. When we bought our house I signed close to a hundred documents. Many of which were the same. Some documents were repeated 3 or 4 times. It's all a game where they try to convince you how grand and thorough and official the whole processes is. It made me realize how incompetent the banks really are.

Well, you buy title insurance so that even if the process wasn't thorough enough you don't lose a whole bunch of money.

https://en.wikipedia.org/wiki/Title_insurance

That's the idea but it's a lot more complicated than, I buy a title search, I buy title insurance. I'm covered 100%.

The insurance companies aren't stupid. It's not quite as easy as just paying some money for the insurance and being done. Normally title insurance is something you pay once and it's valid as long as you continue to own the property. When I bought my current place my real estate lawyer had to do a bunch of digging because there was some ambiguity in some documents 3-4 owners back. The title insurance company would only offer insurance for 1 year if this ambiguity wasn't resolved.

Many of those documents appear to be required by law.

But they are only required once.

That's one reason why some states don't allow title companies and insist this type of work be done by actual real estate attorneys.

It's a (un)necessary hazing ritual to justify how much all these MITM attacks by realtors, brokers, title corp, etc., pinch off for themselves.

For our most recent house purchase, the title company was invaluable -- not for a claim, but for the wealth of information they produced when they did the search. We found out about easements paperwork that we had no idea existed (even from the perspective of the property information system in our area).

I actually called the title insurance company at one point to ask what the heck something was, and was connected to an experienced person who was very happy to fully explain what they'd found.

My guess is that because the history of our house was pretty complicated, the title searcher was relieved to have something out of the ordinary to work on.

The upshot? That title search is really important, particularly if you're buying a property that predates electronic property systems.

We recently sold our house. I discovered a typo on our deed. The previous owner's deed also had the same typo. These deeds had been reviewed by at least 3 lawyers, at least 2 title insurance companies (who had a financial interest in not screwing it up), and at least 3 realtors. Nobody noticed the mistake.

It was hell on earth trying to sort it out, and the sale almost fell through because of it. The real kicker was that our lawyer basically told me he wished I hadn't noticed it because the sale would have just gone through and nobody would have cared... but since I did, we were legally obligated to fix it.

>It was hell on earth trying to sort it out, and the sale almost fell through because of it. The real kicker was that our lawyer basically told me he wished I hadn't noticed it because the sale would have just gone through and nobody would have cared... but since I did, we were legally obligated to fix it.

Perhaps this is why 'nobody noticed'?

Wouldn't that be unethical of the lawyers and title companies?

Hear no evil, see no evil

Ethics don’t pay the rent. In the real zero-sum game world out there people do what’s practical and what keeps the lights on.

An ethical breach by a lawyer is grounds for banishment from the profession.

An ethical breach by a title insurance company likely violates its bylaws, and at the very least opens them up to liability.

It seems like this is a title error so the insurance company would be responsible. I don't see why a lawyer wouldn't report the error to the insurance company. It's billable time that the insurance company would need to pay for and they'd be working to keep their industry with clear deeds instead of faulty ones.

Re: the ethical breach being grounds for banishment, I think that’s quite an idealistic view of legal societies. In reality, they are soft on their own and are not going to drag a fellow lawyer through the coals for something this minor, especially when it can so easily and plausibly be an honest oversight.

Also, as in any client relationship, a lawyer’s first priority is the person paying his bills, not necessarily the industry. Even if it would be better in the long run and more ethical, when someone pays you there is a natural obligation attached to the relationship.

I used to be idealistic, but experience has shown me that people do what is expedient.

I imagine those would have to show some evidence they own some part of the house. It's not hard to imagine that nobody could gather the evidence.

I don't understand how is that possible to not know about a home loan. Didn't you have to open the loan when you bought the home? Don't you know what banked you dealt with?

the loan was presumably sold off, and then again, and again, and again... and suddenly there was divergence, and it was sold off yet some more

Loans and mortgages were sold by the banks to other companies:

https://en.wikipedia.org/wiki/Mortgage-backed_security

A lot of mortgages changed hands several times, the original bank who setup the mortgage would have no longer been involved at that point.

That doesn't explain how OP was able to get the lien on the land title removed when they sold the house.

It's weird to me. You need to know who to pay the mortgage to. The bank would have to notify you immediately when and whom they sell the mortgage to if they ever sell.

Unless they don't notify you on purpose to continue to receive the monthly payment, while cashing out on the resale, in which case that's fraud.

I can also imagine that the next buyer would try to pull the same trick. That obviously causes a problem. It seems to be what happened in the US, in which case everyone should check their mortgage to make sure who owns it.

You don't make payments to the lender. You make payments to a payment servicer hired by the lender.

Until midway through the Obama administration, nobody had any obligation to notify you if your mortgage was bought or sold. Payment servicers had no obligation to tell you who they were forwarding your checks to. Your mortgage could be bought and sold multiple times, but as long as the same servicer was used, you'd never know (there were/are only a few big servicers). If the mortgage buyer used a different servicer, you'd get a letter from your current servicer about the new servicer you should send your checks to, but no info about who now owned your mortgage.

Thank you very much for the explanation.

I see how that could mean that the borrower might not know who owns the loan, but surely the payment servicer knows? Would they simply not tell you, even if you asked?

Exactly.

The servicers existed to serve as a smoke screen for mortgage securitization shenanigans. The servicers sent the payments to trusts that had dubious possession of the mortgages.

Trusts and banks passed ownership of mortgages amongst themselves, though tax law was supposed to prevent them from doing so. Ultimately the servicers had no more idea of who actually owned the mortgages than the homeowners.

A judge can apply corrections in the local land registry. They're obviously conservative in doing so, but bad entries can and do appear, and judges, when presented with the right evidence, can repair them.

If there are court proceedings attached to the sale of the house, the corrections might be done there.

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