Tuesday, January 04, 2011

In Court: (Mortgage) Recording Games People Play

I was in court on a motion and was unfortunately not up first so I had some time to sit and observe some motions that preceded mine, and sure enough one caught my attention.

A case had been initiated by an individual, without a lawyer of course, to compel the Registrar of Deeds to record a document in his chain of title. The Registrar refused and for good reason.

You see, the fellow was facing foreclosure and had gone online and bought himself a stop foreclosure kit, apparently for the tidy sum of $549.

These kits are full of legalistic mumbo-jumbo that sounds good, and if you don't know any better and are facing foreclosure might find a claim that their problem can be magically ended appealing. Often times the teasers online string bits of the Uniform Commercial Code out of context at the reader, maybe mention a charitable trust or two, throw in some "Notary Affidavits" and they claim you can stop foreclosure by filing a few documents in your chain of title.

It doesn't work.

This fellow was trying to file an "Affidavit of Obligation".

Sounds all official-like eh?

Problem is, there's no such document recognized as a recordable document in Michigan, even better was what it said and what he was trying to do with it.

You see, our intrepid fellow had filed out this sworn and notarized affidavit claiming he was worth 5 million dollars and had a primary secured lien on his house as collateral of his personal worth.

There's a few problems with this approach.

One, of course, is that it is laughable on its face and perjury to make such a false claim.

Two, Michigan is a race-notice recording state so his later filed lien is not going to take priority over the earlier filed mortgage liens so the mortgage doesn't go awayand this doesn't stop the foreclosure process but only messes up the chain of title causing further expense to unravel.

Three, if you're worth 5 million bucks, why don't you just pay off the mortgage?

The Registrar refused to accept it, and the judge agreed and dismissed the fellow's lawsuit. The fellow then claimed the mortgages on his property were "toxic". Yeah, that'll show em.  After busting his credibility on his "affidavit" the judge didn't find his last-minute claim of toxicity too believable (or even judicially recognizable).

Unfortunately this kind of activity at most delays the inevitable foreclosure and at worst exposes the poor sap filing these documents to contempt of court and other nasty problems that arise from filing false documents.

Foreclosure is not a good place to be, but perjuring yourself or trying to hang on by grabbing onto untenable and ridiculous quasi-legal theories will not help. Muttering incantations of "Uniform Commercial Code, Affidavit of Obligation, Notary, Toxic" three times fast just doesn't do it.

Don't let yourself be conned into throwing good money after bad by those selling these schemes or stop foreclosure services, especially when they demand your money up front.

As the Comptroller of Currency Department bulletin OCC Consumer Tips for Avoiding Mortgage Modification Scams and Foreclosure Rescue Scams advises, be cautious when dealing with these too good to be true claims. The OCC bulletin has a lot of good advice and is well worth reading.

You're better off dealing with your lender and trying to work things out than paying for an illusion that will only end up costing you. Don't transfer your title to someone else's trust or to someone that claims transferring the title will relieve you of having to pay the mortgage. It won't. You bought the house (or tapped a lot of equity from it) with the funds from the mortgage and owe the money on that mortgage. You know it, the bank knows it, the scammer knows it.

Don't be fooled.

Eventually some poor homeowner following these scammers is going to wind up in contempt of court and possibly jail for following these scammers' advice. The scammers won't be in the cell with them but instead busy counting their money and laughing at the sucker that was fleeced.

Don't be one of them.


Rey Abisan said...

Last year was kinda a bizarre year for the mortgage market. In the first half of the year, you had a decent number of home sales keeping mortgages for purchases stable, thanks to the home buyer credit. In the second half of the year, that changed as demand crumbled when the credit was withdrawn. At the same time, you had very low mortgage interest rates throughout much of the year cause a mini-refinancing boom. 2011 will look very different, as the housing demand continues to struggle and mortgage interest rates have begun rising.

home buyer

Murphy's Law said...

Whenever I wind up in court, I simply state that the Rule against Perpetuities applies in this case and that it should be interpreted so as to stop whatever action is being brought against me. Since that arcane rule is so confusing, practically no one understands it any more, so a good lawyer can make it say whatever he wants, right?

In my case, so far it's proven successful in two property-law cases and one DWI trial.