Do you Know how to spot Gaps In the chain of Title?

It came to my attention yesterday ( Thanks Jim, our Broker who keeps us in line!) that there is another  little detail that we must all be aware of when purchasing a Foreclosure or Short Sale

Let me start with some basic loan information about traditional Real Estate mortgages, a mortgage is a loan secured by Real Estate. Once the loan is created , the information about the debt is recorded in local property records. When the debt is sold the name of the new owner must be recorded, if the loan isn't paid and the property must be foreclosed the identity of the lender can be  found in the local property records. This system is still in place , but another system was created to further the sales of Mortgage Backed Securities ( MBS).
 To create an MBS Wall Street firms buy local mortgages. Title to these mortgages is then often recorded by a third party called Mortgage Electronic Registration System or MERS
With MERS as the mortgage holder, the loan can be bundled with thousands of other loans to create an MBS. Since the title remains in the name of MERS, there are no additional state recordation fees to be paid each time the loan is bought or sold, a savings of better than $1 billion dollars for what lenders claim are unnecessary costs.

Changing loan owners under MERS without the need to record each transfer of ownership has been largely unchallenged until recently. Now, at least seven state supreme courts have ruled against the MERS concept.

The issue of loan ownership leads directly to foreclosures. A lender can't foreclose unless it has “standing” and to have standing it must own the note.

So how does this affect you? Well the bottom line is check your preliminary title report, look at the exceptions. (Yes you really have to READ it!)

If you see an exception regarding the foreclosure of the property , look into it further. Ask your Realtor and Your title company to do a more thorough search. And buy extra title insurance that will cover gaps in the chain of title. The Gaps caused by MBS and MERS.

If a homeowner wants to file an illegal foreclosure suit and go to court and you don't have the extra coverage you could lose the property. So go out there and get a GREAT deal on a foreclosure… just be careful and watch your back, dot your i's cross your t's

It pays to be informed. Do you have an experience you can share with me? I'd love to hear of any challenges and how you overcame them.

HAPPY HOME HUNTING!

Thank you! Sylvia Howard | Your Friend In Real Estate Tel: 602-432-9246 | Fax: 888-651-7897 Keller Williams Integrity First Realty SEARCH Phoenix Properties! PhxHomesOnlineBlog   P.S. will you do me a favor? Help me reach 300 likes on my facebook page like me at http://www.facebook.com/SylviaHowardAZRealtor

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