A White Plains, NY federal court eliminated a woman's $460,000 mortgage debt because the paper trail was so messy that the mortgage lender couldn't prove that it actually owned the debt.
In March, PHH Mortgage filed a proof of claim to the debt noting that it was owed $461,263, which included more than $30,000 in past-due payments. The homeowner's lawyer sought to have the loan modified, but after the bank dragged its feet, as the lawyer described PHH's actions to the [New York] Times, the lawyer asked PHH to prove its claim.Who owns your home? Lost paper trail allows borrower to keep her houseUnable to do so to his satisfaction, Judge Drain ordered the debt expunged, concluding that PHH had failed to show it had been assigned the mortgage.
The case is being appealed by PHH, but even if the homeowner remains victorious, there remains a problem for her: Without a clear title, the homeowner will likely have difficulty selling her home if she chooses to do so.
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I'd heard reports a year ago (on NPR, where else?) that some of these were going to occur. Personally, I think this is a case of the bank being inexcusably sloppy, and I have no sympathy for them.
About time someone besides the banks got a bailout.
Random question, probably in the wrong place:
Is there a good place for talking about BoingBoing the site itself?
And is there any way to get a "richer" view with a snippet and images for stuff that's old, but not old enough to slip to "Earlier Posts"?
IANAL but I am pretty sure that a lack of clear title just means that an action to quiet title or an adverse possession claim will be necessary before the homeowner can sell her home.
Always nice hear about Wall Street taking it in the ass.
Score one for the people.
Finally, the little guy wins one! All the Grand High Muckety-Mucks have gotten their way for far too long. It's about time we got ours. Congratulations to the lady in White Plains! I tip my hat.
I have friends who have now successfully lived rent free for 5 months due to a similar situation. A few months after signing a year long lease, they learned that the bank had repossessed the house from its owner. When the bank asked them to vacate the premises, the inhabitants asked them to produce a deed of ownership -- largely as a stalling measure intended to give them another week to find a new place. Turns out they could do no such thing, and thus have no legal right to evict them. (And yes, a cop call-out on the bank's behalf has confirmed this.) For a couple of types who listened to too much Crass in college, falling into a legally protected squatting situation has been a dream come true. Heck, I'll admit I'm even a little jealous. I doubt it'll last too much longer, but it's not a bad gig when it's so hard to keep/find a decent job around here right now.
Yeah, score one for any people who happen to have a mutual fund owning stock shares in companies associated with this, as they don't have that level of fine control.
Like special interests, Wall Street is made up of a lot of regular people, you know.
It's the little people who pay.
Due diligence. It applies to both the big and the little guys. If you just happened to invest in a mutual fund without bothering to ask whether or not the people who managed it are conscientious and trustworthy, well... whose fault is that?
kc0bbq: Why shouldn't the lender(s) lose out for their sloppy record-keeping? And without clear evidence of ownership, how do you know PHH is even the legal owner of the mortgage? How do you know they're not just some boiler room operation trying to steal from both the homeowner and the real lender?
The level of sloppiness in business these days is appalling. It's not surprising that the folks in charge of recording mortgages have been slapped down finally.
Here's the Wikipedia article about MERS, the organization that has taken over the recording of mortgages from the various counties. http://en.wikipedia.org/wiki/MERS
$460,000? i didn't realize principles/immortal souls were going for so cheap these days!
If you borrow money. You pay it back.
I don't care if you borrowed money from Dick Cheney, Rush Limbaugh or Adolf Hitler.
That the lender fucked up is of no concern - to expunge the debt instead of striving to determine who owns it is tantamount to theft, at least from a moral standpoint.
Since apparently no one can prove ownership of the mortgage, to whom would you have them pay? Maybe they should just leave it in a paper bag on the doorstep to satisfy your moral outrage.
"Due diligence. It applies to both the big and the little guys. If you just happened to invest in a mutual fund without bothering to ask whether or not the people who managed it are conscientious and trustworthy, well... whose fault is that?"
Since most people own funds through 401k accounts, where does all of this due dilligence and choice come in?
Still ignores the point that nothing is free.
But still, property is theft and all that.
I think it would help everybody if people would realize that they do not buy a house when they get a Mortgage, they essentially get the right to pay someone else to live in a house that eventually will be theirs.
This is either related to or is the "produce the note" defense.
The Consumer Warning Network champions it.
http://www.consumerwarningnetwork.com/
Ernunnos @9 - What?!? Did you seriously suggest that investors' fault is in "not bothering to ask whether or not the people who managed it are conscientious and trustworthy"??
Good thing I asked my banker that question (luckily he said yes). Geez, what planet are you from, that you have to run background checks and read reams of dubiously sourced legalese and accountese before clicking one of the Radio Button choices on your company's 401k investment page.
I picked "USAA World Growth Fund", because of the sexy stock photograph girl next to its description. But I really wonder if I shouldn't have picked the one with a picture of a sober-looking middle-aged balding man in a suit. :-(
People shouldn't be required to have a forensic accounting degree in order to make it to retirement.
For decades, the loudly trumpeted wisdom FROM ALL corners has been that you're an idiot if you keep your life savings in a mattress or a savings account. Because you need to stay ahead of inflation, plus your money should be working and not gathering dust, etc. I invest most of my money in a "Target Retirement 2040 Fund", hope it's not run by crooks. :-[
Homeowning is bizarre anyway. If somebody GAVE me a house FREE AND CLEAR on the same block as my apartment, then I'd be paying $550/month in property taxes instead of $675/month in rent (I actually did the math). I could own a home, but I just don't see the point, unless I'm willing to move so far out that my daily commute would go from 5 minutes round-trip to an hour and a half?
So what does owning a home (on property you own!), actually mean, if you still have to pay rent every month (or year) to live there?
I'd say that at best it's a kind of pyrrhic victory. Yippee, no mortgage payment. Yeah, and no ownership either. What she'll save buy not making mortgage payments will be a fraction of what she spends lawyers if she pursues a title. Even if she wins, in no way do I think she'll look back on this in five years and think she can out ahead. Unless she just walks away.
@knodi
it means that everyone needs to look into the fact that property tax (or any recurring tax levied on a regular basis in the absence of any other transaction) is illegal and unconstitutional.
it is inherently wrong to tax someone for *owning* something - it fundamentally undermines, nay, negates, the concept of ownership. "This is my house. I bought it with a loan, and I paid off the loan. It is my house. Except for if i don't pay the government every year for the privilege of living in the country that I was born on. Then it's not."
That the lender fucked up is of no concern - to expunge the debt instead of striving to determine who owns it is tantamount to theft, at least from a moral standpoint.
Oh hai, Aiyam Ur gNu m0rt33gage h0ld3r! Pll33ze senme aWl Ur paym33ntzez ztart1ng r1ght Nauw. Doan wurry, 1 haz teh papurzezs & 3vreeting. awls3w, Urr CaR paym3nts 2, K? kthnxby.
The fact that I may own part of a company does not at all discourage me from believing they should be held to a reasonable standard of accountability, never mind accountancy. Those standards are what protects all the other companies I invest in and/or do business with and/or am paid by. I'm perfectly willing to lose $100 in my investments to protect my $1K on the other side of the equation, if that's what it takes... and to accept that mutual funds are counting on average return rather than the performance of any one component of the fund.
Investment, of any kind, is not without risk. Your mattress may get stolen (or your money chewed up into mouse nests), and you lose against inflation. IN GENERAL, and FOR THE LONGER TERM, cautious investing remains a better bet -- but the keyword has always been "diversify, diversify, diversify" so you don't risk getting wiped out by one set of idiots or crooks or similar disasters, and the expectation is that there *will* be losses in some areas which are offset by gains in others.
The simplest advice remains a good balance of no-load, low-fee index funds. They aren't sexy. They will often be outperformed. But on average they perform as well as most, they don't have the all-the-eggs-in-one-basket risk, they don't skim a lot off the top, and they don't put you in the position of trying to bet against the pros. (If you don't see the sucker at the poker table, he's sitting in your chair.)
Could I have done better with deeper diligence? Sure. But I'm not willing to make tracking my money my full-time job, nor do I find it a particularly interesting game. In return for not having to deal with it, I accept lower returns, and I accept that any one or two years may go negative... but the average return over the will probably be Quite Good Enough.
If you aren't willing to accept losses from time to time, you probably don't belong in the market. It'll drive you crazy.
What owning a home means is that I can customize my living space to my own preferences without having to justify it to the landlord. It means I can make noise at 3AM without bothering the apartments around me. It means I have better privacy. And I have all these new hobbies, like painting windowsills and repairing the dishwasher and refinishing the library floor and ...
Rent and taxes and such depend on where you are and what you want. My mortgage payment's not very different from what I was paying in rent, and I have more space. Admittedly I'm also now paying for taxes and insurance. On the other hand, mortgage interest is a deductable expense, as are the taxes (on the federal form, anyway), so it balances out.
Don't buy a house as a profit-making investment. Buy it because you want to live in it. If prices are going up and you make a profit on the deal (which is the general trend in some areas, but is emphatically not guaranteed, especially if you can't afford to wait for a good market before selling) that's a bonus... but people really shouldn't have let themselves get sucked into the house-as-money-machine mindset in the first place.
Investing is like thermodynamics. "You can't create money. You can't move it without losing some. A closed economy becomes more disorderly over time."
Do you rent an entire house? If so, then that's a great deal you have there. If not, then comparing them directly like that is not accurate. How much would it cost to rent the house? Also, after 20-30 years of renting, you have nothing to sell. After 20-30 years of paying a mortgage, you have a house to sell. That's a big difference. Whether it makes financial sense depends on timeframe, mortgage terms, whether property assessment happens every year, etc. Your point is valid, however, when you consider timing. It may be better to save up for a large down payment and continue to rent rather than start now. Of course, this neglects other homeowner benefits like a yard (maybe, depends on the house), painting however you like, etc.
"Oh hai, Aiyam Ur gNu m0rt33gage h0ld3r" -- Don't laugh. I once got a note saying one of my loans had been sold and giving the new payment address. Problem was, said note had clearly come off a PC printer, possibly a Mac judging by the font. (This was back in the dot-matrix dinosaur age; PC printing was very obvious.) Didn't help that the new lender was one that had rarely been heard of in my part of the country, and that had a name which sounded just a bit too cutesy.
It did get straightened out in the end, but it was a good example of a bad example, very nearly as bad as the l33t-speak monstrosity you constructed.
@nutbastard: Unfortunately, that turns out not to be the case.
Wasn't this whole thing invented by a housewife who obeyed one simple rule? I hear she also got whiter teeth & ditched the belly fat the same way. "Can you PROVE that it came from something I ate? I don't think so!"
@nutbastard- Despite your outrage, history is against you on this one....property taxes have been assessed as long as organized states have been around, at least as long as recorded history. You're swimming against a pretty stiff tide here.
Nice to see that "Possession is nine tenths of the law" can pay a good dividend. For anyone thinking it's theft to take possession of one of these wonders, the reality is legally that no one owns it but the person who has possession until proven otherwise. There is "no one to pay back" as no paperwork exists to prove where the money is supposed to go or a deed to prove ownership so that money is owed. It would be damn stupid to pay for any period of time, only to find that the loan was not paid off because you were giving it to someone who was basically stealing it.
Pay it back to whom? Like the other poster said, there is no guarantee that PHH owns that loan any more. Loans were passed around like partners at an orgy. Often they were carved up into little pieces and sold to different creditors. Sure, if you borrow money from someone you have a moral obligation to pay it back. But what if you don't know who you owe the money to? If PHH can't prove it's the one, then the borrower doesn't owe it anyting.
That depends on the state. Here in Pennsylvania the title doesn't go to the lender, it automatically goes to the buyer.
That the lender fucked up is of no concern - to expunge the debt instead of striving to determine who owns it is tantamount to theft, at least from a moral standpoint.
Who do you want to do that 'striving'? Are you suggesting that the court should start making aggressive investigations? Is this a plea for more government intervention in private contracts? Yay!
My take is that I would, and do, feel obligated to pay as long as I have reasonable confidence that the money will, in fact, be credited against my loan correctly.
On the other hand, I do not feel obligated to insist that anyone else continue making payments when that point is in question. Two wrongs don't make a right, but as National Lampoon said many years ago, sometimes three do.
The larger banks have been notoriously lazy about paperwork for quite some time. There are a number of places where they have been leaking money, but have decided that it would cost more to close the leaks than to let them persist. If they make that decision up front, they really do have only themselves to blame when something slips through their fingers... and in fact they may have come out ahead on the decision when you average it over enough cases, so it's hard to feel sorry for them.
And is there any way to get a "richer" view with a snippet and images for stuff that's old, but not old enough to slip to "Earlier Posts"?
I usually visit the homepage first to glance at the thumbnails and look for any significant interface changes, then add the date to the end of the URL to start reading the posts. For example, boingboing.net/2009/10/27/
This effectively enters the archives starting with the current date. All posts appear with the same "richness" this way. It's a tad annoying to have to recall today's date and manually type it in, but I find it worth it to get rid of the "minimized" posts.
I worked for, well technically I still consult for, a company that takes care of these problems for lenders.
My understanding on how this all works is:
You get a loan to buy a house from Lender A. You've agreed to pay back, over the course of 30ish years, three times the amount you borrowed, roughly. But Lender A wants some money now, so they sell your loan to Lender B, usually in a group of other loans. So they sell a bundle of loans with a value, in 30 years, of $3 million (which they paid $1 million for), for say $1.5 million. They just made .5 million dollars, not too shabby. Now Lender B sits on the loans for a year or so, then decides to keep some of the loans, and bundles up the rest along with some others they own and sells them to Lender C. Lender C owes Lender D some money, because of some deal and pays off Lender D with another bundle of loans. This can go on quite a bit, and it's not unusual to see a loan get passed through 20 hands. Eventually someone decides to sell the loan to Fannie Mae or Freddie Mac.
But not you have a problem, because both Fannie Mae and Freddie Mac require a full legal paper trail of all the hands that have held the loan, and if that does not exist they will not pay for that loan.
What happens when Lender B merged with Lender H? Where are their records now? Faxes don't count, they need to be notarized copies, whereas banks often sell to each other on the basis of faxes and emailed copies of the documentation. And when Lender D had a fire in their record storage facility, what happened to the paperwork? Or what happens when Lender C sells the same loan package to Lender D and to Lender E? Who owns it? All kinds of things can happen legitimately, and not so legitimately, to cause paper work to be misplaced or be wrong.
The company I worked for tracked the loans from the beginning through all the various companies that owned it and got the proper documentation for Freddie Mac or Fannie Mae to buy the loans. When the proper paperwork physically did not exist they got sworn notarized depositions about the paperwork, which counted.
It was amazing to me, on the database side of things, how often the same loans were sold to the same bank. One bank might have bought the same loan four or five times. So here they thought they were buying five separate loans but it turned out they just bought the same one five times. Whoops! The banks and institutions we had as customers bought loans bundled up in the hundreds of thousands. It was very difficult for them, apparently, to sort through and make sure they were not buying multiple copies of the same loan. Or that they were not buying loans they already owned. Especially when the selling banks tended to wiggle stuff around so that it did not look like they were the same loan. Maybe they did that on purpose, maybe it was done to them and they really didn't know. No idea. There were also instances where two or more customers claimed to own the same loan.
I remember one project for one customer where we took in several hundred thousand loans and they wanted us to check for duplicate loans within that and with a list of loans they already owned. I think we ended up whittling it down to like 40,000 loans. All the rest were duplicates.
So yeah, do make sure when you get a notice that someone has bought your loan that they actually have bought your loan.
I think the idea is that the government protects that house. It's unlikely that a foreign nation will start an invasion right at your front door, but if they do you can count on a lot of big guns coming to protect you.
No ticky, no laundry.
Now I feel like a sucker for paying cash for my house. Thanks a lot, BB!
@kc0bbq "property is theft" Nice shout out to Emma Goldman!
I remember hearing about something similar years ago - apparently it's surprisingly common to have the papertrails involved in mortages and the like end up like this.
I said property tax, not mortgage payment. Read more carefully. ;-)
Besides, if at the end of a series of mortgage payments I OWN a $200,000 house, then I guarantee I paid more than $200,000 in mortgage payments over the years. Except for aprpeciation, which you can't count on, there's no way it's a good deal.
No, the previous guy nailed it, who said "only buy a house if you want to live in it, if the space and privacy and customizability mean something to you and are worth it".
In certain states, all the homeowner would have to do is to have the judge's order recorded in the land records of the county in which the property is located. As it is, a title company would look at the case, see the order and would insure title. Having the judgment in land records would merely save future title companies time and energy.
Wrong anarchist: The slogan 'Property is theft' comes from Pierre-Joseph Proudhon.
Tanta, over at calculated risk wrote about this sort of thing. http://www.calculatedriskblog.com/2007/11/deutsche-bank-fc-problems-and-revenge.html
Property taxes (taxes in general) exist to pay for the services the government provides to property owners. Most generally, property rights: national defense, policing, courts etc. These just aren't optional; they're necessary to ensure that someone doesn't just come to your house and kick you out and keep it. And then infrastructure and other nice things: roads, sewers, etc., which are maybe a little less necessary but all in all most people appreciate them.
Also, if you're renting, you're paying your landlord's property tax, and possibly their mortgage, and not accumulating assets.
The most cynical view would be that a person pays property taxes so the state won't throw them out and turn the property over to someone who will...defense and infrastructure are just nice bonuses.
We've got a 25 year mortgage, with 10 years locked in at an obscenely low rate. Slightly higher than prime right now, but seeing as it can't go much lower than it is now, sometime in the next 10 years it'll go back up again and we'll still have a nice low rate.
We bought because we wanted to own a house. Basically, that's it. It's nice that in 25 years (likely sooner, depending on how our payments go) we can sell the house and get some cash money, but that's really a bit of trivia at the moment.
What we've got, for combined mortgage and tax bill, is a four bedroom home in a nice neighborhood on mass transit close to my work, for less a month than it would cost to rent a three bedroom apartment close to my work. And we're the owners, which is a nice fuzzy territorial feeling. We can remodel if we want to, we can yank up the carpets and repaint the walls, we can replace appliances, it's OURS. RAWR.
In the end, that's mostly what you're paying the premium for - your own territory.
Yes, for the moment it's really "ours" where "us" includes the bank. But while the bank gets a say in transferring the property to a new owner, they DON'T get a say in all the things a landlord has a say in.
The bank is an INVESTOR in our home, not an owner in the "Grr territory" sense.
This matter has also arisen and been addressed by the Supreme Ct of Kansas in
LANDMARK NATIONAL BANK, Plaintiff/Appellee, v. BOYD A. KESLER, Appel-lee/Cross-appellant MILLENNIA MORTGAGE CORPORATION, Defendant, (MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. AND SOVER-EIGN BANK), Appellants/Cross-appellees, and DENNIS BRISTOW AND TONY WOYDZIAK, Intervenors/Appellees.
No. 98,489
SUPREME COURT OF KANSAS
2009 Kan. LEXIS 834
August 28, 2009, Opinion Filed
The Court found against the mortgage company for similar reasons...
@Lobster
The problem with your national defense argument is that property taxes don't go to the federal government. So that argument is irrelevant.
@knodi
ok so you paid more than 200k for the 200k house if you had a mortgage. That is how loans work, you are paying for a service. How much money would you no longer have from rent? I know that I have shelled out about 200k over the last 10 years for the rent on my loft. That's 200k that I will never see again. Oh yeah, that's a great deal. Unlike a mortgage though, there is no timeframe for that cost to end.
I believe knodi's point is that by his calculations he's paying less in rent than he would be paying for interest payments, principle plus property tax. Sure, you have to pay rent for as long as you live, but you could end up paying less in lifetime housing costs.
That is a good suggestion! Should have paid more attention to the URL construction.
Kind of a pity the redesign sort of ignores people who enjoy keeping up with all the site but might wait a few days before playing catchup. (Actually I don't know what use the "headlines" only section is, except to let casual readers know "but wait there's even more!")
The apples to oranges problem with knodi's calculation have already indicted his numbers. So sure, you may pay less in housing if you are willing to live in a tiny studio apartment your entire life. Let's not forget that your rent is going to go up every year by at least 3%. Whereas if you have a fixed rate loan that is going to stay the same. Now property taxes are a whole other can of worms because they vary so wildly between localities. Here in CA, we have great property tax, but that seems to have had the effect of increasing the value of property. So that could be a wash. Nevermind being able to transfer property to your offspring.
First of all, the only thing that can't be proven here is that she owes the bank money. They have proof that she owns the house, but have no idea where the money came from for her to buy it.
Also, Buying makes sense because you get to keep the house when you are done paying the mortgage. If you have a $200K mortgage, and pay off $100K from the principle, then you now only own $100K on the house. When you sell the house, for $200K+ you now have $100K in your pocket. You may have paid in that time $75K in interest, but you still have $25k in your pocket. Also note the $200K+ which means that house values almost always go up. So you will most likely sell for more than you bought it for. If you had paid that same $175K in rent over the same period, the money is gone, and you will never see it again.
Also, if your mortgage payment is $650 a month, it will be $650 in 10 years, or in 20, as long as the mortgage lasts, assuming constant interest. Meanwhile the rent can (and probably will) go up by 3% (or whatever your local law allows as the maximum) ever year.
Problem with your argument is that the entity trying to collect the debt may no longer have the *right* to that debt. If they sold pieces of it off here and there, which happens with mortgage-backed securities, they no longer "own" the debt.
Not to mention the incestuous frequency which corporations sell and re-sell these securities within their own corporate structure to get tax advantages etc..if they can't prove they still own it, the legal and in my opinion, moral, obligation vanishes.
The nortgage on my home has been internally "sold" three times in 11 years to different parts of a huge coroporation and parts of that corporation were later bought out by a different corporation.
I am satisfied that the people I am paying my money to have a legal right to that money as I followed the chain of custody of the mortgage especially after I got a letter from a company I had never herard of claiming I was to make my payments to them from a certain point on.
Due dilligence works both ways. Just because someone *says* they now own a debt doesn't necesarily make it so.
Or at least if you do think so, I know several deposed Nigerian President's widows who want to discuss a financial deal with you.
And tomorrow the landlord can double your rent and six months from now can decide he wants to bulldoze the building and turn it into a rollerblade park or give your apartment to a family member (just about the hardest form of eviction to fight) or even decide to paint your interior flat black and olive drab with orange plaid countertops and you can't do squat other than move.
You live there at his whim and you dance to his price...want to paint your rooms a different color? Probably won't be allowed to. Dislike your dishwasher? Tough cookies...maybe you can sneak a new one in but the landlord now owns it and even in most rent controlled places can charge you more for "improvements" you spent your own money on. Not enough hot water? Tough noogies if what they supply meets building codes. Want air conditioners? Only if the landlord permits it.
Not saying renting is a bad thing and for some it is an ideal thing. But for some, like me, it is much nicer to own. I pay the same mortgage now as I did ten years ago...they cannot raise it no matter what so long as I pay it. And the mortgage was quite reasonable ten years ago and a lot more so since my income has grown a lot in the decade.
I live in a state where the property tax cannot be raised at whim or get pegged to some artificial paper value you don't have but have to pay a lot more for.
I pay about what it would cost to rent a modest two bedroom apartment in the same area but I have about 75 per cent more space, a garage etc.
Neither way is perfect for everyone, that's why there's choices. Right now since I am moving to a new state for a job I'd rather be renting as it'd make my life a lot simpler. This is a lousy time to be selling..but I bought wisely and cheaply so I can still make a tidy profit to pay down the cost of my next home once I do sell.
"If somebody GAVE me a house FREE AND CLEAR on the same block as my apartment, then I'd be paying $550/month in property taxes instead of $675/month in rent (I actually did the math)."
Unless you live somewhere with massive rent control (or an idiot landlord) or a whopping 5% per year property tax that is impossible. At 1% property tax, that would he a $700,000 home you're talking about.
@gandalf23: that's a freaking awesome perspective that i've never heard before -- buying what you already own? that's classic -- ah the wonderful efficiencies of the market....
I guess the idea of not taking any of the options never occurred to you? "What, but that's outrageous! Not have a 401k?! That's crazy talk!" Is it? How's that 401k working out for you? You like those 0% returns since 1999? Oh, wait, that's not accounting for the declining value of the dollar. If you do that, it's a 25% loss.
You don't have to be smart enough to know how the game is rigged. You just have to be smart enough to know that it is rigged. And then confident enough to step back from the table.
You never *really* own your house. The property taxes you pay is rent money to the government for the right to live there and they can take away your home at will. You can buy a house and have it torn down for a freeway, coal pipeline, etc.
The property taxes you pay is rent money to the government for the right to live there and they can take away your home at will.
Not if your state has a homestead law. The government can put a lien against your homestead, but not seize it.