Usually a cloud on title occurs on a private transactions that aren't recorded. Who knew this was going to happen when the bank was mishandling your mortgage. It's sort of upsetting when you pay fees and interest and they industry still can't track millions of loans. This scary to home owner and the investor of mortgage back securities. Would you want to purchase these securities packed by banks right now?
“Defective documentation has created millions of blighted titles that will plague the nation for the next decade,” said Richard Kessler, an attorney in Sarasota, Florida, who conducted a study that found errors in about three-fourths of court filings related to home repossessions.
And this the key problem the transfer of the promissory note and mortgage to new lien holder when the mortgage is sold
The biggest deficiency in foreclosure suits is missing or improperly handled documents, Kessler found in his study of court filings in Florida’s Sarasota County. When home loans are granted, borrowers sign a promissory note outlining payment obligations and a separate mortgage that puts an encumbrance on the property in the lender’s name. If mortgages are resold, both documents must be properly conveyed to prevent competing claims.
In some cases, mortgages were conveyed using the Reston, Virginia-based Mortgage Electronic Registration System, or MERS, designed to cover transfers among system members. Promissory notes also often were endorsed as payable to the bearer to avoid the need for multiple transfers. Both practices have been challenged in court.
“If I were in the title industry, or a mortgage holder, or someone who bought a foreclosed property, this is something I would be very worried about,” said Michael Carliner, a Potomac, Maryland-based economic consultant specializing in housing.
This problem is going to cause lawsuits all over place and they have already started. Also, this is going to slow the pace of foreclosures hitting the market, right now the estimate is 40 months. Plus, I'm going do another posting on the increase of 90 day delinquencies.