Borrower Not On Title
Hi Everyone.
Just picked up a shortsale this week in which the only borrower on the loan quit claimed his interest 6 years ago. The loan was originated by Freemont Investments in 2006 and is now with Ocwen. The borrower has been helpful and has even provided all the requested income and asset docs. My issue is that I don't want to add the borrower to the title. I ordered a prelim title report adding his name with the other 2 sellers on title and 3 open judgments came up. The file is difficult enough as-is with 3 mortgages to negotiate so I'm not looking to deal with 6 creditors on one file. lol.
Has anyone else been able to get a SS approved without the borrower on title? He's willing to sign all SS related docs at and before the closing. Its a fairly large deal so I don't want to drop the ball. I already have an executed contract and the shortsale package is almost complete. But I don't want to submit it now and waste a month with Ocwen only to find out I have to re-do all my docs. These Ocwen shortsales are already a pain in the butt considering they have outsourced their offices and the new Hubzu/Altisource auction process that I can hopefully avoid. Thanks in advance for your help!
Replies to This Discussion
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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on
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Who's name is on the NOTE? I also suspect there is a "Due on Sale" provision in the original Note and since the borrower Quit-Claimed the property 6 years ago (likely without written permission of the lender) the loan probably became due in full at that time. The borrower may have a legal battle on his/her hands. There is minimal likelihood Ocwen will cooperate with this short sale and I suspect this one will go to FC since Ocwen has subsidiaries that purchase these properties so they can flip or rent themselves. I would not spend much time on this one. I suggest the "borrower" seek legal advice immediately. - Simply my opinion and not legal advice.
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Permalink Reply by William Rios on
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Only person on the note and mortgage is the borrower. I'm sure there is a "due on sale" clause that would have accelerated the note (had the bank realized it at the time) but what difference would that make now if the note has already been accelerated for other reasons......the payments haven't been made for 4 years?
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Permalink Reply by Larry A Willard on
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His name was added to Title back when he gave the bank the mortgage and signed the note.Remember Quit Claim means nothing when it comes to paying the lender back. You sign the note and give the mortgage and its your responsibility.Title is cleared short sale moves forward. Sounds like a easy fix if your borrower has been helpful and participating with all issues.You must negotiate with the recorded liens (borrower pays,buyer or you) work out a release with each one.Funds can come from the sale of property too.Depends on type of loan/Investor That's when you go to the Investor (guidelines) Some have certain amounts for 1st and 2nd liens..........Good Luck and Push Forward taking control over fear...
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The interesting thing in all of this is that the current "owner" who was quit-claimed the property leaves without any impact on their credit. The borrower takes a default / short sale hit on their credit. If I were the current "owner" I would walk away and let the borrower deal with it. Who signed the Listing Agreement?
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Permalink Reply by Saurabh Singh on
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To approve or reject this short sale is for the lender to decide. There is no law that requires the borrower to be on title. If this were a Short Sale through the HUBZU platform and I was still with Altisource, I would want the borrower on title. If the borrower had judgments filed against him before he quitclaimed the title to the property, they would still attach to this property. This would put Premium Title (or your title company) at risk should the judgment holders decide to pursue the buyers for their dues. The title report should show the judgments even though the borrower is not on title. If the judgments are not on title, it is either because of an error on part of the title company or because the judgments are dated post quitclaim. The lender, however, is not liable to provide clear title to the buyers. The sellers and the title company are. So the lender may rely on the advise of the title company to make a decision. If the lender is convinced that there is no violation of arm's length agreement and/or risk of short sale flip and that it does not make sense to foreclose, they may okay the short sale. However, I would want the borrower on title because borrower not on title also matches fraud alerts unless the present owners have acquired the title through foreclosure.
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Thom, The current owners understand they are way underwater and there days are numbered. They signed the listing agreement. At this point, the current owners are cooperating with the borrower and me trying to settle the 3 mortgages(in a shortsale) so that the borrower can avoid the possibility of a deficiency judgment in the future. As complicated as the deal is, its fairly large($$) and I can sure use the commission if I can find an amicable solution for all the parties involved:-)
Saurabh, The judgments against the borrower were entered post quit claim deed. They are presently not attaching to the title. On the other hand, if I add the borrower back on the deed now, the judgments will attach and create a nightmare situation for me. It will require me to negotiate 3 mortgages and 3 judgments. No fun there.
Chad, I believe everything I've wrote so far about my situation is inline with the definitions/roles you provided. I have a prelim title commitment with the current owners ONLY showing there are no judgments attaching(other than the foreclosure judgment of the subject property) . I requested another title commitment afterwards adding the borrower and 3 judgments attached. This is the reason I want to avoid having to add him to the deed. With that said, it sounds like you understand my situation if you have gotten many approved without the borrower on title. Have you gotten any of them approved with Ocwen? Are there any additional pointers/pitfalls you can shed light on? Your help would be greatly appreciated.
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Permalink Reply by Chad Gelsinger on
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William, now you are asking for a miracle...I'm not sure if any of our past situations were with Ocwen or not. I know we have closed them with Fannie, FHA, WF, BOA, and Chase... Ocwen, I'm not sure. We just handle too many Short Sales to remember.
Overall, as long as your paperwork is in order with all docs/disclosures/info, you should be OK. I'm sure it will be difficult given 3 lenders and dealing with Ocwen. The biggest hurdle I can foresee (other than the normal lack of communication on their part and HUBZU), is their rule that closing costs can't exceed 10% of the purchase price. It can cause some issues with the other lienholders receiving an acceptable payoff.
I'm assuming this is a Conventional type loan. Is Fannie involved in this transaction? IF so, do not hesitate to contact them directly for assistance. Also, if Fannie is involved, you should not have to worry about HUBZU.
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Chad, The deal is large enough so the buyer can pay part of the 2nd and/or 3rd liens if needed. He's expressed willingness to do so as long as the lender doesn't counter offer above appraised value.
The original loan amount was for $1.5M so I assume none of the government backed/guaranteed entities are involved...so im not out of the water with Hubzu. That's my next big potential obstacle, if they insist on placing this property on HUBZU, I find it unlikely they will be able to close it because of its complexity. Its almost certainly going to require the buyer to pay for more than his typical share of cost. I don't know if there is anything I can do to help steer the file from going to Altisource? Anyone out there have success?
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A short sale is also an opportunity for the borrower to go debt free. If there are judgments against the borrower, this is the best time to negotiate them. Judgment holders are more willing to accept a low settlement amount when they see that the other lien holders are settling for less.
Ocwen may be willing to approve payments to judgment holders beyond the 8% of UPB owed to junior mortgage holders. These are not dealt as closing costs.
Even if I were a Realtor, I would want the borrower on title. If I were a borrower, I would want to be on title unless I have plans to deceive the lender and profit from this deal.
I would be very keen to get my hands on details of any such deals that may have been approved by Ocwen as I want to convince the investors of the risks of dealing with Ocwen.
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Hi William,
I think you understand these, but keep these definitions/roles in mind and try not to let people confuse them:
Title (Deed): Recorded owner of the property-Supposed to match the Mortgage (There are some attorneys that change the Deed without notifying the Lender or the Lender does to change the Mortgage on record when notified, which is why the Due on Sale provision is in place. It can cause a legal nightmare for Lenders when they go through the foreclosure process, but usually does not come into play on a Short Sale Transaction when the Borrower is cooperative.)
Sellers: Owners of the property-Must sign all real estate paperwork as such. Seller's should be signing Arm's Length Affidavits for the transaction as well.
Note: Promise to repay the loan-Signed by Borrower.
Borrower: Signed the Note-Obligated to repay the loan-Must sign/supply all Short Sale paperwork. May or may not be an owner of the property.
Mortgage: Recorded document allowing the lien (Note) to be place against the property (property is the collateral). Supposed to be signed by all Owners of the Property. The Borrower may or may not be on Title as the owner of the property, but it is usually required the by the Lender therefore forcing their signature as well.
I'm not sure what state you are in or how your title laws will affect this. Have the title company check to see if the Sellers (Owners) on Title (Deed) have any liens or judgments against them that will affect the sale. Also check to see if there are liens/judgments against the property. There are occasions where the liens/judgments could have been attached to a previous owner and therefore attached to the Title PRIOR to the Quit Claim Deed being recorded. IF this is the case, you will have to negotiate those liens/judgments. It is tricky to explain whether a personal judgment transferred to the property, but your title company/attorney will be able to tell you what needs to be addressed.
In any case, I would NOT add the Borrower back onto the Title. We have closed dozens of Short Sale transactions with the Borrower removed from Title. I do not see any reason why you can't proceed with this one. Good luck, Chad
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Story from American Banker on-line
N.Y.'s Lawsky Targets 'Self-Dealing' by Ocwen, Realty Affiliates
byAPR 21, 2014 5:54pm ETNew York regulator Benjamin Lawsky raised fresh concerns about potential "self-dealing" by Ocwen Financial (OCN) with affiliated businesses that critics say try to capture real estate commissions and charge additional fees to homebuyers.
Lawsky sent a letter Monday to Timothy Hayes, Ocwen's general counsel in West Palm Beach, Fla., questioning the servicer's relationship with Altisource Portfolio Solutions (ASPS), a Luxembourg-based distressed property manager, and its online auction site Hubzu.
Altisource has an eight-year agreement to manage distressed and repossessed homes in Ocwen's $435 billion servicing portfolio. It requires that properties be listed and marketed through Hubzu, even if a distressed borrower has already signed a contract for a short sale. William Erbey, Ocwen's executive chairman, owns or controls 26% of Altisource's stock and 13% of Ocwen's.
Lawsky, the superintendent of New York's Department of Financial Services, says he is concerned that Hubzu charges inflated fees "through conflicted business relationships" at the expense of mortgage investors and strapped homeowners. Altisource says that is not true, though it recently changed its fee structure in February and now charges a homebuyer's "premium" instead of taking a cut of real estate agent commissions.
"These higher fees, of course, ultimately get passed on to the investors and struggling borrowers," Lawsky wrote in the letter to Ocwen.
Ocwen said it received Lawsky's letter, and plans to "fully address the questions raised" by April 28.
Last month, Lawsky created havoc in the mortgage servicing industry when Ocwen put an indefinite hold on a $2.7 billion purchase of a mortgage servicing portfolio from Wells Fargo (WFC). Ocwen did so at Lawsky's request, because he worries the nonbank servicing has grown too quickly.
Lawsky has said previously that Erbey's stake in Altisource "raises the possibility that management has the opportunity and incentive to make decisions concerning Ocwen that are intended to benefit the share price of affiliated companies, resulting in harm to borrowers, mortgage investors or Ocwen shareholders."
The dispute over Altisource's role in sales of distressed properties has been going on for a few years. Real estate agents have long grumbled online at Ocwen for intruding in the short-sale process and trying to take a piece of their commissions.
"Ocwen is trying to turn the distressed short-sale business into a profit center for itself, above and beyond the servicing fees it is getting," says Phillip Querin, a lawyer who represents the Portland Metropolitan Association of Realtors in Oregon.
Rob Bridges, an Altisource associate general counsel, says another affiliate, known as RHSS, used to share in real estate agent commissions when it required 1.5% of agents' commissions on properties sold through Hubzu. But the company changed its policies in February after "the brokerage community felt it was interfering with [agents'] listings," he says.
If the Hubzu site gets a higher offer on a property, it charges the homebuyer a premium ranging from $625 to 4.5% of the bid price for the home, plus a $299 technology fee. (The buyer's premium is 3.5% in California and Nevada.) That buyer's premium comes on top of the traditional 6% commissions paid to agents, which are negotiable.
"We aren't taking anything unless we improve the offer and bring value," Bridges says, though he acknowledges that agents viewed the splitting of commissions "as nefarious."
"The buyer's premium does not go to the investor or Ocwen. It is paid by the buyer at closing and kept by Altisource," says Bridges.
Agents say Ocwen and its affiliates are interfering with bona fide short sale contracts and are trying to extract additional commissions from homebuyers.
"They want me to have my client sign an agreement allowing Altisource to step in and negotiate the short sale, even though we already have a signed contract," says Paula Bachman, a debt negotiator, real estate agent and owner of Property Choices in Trumbull, Conn.
In December, Altisource stated that its objective is to expand operating margins in its default-related businesses, which includes Hubzu and RHSS, to 47% by the end of the first quarter.
Ken Trepeta, director of real estate services at the National Association of Realtors, says the buyer's premiums charged by auction sites "often look fishy to real estate agents," and that regulators should make sure that "consumers are not being harmed." But he maintains that mortgage servicers can act as the "agent of a seller," and the real estate agents can agree to split their fees or not.
"The structure of commissions is negotiable," Trepeta says. "If a real estate agent doesn't want to take the agreement, they don't have to."
The issue has become such a concern that the California Association of Realtors has backed state legislation that would make auction companies like Hubzu or auction.com liable for any harm to consumers if they take over negotiations in a home sale.
"It's simply a fairness thing," says Alex Creel, an attorney and lobbyist with the California Association of Realtors. "Realtors spend months of work on a short sale so if an auction company is going to take over the deal, the auction company should be liable" if a deal falls through and a buyer or seller tries to sue an agent.
Marketing and selling homes online is theoretically supposed to reduce the cost of buying a home. In practice, these affiliated businesses have done the opposite. Homes purchased through sites like Hubzu or auction.com can include total commissions of 9% to 11%.
Thom Colby, a real estate broker in Irvine, Calif., says he will not do business with Ocwen, Altisource or Hubzu, because he believes the companies are trying to take real estate agents' commissions.
"They own real estate brokerages, they service these loans and they really don't want agents involved, they want to use their own agents and keep the commission themselves," says Colby, who often posts comments on a site called shortsalesuperstars.com about his difficulties selling short sales and real estate-owned properties.
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I appreciate Thom's decision of not doing business with Altisource and Ocwen. I was there and my intention was very straightforward - get the borrower to be debt-free and get highest possible price for the investor. Altisource wanted to just profit from the deals at the expense of borrowers and investors. The people at Ocwen-Altisource just want to see their personal wealth grow. They even did not pay me incentives for over ten months and never reimbursed the expenses I incurred on my trip to Mumbai to train their employees.
However, I am confident of action against William Erbey and his crew. If crooks like them are not dealt with soon, anarchy will prevail.
Anyone with information that may be helpful in getting these crooks punished should immediately forward it to CFPB. Please also write to investors asking them to stop giving business to Ocwen-Altisource. Please also request credit rating agencies like Moody's to downgrade Ocwen's rating. We need to get more settlements against Ocwen and at the same time increase their cost of borrowing and prevent new business from flowing in. If we can get regulators to notice any flaws in their loan origination business, it would be very good.
Existence of companies like Ocwen and Altisource is a threat to global happiness.
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