Written By: Kevin Weaver, Underwriting Counsel

Do you ever wonder why title companies concern themselves with unreleased mortgages that are 15 or 20 or even 25 years old, especially when the lender is no longer in business? What could possibly happen, right? Who’s going to come knocking on the homeowner’s door after all this time? Well, unfortunately, there are enough door knockers that our industry has a name for these seemingly dead liens. They are called zombie mortgages. Like creatures from The Walking Dead, they rise up against unsuspecting homeowners and, in some cases, cause the havoc one would expect. One homeowner pulled up to her house to find numerous cars and officials wandering around with clipboards taking notes. When asked, the head honcho informed her the home was being sold in foreclosure. In another case, a $700,000 home was sold at auction for $170,000, twice as much as the face amount of the mortgage due to interest and penalties. And these are not isolated cases. Although accurate numbers are hard to come by, it is estimated New York alone has at least 10,000 old second mortgages that had foreclosure activity initiated on them in the past two years. In Maryland, a researcher found over 500 mortgages that had been in default and unpaid for more than a decade but are now in foreclosure.

How does this happen? It’s a combination of factors. In some instances, borrowers claim they were told their second mortgages were forgiven as part of loan modifications. In others, the lender is out of business, and the homeowner was never notified as to who now owns the mortgage on their property. Mortgage-backed securities also play a large part. Thousands of loans are bundled together and sold to investors. Sometimes they are sold at rock bottom prices by failing banks, especially fifteen years ago when the bottom was falling out of the market. In one case 9,000 loans were sold to an investor for $6,000. Some of those rock bottom acquisitions weren’t productive back then, what with first mortgages ahead of them and declining home values, but now that home prices are at historic levels, they are starting to pay off for the investors. It only takes a few of those 9,000 loans that were purchased for less than a dollar each to make a handsome return on that investment.

Take a minute to research zombie mortgages, and you’ll read some of the horror stories about how these living dead things can ruin people’s lives. The next time you are irritated because you think your title company is dragging its feet on clearing a lien, remember that we are looking out for three parties – ourselves (what title company wants to pay a claim?), the lender (who wants to deal with a claim?), and the borrower (who wants to lose their property?). That requires an extra level of care to determine what risks the old mortgage poses to each party. Some title companies may always require a Release no matter what. Others may remove it no matter what. Neither path seems designed to protect all the parties. A little research can go a long way. Maybe we can track down whoever owns the assets of a defunct company. Maybe there is subsequent financing that’s been insured. Maybe the credit report is revelatory. Maybe the borrower has documentation regarding payoff of the loan, like a Settlement Statement from a newer loan or a letter from the lender acknowledging payment.

Enough maybes can add up to information almost as good as a Release, but sometimes gathering that information takes time. Just remember that your title company wants to close the loan as much as you do, but sometimes killing a zombie is not as easy as it looks in the movies and on TV.

• Tuesday, May 7, 2024 at 3:30pm PST for our ARS Anniversary Celebration.
• Monday, May 27, 2024 in observance of Memorial Day.

One of our favorite times of the year! Our whole team comes together to celebrate with some food, laughs and a little friendly competition. Who will win this year? Team Gold or Blue?

Please take note of the following to avoid any potential payoff delays.

There is a high probability a creditor will reject an e-signature and will require a wet signature on the Borrower’s Authorization form. In addition, some creditors will also require an ARS specific Borrower’s Authorization form when we are requesting payoffs on the client’s behalf.

Download a copy of the ARS Borrower’s Authorization form below.  

Please reach out to your Settlement Team or Solutions@AllegiantReverse.com with any questions.

Allegiant Borrowers Auth

Written by: Mylene Marcelo, Title Manager/Title Officer

We have a current vesting deed adding son into title dated 2017 as joint tenants with rights of survivorship. The Deed was executed by a Power of Attorney (POA) made by Wilma, Principal to Fred Jr., as Agent. The POA was dated 1997. Wilma was competent at the time the Power of Attorney was signed but the problem is, review of POA shows it does not allow self-dealing. By Fred signing on behalf of Wilma adding himself into title is deemed self-serving. He did not have the authority to transfer title to himself. The worse part of it is Wilma is now deceased. Now, does Fred Jr. obtain title as surviving joint tenant? How do we fix this?

Fred Jr. does not automatically obtain title as surviving joint tenant. The fact that the Deed creating joint tenancy was created by self-dealing would be deemed invalid. In this scenario, Wilma originally owned the property. When she died in 2010, she left a Will leaving her estate to her two children: Fred Jr. and Pebbles and said Will was admitted to probate. We requested for the probate documents to be pulled. We want to review the Petition, the copy of the Will, the Letters issued to the Personal Representative and the Order of Distribution and all other pertinent documents regarding the Estate. Apparently, Fred Jr. was the appointed Personal Representative of the Estate of Wilma. The solution would be to have a Deed executed by the Personal Representative and a Deed from Pebbles who is the other heir in order to perfect vesting into Fred Jr., who is the proposed borrower to be insured.

It is very important that the authority of an Attorney-in-fact is reviewed every time a Power of Attorney is being used in a transaction. This is just one of the documents that we review on a daily basis. It can be one that has already been recorded or one that is about to be used in our transaction. Either way, it is always best to submit the executed Power of Attorney for review and approval.