UPDATE - Bank Says I Don't Own House - Posted by Elizabeth NJ

Posted by Jim V on May 17, 2006 at 01:13:42:


I would have thought it was readily apparent from the thread that litigation was likely. As I stated, I agree with your general viewpoint, but there are nuances in this particular situation that could alter how the court may view individual party claims.

Thanks for stating you think I’m confused about what a BFP is, it provides some insight into either your lack of reading skills, or perhaps comprehension. You certainly do have opinions, though.

UPDATE - Bank Says I Don’t Own House - Posted by Elizabeth NJ

Posted by Elizabeth NJ on May 09, 2006 at 12:16:30:


I promised that I would update the status so here it is:

You may recall that about a month ago I posted here that I had purchased a nice 2 family house in March 2006, after running full title, etc. I recorded my deed, registered the bldg with the City as required and took every other action legally required to establish ownership. We gave the upstairs tenant a new lease and began working on the first floor apt. so we can rent it out.

I bought the property sub2, so my atty wrote to the bank’s attys & requested a payoff statement for the outstanding mortgage. A secretary at the firm called my atty & said the bank had foreclosed on the property and that I do not own the property and that my seller, the owner of record, had no authority to sell the property to me because of the foreclosure. However, there was nothing in title about a foreclosure.

I contacted the foreclosure dept. at the sheriff’s office and learned that, sure enough, the bank had foreclosed in 2002 but, lacking a buyer, they bid their lien. They did not pick up their deed from the sheriff until 2004 and never recorded the deed.

My attorney told me to hang in there, because NJ is a race notice jurisdiction state and I had legally purchased the property and secured it by recording my deed.

I love a challenge and I wasn’t about to walk away from the property I had purchased just because the bank’s attorneys said I should. I began the process of arming myself with any and all documentation that might be required in anticipation of litigating to establish ownership.

Last month the bank’s attys had one of their management companies sue my tenant in L/T court for past due rent. The action was dismissed because the plaintiff didn’t show up & the L/T Court.

In the meantime, my attorney continues trying to get a payoff figure from the bank’s attys, and they keep stalling and saying I don’t own the house and that my deed has no validity.

Last week my tenant called me & said she was being sued by the bank for possession of the apartment. She gave me a copy of the summons & complaint. I told her they couldn’t do anything because they don’t own the property.

Well, I prepared a beautiful package of documents for the L/T judge (with tabs & everything) with a brief covering letter clearly stating that the bank cannot evict my tenant because they don’t own the property, that they’re only entitled to be paid for their outstanding lien.

I went to L/T court with my tenant this morning and told the intake clerk that this action had to be pulled from the court calendar because the plaintiff had no authority to request relief of any kind from the court since they don’t own the property.

The bank’s atty showed up and I immediately told her what was going on, that she had no authority to make this action. I gave her copies of my deed, registration, & tax records, all in my corp. name. She said she had no idea that someone had bought the house, that this was all news to her. She then opened up her file in front of me and there in her file is my attorney’s letter asking for the payoff statement.

So, here’s the good news: The L/T court immediately dismissed the bank’s action. The bank’s atty called her partners for guidance & they instructed her to tell me that they will immediately issue a payoff letter to my atty, that all they want is their client’s money. Wasn’t that my position all along? And isn’t that what my attorney has been asking them for?

And my tenant paid her first month’s rent to me on the spot now that she’s confident about who actually owns the building.

What a great morning!!!

MORAL: If you know you’re right, hang in there!!


Thanks Elizabeth - Posted by JT-IN

Posted by JT-IN on May 11, 2006 at 19:02:49:


I just wanted to thank you for opening up your deal to all here… It has been great for discussion and stimulus for thought to many.

I sense that it is customary for you to do a very thorough job in your RE dealings, and you must do an excellent job of such. I do think that there are some title issues here that are considerably out of the norm from what you deal with in most of your deals. This situation is right in the wheel house of many who have participated in this discussion, that deal primarily with foreclosures and sheriff sales. Please understand that none of the folks involved here are wanting to prove that you are anything but the owner of record. None of us know for sure, as there simply isn’t enough data about this case available in the thread for anyone to know the answers about the opinions speculated.

Your deal involves an area and circumstances that many title companies and some general prcactice Atty’s aren’t all that sharp on. So understand that those that are offering opinions are attempting only to caution you of some of the potential land mind problems that could exist in this deal, depending upon EXACTLY what did and didn’t transpire with the sheriff sale and deed, 4 years ago. If the sale was properly completed, it seems impossible that you could ever convey title without quieting the title, and extinguishing the claim of the Mortgagee. Now I can’t say that this will be necessary, but it sure seems highly likely from what has been posted and discussed to thsi point. Of course, it is possible that the foreclosure case was flawed along the way, thereby never extinguishing the mortgage and title rights of the party who granted the deed to you, and in that case, you could be in the clear.

So what Joe Kaiser has said, in much fewer words than I, is IF you negotiate an acceptable payoff with the Lender, then also get them to execute a Quit Claim Deed from them to your company, and that will go a long way to solving any problem down the road, if in fact it does exist… (as I and other experienced foreclosure investors suspect). Better safe than sorry, and for the cost of a deed prep, it will be great insurance, if the Lender will sign it. If not, then some day you will find out if all this concern over the issue was valid or not…

Again, thanks continuing to expose your deal here. Also know that NO ONE here is attempting to be critical of you or your deal, as we are ALL simply trying to expose what we see as a potential problem, which could be the worst kind to have, if not anticipated as such. So please continue to post the outcome of the payoff when you receive it, and know that it is challengin events like the one you are involved in now, that make participating here worth all the time spent…

I have no real doubt that you will get to bottom of this deal, as I can sense your tenacity through your many posts about this and other situations that you posted about. Keep on keepin on, not that you need me to tell you that… LOL

Just the way that I view things…


Re: UPDATE - Bank Says I Don’t Own House - Posted by Joe Kaiser

Posted by Joe Kaiser on May 11, 2006 at 17:10:58:

Good going . . . I think you’ve got their attention.

Along with that payoff, you might want to see if you can get them to give
you a deed. I’ve got a feeling it’s going to come in handy.


Why the bank will fold - Posted by John Corey

Posted by John Corey on May 11, 2006 at 05:04:22:

To all,

There is a good debate as to chain of title and what constitutes notice. I lack the knowledge to really add to that discussion.

Looking at the other side. A bank is motivated to get the asset off the books as a bank is not legally able to hold RE as an investment beyond what is needed to run the operations. Hence the bank can have no long term interested in a residential property that was acquired from a foreclosure. They have to get it sold.

Elizabeth may or may not have had clear title. At the same time HUD and the bank both have no interest in owning a rental and otherwise continuing to be on title. Even if it worked out that Elizabeth was not the legal owner the result would have been a subsequent sale by the bank or HUD.

If both sides want to get the bank off the title and both sides can agree a reasonable number (balance owed seems to be where two sides will meet) then the deal can be done to close out the transaction and clarify the chain of title.

Ultimately both parties wanted more or less the same thing. Even if Elizabeth’s legal interest in the property was not clear or absolute the bank’s interest can still be met.

There is no upside to the legal process compared to wrapping up the details and moving on. It just took a while for the bank to realize that they had a bit of a mistake/mess from the past and a clear path to collect a check while disposing of the asset.

John Corey

Keep us posted - Posted by ken in sc

Posted by ken in sc on May 10, 2006 at 15:40:50:


I have just read this entire thread, and remember the previous one. I am impressed by your knowledge. Please keep us posted when you get the actual payoff figure so that we can watch you as you hopefully finish up this deal. Threads such as these are why I keep coming back here to post and learn.



Re: UPDATE - Bank Says I Don’t Own House - Posted by BTI

Posted by BTI on May 10, 2006 at 12:32:54:


Congradulations, I’ve had a few docs that went ‘wild’ in my career and it’s no fun. Just had one question I don’t remember being covered. You give me the impression that your very professional in your business activities, so did you contact the tenant on the premises and have them confirm who they were paying, how much and maybe get a copy of their lease?

I get the impression the former owner was still getting the bucks that should have gone to the bank. It’s always on my checklist because a party in possession is always considered constructive notice in my state, even in a rental, and a tool the bank could use in it’s case, but I don’t know a thing about the garden state.

House - Posted by Nike

Posted by Nike on May 10, 2006 at 10:19:39:

You wrote: “Last month the bank’s attys had one of their management companies sue my tenant in L/T court for past due rent.”— Did the tenant sign a lease and was rent past due?

The issue is whether you had notice (actual or constructive) that the bank foreclosed–if you did then you’re not a bonafide purchaser and you take subject to third-party claims. You keep stating that Jersey is a race notice state yet you seem to only focus on the race aspect.

Landlord/tenant court is not going to resolve this issue. Do you agree that prior to your claim the bank owned the property? Whether they recorded the deed does not change whether they own the property rather recording protects them from subsequent bonafide purchasers. Whether you’re a BFP is an open issue.

Re: UPDATE - Bank Says I Don’t Own House - Posted by JD

Posted by JD on May 09, 2006 at 12:51:45:

Great job!

I remember, but can’t find, the March thread. Please post a link if you have one.

I don’t think it accurate to say that the Bank is giving you a payoff because you were ‘right’ about the race notice issue. I think the Bank is giving you a payoff because it is the smart thing to do for the Bank. But that is a Win if that was your plan all along. As long as you are willing to pay off the loan amount with the years of accrued interest, the Bank would be foolish to not take your money. I have to wonder why your attorney failed to convince the Bank’s lawyers that that was the pragmatic resolution, yet you were able to do so in less than an hour.

Great Job! - Posted by Berno

Posted by Berno on May 09, 2006 at 12:42:44:

It’s nice to hear that other people have odd issues like this surface too…and are able to stick it out and come out on top. Great job!

Re: Thanks Elizabeth - Posted by Elizabeth NJ

Posted by Elizabeth NJ on May 11, 2006 at 22:46:46:

JT, I appreciate your comments and those of the many who have posted.

I realize I may have come across in a few responses as defensive and I’m sorry if I offended anyone.

Not an excuse, but I have other deals going on at the same time, each with its own set of problems.

I value everyone’s comments, especially those from people such as yourself who have experience in the foreclosure venue.

This subject has opened up a healthy dialogue and hopefully we will all learn from the various postings and responses that are being put on the board. I will definitely keep posting as I progress through my transaction.

Because I buy mostly older abandoned properties with missing owners, title issues always crop up. But you’re right, I’ve not had one like this before.

The quit claim deed is a good idea because otherwise the bank is still out there with their unrecorded deed. I have considered an action to quiet title if the bank is not so cooperative about a deed.

You’re right, most attorneys who are specialists in these fields really don’t want to take on the challenge of defending property through endless litigation.

I was researching the issue of race notice jurisdiction and the “zimmer law” today and learned that, while some states have the race statute and apply it, once applied, its interpretation seems to differ from case to case, depending on who’s using it. One of the examples was this:

O deeds to A who doesn’t record.
O dies and O’s heirs, unaware of the unrecorded deed to A, deed to B who does record.

Who has title? According to the case law I read, B is the owner of the property, with a clear chain of title from O’s heirs to B. A is outside the chain with a wild deed. Of course there was much more to the case law

My niche is research so I loved going through this stuff. And after so much research today, I can see why there are so many different opinions on this subject.

I hope you’ll keep giving me your opinions on this and whatever subjects come up.

Best regards.


Re: UPDATE - Bank Says I Don’t Own House - Posted by Elizabeth NJ

Posted by Elizabeth NJ on May 11, 2006 at 22:53:51:

Thanks Joe, you’re not the only one advising to get a deed from the bank.

Definitely a very good idea.



Re: Why the bank will fold - Posted by Elizabeth NJ

Posted by Elizabeth NJ on May 11, 2006 at 11:30:31:

John, thanks for your comments.

My position all along is that I am prepared to give the bank what they are entitled to, which is a payoff of their lien plus reasonable interest, not four years? worth. Their attorneys are certainly not entitled to four years of legal fees and ?property management? fees. The attys dropped the ball, either intentionally or otherwise, and held onto a property that should have been turned over to HUD four years ago. The fact that the bank?s attys chose to manage the property including issuing a month to month lease to a tenant, is crazy and not a reason at law to hit me with their fees & management costs.

There is discussion on the board about whether I have clear title in response to my inflammatory statement that I own the property. This kind of discussion is healthy and informative for us all.

The bank?s attys have agreed to give me a payoff statement and that?s all their client is entitled to. More importantly, their attys don?t want their mishandling of the property to come to light.

Had I not shown up in L/T court, I am convinced the bank?s attys would continue ?managing? the property for as long as and for whatever reason it suited them. The tenant told me that the person from the management co. told her that they owned the house. Maybe the attys intended to ?sell? the house to their management co. I would not be at all surprised were this to be proved true.

Of course you are right about banks not being permitted to hold properties and “manage” them. I?m sure you remember the whole RTC fiasco back in the 80’s when S&L?s were holding so many properties, they were forcibly shut down by the gov’t and their assets were liquidated by the Office of Thrift Supervision. That’s when all the real estate gurus popped up and started selling programs about buying properties from the banks for pennies on the dollar because it could be done so easily. Today banks have their books audited on a regular basis and they can be sanctioned if they hold too much property.



P.S. to anyone reading this posting: The OFFICE OF THRIFT SUPERVISION is a great place to track down info about old banks & the properties they formerly held. The OTC has records going back for many years, so if you can?t find an older out-of-business bank, try the OTC.

Here?s the link: http://www.ots.treas.gov/

Re: Keep us posted - Posted by Elizabeth NJ

Posted by Elizabeth NJ on May 10, 2006 at 15:59:14:

Thanks Ken for your comments!!

Re: UPDATE - Bank Says I Don’t Own House - Posted by Elizabeth NJ

Posted by Elizabeth NJ on May 10, 2006 at 14:18:34:

Thanks Brian,

Yes, I spoke with the tenant after I had closed & recorded the deed. She told me that someone had given her a month to month lease but was unclear about that person/entity. About the same time I learned about the foreclosure, I learned that the bank’s attys had put a manager in charge of the property, and the tenant had never paid them in any event.

She now has a new lease with me. In fact, in the hall outside the courtroom yesterday, I asked the bank’s atty to inform my tenant in front of me who owned the property so that she would be clear about who gets the rent. The atty didn’t hesitate and said to my tenant, she owns the house and you have to pay your rent to her.

The former owner was out of the picture entirely, didn’t even live in the area. When I found out about the foreclosure after I had closed, I drove out to the gentlemen’s apartment and he claimed to have no knowledge of the foreclosure. It seems that service may have been made at the property itself. In fact, I keep getting mail at the property from the same bank addressed to my seller asking if he wants to refinance his loan with them. Which really speaks volumes about the bank?s records. [Before anyone posts that I?m stealing the mail, my seller authorized me to open any mail from the bank.]

We?re waiting for the payoff statement now and I?ll be able to move forward. This has been a stressful transaction!!!

But, the next step here is to carve down this mortgage. From my analysis of the mortgage dox on record, here’s what I’ve learned: The mortgage was written by a co. that had its license suspended by the State 2 months later. The mortgage co., as part of ridding itself of its active accounts, then assigned the mortgage to a servicing agency and the assignment was executed by an officer of the same bank I’m now dealing with as “attorney in fact”. The bank took assignment of the mortgage months later, although there’s no assignment on record for the bank, which I’m advised is ok in NJ. I’m not saying anything illegal took place. But this is the kind of very fertile ground I usually dig in when I short a lien. We’ll see what happens.


Re: House - Posted by Elizabeth NJ

Posted by Elizabeth NJ on May 10, 2006 at 15:14:55:

Nike, thanks for your comments.

I?m very clear as to what the issue was in this matter. I don?t claim to know everything, but what I do know, I know. That is not to say that I would foolishly ignore sound legal advice from my attorneys just to boost my own ego. The level of detail I bring to all my transactions and those of investors who retain me to clear title is extreme, to say the least. So, there is no way I missed anything that would have tipped me off about a foreclosure. As a matter of fact, I don?t even buy properties either in pre- or post-foreclosure status. I deliberately avoid them. And I have stated here in my numerous postings about this transaction that I had no knowledge of the foreclosure.

I say this so that you will clearly understand that my assertion has always been that, while the bank is a ?party in interest?, the bank is not the owner of the property because the bank?s deed was never recorded. The bank is only entitled to have its lien paid, nothing more.

“Race notice jurisdiction” is a very real law in many states. You state that I have focused only on the “race” aspect. I find your statement demeaning, although you have no way of knowing my depth of knowledge in this field, so you’re forgiven. My focus has been on the entire matter before me and protecting my investment and my very real ownership of the property.

You state ?Whether you’re a BFP is an open issue.? Actually, it?s not an issue at all. In a race-notice jurisdiction state, a ?bona fide purchaser? is a subsequent purchaser who records his deed first and, accordingly, in any race recording state, the first purchaser to record his deed prevails.

I?m not a polyanna simply hoping that things go my way. There is no question that I own the property.

The bank has made the decision to issue a payoff statement because their attys, who are specialists in this field of law, recognize that it?s easier to let me pay off the lien than attempt to defend their position in any court I bring them to assert my ownership of the property. [I well know that the proper venue for this litigation is not L/T court.]

And truthfully, I believe the attorney for the bank was surprised to find me in L/T court yesterday.

One other thing which I believe I mentioned in my original posting last month:

The bank also failed to properly process the property for HUD. This was a VA loan and, accordingly, this property should have reverted to HUD at some point after the foreclosure. I called the local HUD office and asked the officer under what circumstances a bank could hold onto a property after foreclosure before turning it over to HUD. He pulled the address and was shocked to see that 4 years after the foreclosure, the property is still in the name of my seller, that the bank is “managing” the property including issuing a lease to the tenant thru its management co., instead of removing the tenant, closing up the property, and the bank’s attys filing their claim with HUD. He further stated that HUD does not want the property, because it will have to turn it over to a realtor to be sold, and here I am having already bought it. I don’t believe the bank wants their mishandling of the property to be aired in public.

Thanks again for your comments.


Wild Deed issue - Posted by JT-IN

Posted by JT-IN on May 10, 2006 at 11:44:05:


I agree with your assumptions here… of course the L/T Court can’t resolve this matter. Not sure whether Liz was aware of the actions at the time of accepting her Deed from the (former or current) owner… due to the lack of recording of the Banks Sheriff’s Deed. This is a matter of there being a Wild Deed out there, which could require quieting, if the parties cannot come to terms.

I do believe that if the Bank wanted to fight this thing, properly recorded their Sheriff’s Deed, even if it was recorded NOW, and they then sued to quiet title, that they would win… Not sure of the validity of the Lis Pendens in this case, as to whether it would have expired or not, with the conclusion of the case. However, the matter of the Sheriff Sale is “of record”, which serves about the same purpose of a Deed, in reality. The Deed issued by the (former or current) owner doens’t really establish a chain of title, as a result of the conclusion of the foreclosure and the Sheriff’s Deed being issued. In other words, with proper due diligence and title search, the status of this case could still be ascertained, regardless of the filing of a Sheriff’s Deed, is the way that I think about the case. I can’t really understand how Eliz could even sell the place, rendering clear title now, due to the existence of the formerly issued, and unrecorded Sheriff’s Deed. The Grantor of Eliz’s Deed really didn’t have vested title, so ownership cannot be truly conveyed, regardless of recording a Deed to Eliz’s entity.

Hopefully for Eliz, the Bank in question, based on advice from Counsel and Counsel’s lack of follow-thru and understanding of all the details that have transpired, will simply issue a payoff statement that is palatable… Then all the questions can go away quietly… But this bould be a real shocker, if it played all the way out in a title action suit.

Just the way that I view things…


Re: UPDATE - Bank Says I Don’t Own House - Posted by ski

Posted by ski on May 09, 2006 at 19:11:17:


Re: UPDATE - Bank Says I Don’t Own House - Posted by Elizabeth NJ

Posted by Elizabeth NJ on May 09, 2006 at 13:07:20:


Thanks for your comments.

It wasn’t a matter of my attorney being unable to convince the bank’s attys – it was a matter of the bank’s attorneys completely ignoring her communications.

I think it just took the bank’s attys seeing a “real” person face to face to move this along. Plus I stated that I was willing to litigate to defend ownership of the property.

As to the interest on the bank’s outstanding lien, we are waiting for the payoff figure & then I’ll probably negotiate down the interest – nobody in their right mind would pay interest over the last years when the bank failed to record their deed – that’s their loss, not mine.


Re: Great Job! - Posted by Elizabeth NJ

Posted by Elizabeth NJ on May 09, 2006 at 13:16:46:

Thanks Berno!!!