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  1. #1
    Member nickelcityhomes's Avatar
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    Foreclosed properties: Buyers Beware

    This may be a box of rain, or it could have some merit. Either way, keep it in mind if you are looking to purchase an REO.

    The problem is created through a break in the chain of mortgage ownership. Until the 1980’s, most mortgages were loans between the homeowner and a bank, who lent the money directly. More recently, the mortgage financing system transformed into an international system of securitization, with mortgage lenders packaging their loans into securities, bought and sold by investors like stocks. These transactions even split individual mortgages into sections, where each loan could have parts owned by different investment banks.

    The transfer of ownership in these mortgage backed securities (MBS) was done with contracts on the balance sheets of Wall Street investment banks, such as Morgan Stanley and Goldman Sachs. The company who originally appeared to make the loan was normally a retail lending company such as Countrywide or Lending Tree, who typically acted as a sales company, and sometimes remained contracted to service the loan.

    In the event that the loan goes into foreclosure at a later date, the then-current owner of the loan files the foreclosure and sells the property to a new owner, often at auction. The land records would show a deed of transfer from the investment bank to the new owner. This creates a break in the chain of ownership of the mortgage rights. In many cases, the transfer of ownership of the mortgage loan has gone from the original lender, through several owners, and then to the foreclosing bank, none of which is recorded on the property title history. Technically, the foreclosing bank has no recorded title rights to foreclose in the first place…
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    Most of all I like bulldozers and dirt

  2. #2
    Member nogods's Avatar
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    Never purchase foreclosed property without title insurance.

    Even if the the proper party commenced the foreclosure, any party in interest who was not properly served would still have a claim to the property. the expense of trying to determine if all proper parties were served would far outweigh the cost of title insurance.

  3. #3
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    Shouldn't there be an Assignment of Mortgage from Bank A to Bank B?

    And, if you buy something at foreclosure without checking the Title work, then shame on you.

  4. #4
    Member 300miles's Avatar
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    I thought hiring a mortgage attorney is required in NYS, and part of their job is to research the title? Or is that not required for auctions?

  5. #5
    Member CAugust's Avatar
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    this is the biggest reason I leave reo's and foreclosures to those that do them all the time, and besides they give me a headache
    Colleen
    Realtor

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