Strange foreclosure issue

General Questions
#1

Colorado if it matters. There’s a house I want to make an offer on because it was foreclosed 2 years ago and has been abandoned ever since. Oh and the taxes have not been paid in almost 3 years which means the owner can lose it on a tax lien in a couple of months.

The owner of record i.e. the person on all county records and the public trustee deed says he foreclosed on a second mortgage and the bank owns the first mortgage of $600K but has not dealt with him on it in the two years since he foreclosed. I called the bank and after being passed around, I got the bank-owned department that says that they don’t have the house, but then again if it wasn’t foreclosed on (and I know they didn’t foreclose because there’s no public trustee record of it) then her department wouldn’t have the info. The mortgage department would but I probably wouldn’t get any info out of them.

  1. Does any of this make any sense? Is it possible the first mortgage doesn’t exist or got lost or invalidated be the 2nd mortgage foreclosure or something?

  2. If I buy the house from the owner of record and the bank decides to foreclose, can they take the house or is it too bad so sad go find the guy that defaulted.

  3. Where would I find a copy of the mortgage liens on the house. The county records have the tax and a municipal lien but no mortgage liens.

  4. Is there a question I should be asking but am not?

#2

More info:
The guy who got foreclosed on 2 years ago to the 2nd mortgage signed of a deed of trust to a bank (WaMu) about 4 months ago but the bank is not listed in county records as the owner.

#3

I can’t answer your question. I can only pose another.

Why on Earth would you want to involve yourself in that hideous quagmire of dubious ownership? You’re just begging to get lien-ed out of existence by an as-yet-undiscovered third (or fourth, or fifteenth) party with ownership interest.

It seems.

Still, if it’s worth the risk and the rather heavy-duty investigative work to you, more power to ya. Good luck.

(Yeah, sorry, not very helpful. But I think the question bears asking, if only to frame the risks appropriately. If the COUNTY doesn’t even know the ownership status… what chance does a title insurer or any other hired gun might? A dirty encumbered title is a property-buyer’s nightmare.)

#4

I wouldn’t buy it without a title search and quiet title suit(s). I have no clue if it would be a great deal or not and I can always walk away.

#5

I agree with gnoitall. My first house was a foreclosure, with much simpler circumstances. It still took almost a year to close, and years later when I sold it issues popped again.

I’d also suspect the owner of record is intentionally uncooperative and hopes to hang onto the property somehow, or profit unjustly from it.

#6

Saint,

Banks routinely fail to file their deeds of trust with the city/county/etc.
There are a dozen different reasons they might not bother filing it after he signs a deed of trust.
Attach no significance AT ALL to that data point.

Frankly, I’m with gnoitall; I’d run away from this property screaming.
There is ALWAYS somewhere else to buy.

#7

Last call of the day was the most unhelpful.

REO department was most helpful and researched the property but since it was not bank-owned it was handled by another department. 10 minutes explaining the situation x 4 different departments and I finally get what I fand out later was the foreclosure department. Some highlights:

Him: Sir I can’t discuss the account with a third party.
Me: There is no third party. You got the deed of trust.
Him: Why are you saying that? I suggest you research the records at the county office.
Me: I did.
Him: How are you sure that there is a deed of trust?
Me: Because I saw it at the the county records. The reception number is 123456789
Him: Sir I can’t discuss this property with you unless it is on MLS
<Bear in mind, he never asked for the address so he has no clue what is going on with the property>
Me: The owner of record doesn’t think he can sell because you guys have a deed of trust. Why is it that the REO department was able to help me but since Chase doesn’t own it but is servicing it, she said I needed to discuss with another department to see what I need to do to buy it from the owner?
Him: The reason you are getting the runaround is because you do not have an account number or a social security number. You will have to talk to the REO department but they closed 5 minutes ago.

I couldn’t punch him in the dick through my phone so I hung up.

#8

So here’s where it stands.
2nd mortgage foreclosed - now legal owner is Mr. O
1st mortgage - Idiot Bank given deed of trust, in lieu of foreclosure I assume.

If I buy the property from the legal owner, can Idiot Bank stop the sale? Do I owe idiot bank anything if I buy the property?.

#9

Colorado, eh? Easy: Just pay somebody (anybody) $5000 and move on in! If, by some chance, somebody tries to reclaim the house, just declare bankruptcy. You’ll be set in your new digs for life!

#10

YES! If the 2nd mortgage foreclosed, they eliminated all junior liens. No worry if there are 3rd or 40th mortgages. Those are gone.

However, the legal owner, Mr. O, at the foreclosure sale, took the property subject to the higher mortgage. If you buy from him, he can’t give you anymore than he has, so if you buy, you are subject to the senior mortgage.

Idiot Bank’s deed of trust is binding upon Mr. O and you if you buy. (Assuming properly recorded, etc. IANAL. YMMV).

#11

You desperately need the services of a competent real estate attorney.

If you engage such, you might be able to pick up a real property bargain. Or you might be royally hosed, attorney or not. Are you up to it?

#12

I work at a mortgage foreclosure law firm. I actually just worked on a similar case. Trust me - Stay the hell away. Even competent lawyers can easily screw these things up and you’ll be left with nothing. The poor sucker in my case was only left with a weak ass lawsuit.

#13

A deed of trust does not convey the fee. It is a form of mortgage, unless you mean a deed in trust.

I’m not familiar with Colorado real estate law, but the laws are generally similar in all the states. From what I gather from your posts, a junior mortgage was foreclosed, and the mortgagee was the buyer at the foreclosure sale (if Colorado has foreclosure sales). The buyer got the property subject to the first mortgage, taxes, and what other prior liens may be on the property. If all the necessary junior lienholders were not made parties, their liens would also not be affected.

If the property was foreclosed, the original owner would not be the owner of record any more (provided there was no redemption and a deed ultimately issued to the foreclosing party). The property in question would not be owned by the borrower, and so he could not execute any instrument regarding the property. The bank would not be listed as the owner because it isn’t. It doesn’t even have a valid lien.

#14

That’s what confused me too. How could the guy who was foreclosed on grant a deed in trust to a property he no longer owns - especially that it went to the original mortgage holder that no longer exists - so could they legally foreclose on the property?

I think I should take all the paperwork I have and head down to the local realtor and see what their take on it is.

#15

If it is a deed in trust and not of trust, it may have been in lieu of foreclosure, as you noted. You said before deed of trust. He could’ve conveyed the property to the mortgage holder in trust for the borrower so that it could sell it, with any excess funds for the benefit of the borrower. It would a good idea to take all the paperwork to a realtor or lawyer who is familiar with Colorado law.

#16

More news:
Looks like idiot bank is trying to foreclose on the original owner. But he doesn’t own it. What a clusterfuck.

Oh and it is a deed of trust

#17

I’ve found some of your posts confusing for two reasons: One, I’m not familiar with Colorado law regarding foreclosures. Apparently, from your posts, after foreclosure a “public trustee’s deed” is issued to the party who foreclosed. (In most states, the property must be put up for public sale after a foreclosure, following which a certificate of sale is issued by the county, and after which the owner has a certain period in which to redeem before a deed is issued.) Two, your use of pronouns often confuses what parties you are referring to (the antecedents of the pronouns is not clear).

But, in any event, only the junior mortgage was foreclosed. That leaves the prior mortgage still valid and a lien on the property, regardless of who owns it. A foreclosure is not against a person, but against the property. I gather from your posts that only the second mortgage was foreclosed.

#18

Maybe that’s the point I’m missing. Does that mean I could sell my property for $1 to somebody and when the bank forecloses, they seze the property from the new owner? I’m assuming there are reasons no one could do that but then again, I’m in a state that allows squatters to occupy a home because they paid someone not associated with the property at all a $5000 fee.

#19

OK went to a realtor.
The “owner” actually holds a land-hold lease which gives him rights to the property (maybe dealing with the mobile home that used to be on there). Why he’s listed as the owner may be a mistake in the county office when they saw the public trustee deed. So the first will foreclose and someone is gonna take a real hurting on this.
$11K in back taxes that in November can be surrendered for a treasurer’s deed.
$300K in an unpaid mortgage

Property value: Less than $60K for a house in disuse for at least 2 years.

I’ll probably wander over when they auction it and offer $100 for the 4 acre pasture in the back.

#20

Yes, it does. The basic principle of real estate is that you can’t sell what you don’t have.

If you own a house worth $100k and the bank has a $90k mortgage against it, you can’t do any more than sell your $10k worth of equity in the home. By borrowing the money, you gave the bank a superior interest in it.

Now, if you try to sell me the house, it’s my duty to go to the courthouse and see that a bank has a superior lien. That was the original purpose behind deed recording laws. If they are published at the courthouse, then they are visible for any prospective buyer to see. That’s why banks make you get a title search done before they loan you money so THEY don’t get screwed.

So, if I buy your (hypothetical) house, I should see the $90k mortgage outstanding and realize that the most I should give you is $10k. If I don’t do that search and overpay, that’s my fault and the bank still has a superior title. (That’s not to say that I wouldn’t have a personal suit against you if you lied). They can foreclose on me if the original mortgage or deed of trust is not paid as specified. As another poster said more accurately, they foreclose against the property itself.