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Title Insurance

Today’s commentary documents the case of an undisclosed heir taking sole possession of a property, which is a situation that a mortgage lender’s title insurance policy should handle. It seems that the title insurer should have made investors whole once the court decided that the undisclosed heir was the sole owner of the property. Instead, investors have not seen a payment on this loan in over 10 years.

Ocwen has been the servicer of this loan from the start, but this story is not in any way a criticism of Ocwen’s handling of the loan. The property had been in litigation from June 2004 through March 2012. The Appellate Court concluded that the undisclosed heir was the sole owner of the property and that the heir is subject to the Delta loan securitized into RAMC 2003-2. Three years later, investors still have not received any payments.

The story takes some twists and turns after the Appellate Court’s ruling. The undisclosed heir appears to have sold the property, although NYC had not recorded the deed. The property is then assigned to Custom My Couch LLC, which is recorded by NYC, but NYC still shows that the undisclosed heir owns the property. This transaction is just odd. Eighteen months after the ruling, the trustee attempted to foreclose, albeit unsuccessfully. Google Maps shows the front door is chained and padlocked, suggesting the property is unoccupied. The undisclosed heir has filed Chapter 7 bankruptcy and the case is now in the U.S. Bankruptcy Court. In March 2015, Ocwen placed the loan on a forbearance plan. The forbearance PITI is $2,149, which is $451 higher than the original payment. Ocwen may be bringing this loan back to life, but at what cost to investors? Some may argue that with a BPO of $620,000, it is time to foreclose and move on.

It is a fascinating story and testament to the insanity involved in servicing residential loans.

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