brokedickdog
Posts: 114
Joined: 8/13/2010
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Actually that is not the sure thing - that the property does not belong to the person who occupies it. This assumes, of course, that the occupant is also the mortgagor.
See, of the parties involved, the mortgagor and the mortgagee (or subsequent mortgagee if the security interest is conveyed to another, also known as the assignee), it is the mortgagor (homeowner if you prefer) that is the most easily identifiable, and the most certain. A mortgagee, in order to have the superior security interest in the subject property, must have a perfected security interest. In the case of securitized instruments this is only possible if the paperwork has all been done in accordance with the laws of the jurisdiction in which the subject property is located.
The chain of title is among the means of perfecting a security interest for a mortgagee. But in many instances the paperwork was not done properly, or sometimes at all. About now you're probably having thoughts along the lines of "Yeah, well, they borrowed money and owe SOMEBODY, so they can't just keep the house for free." True, but not quite so simply. The only entity that is actually owed any money is the entity with a perfected security interest. while money may be owed by the mortgagor to some entity if that entity cannot be identified then it is folly to make payments to the wrong entity. Also, the only party with a right to foreclose, or repossess, is the party with the perfected security interest. It is also folly to give a homeowners property to someone that isn't entitled to it.
In securitized mortgages they typically are supposed to be conveyed several times to several different entities (I say "supposed" because the paperwork is so defective, or completely absent, that we don't know what really DID happen - and in title to property it doesn't matter what was supposed to happen, it only matters what actually DID happen). If no single entity, as motgagee, has a perfected security interest then each of those entities can make a claim on the subject property. If the courts allow one entity with a defective security interest to lay claim to the property then why not each of them? In that case a mortgagor would end up owing the debt to several entities. So which one is entitled?
Well, when title defects like this occur properties usually revert back to the mortgagor. A smart mortgagor will file a quiet title action (google it) and if no one can step forward with a superior claim to that of the mortgagor then the mortgagor is given clear title to the property. This is as it should be. We have statutes of fraud, recording statutes, etc., precisely so that we can, and do, know WHO OWNS PROPERTY AT ALL TIMES.
Ponder on these questions for a bit. Is it ethical, proper, legal or right to take property form a homeowner and to give it to an entity who cannot demonstrate or prove a perfected security interest? Wouldn't that be "giving a free house" to someone not entitled? In the case of several parties with no interests, or defective interests, should we chop up the property and divide it equally amongst those with no clear or perfected interests? In the case of several parties with no interests, or defective interests, should we require the mortgagor to pay each of them the full amount of the alleged debt?
Some of this may become clearer for you if you give Federal Rule of Civil Procedure 17 relating to "real party in interest." It may also help to read the statute of frauds and the recording statutes in your jurisdiction. I'd also suggest a thorough read of the Uniform Commercial Code, or your states adoption of such, to understand more fully how negotiable instruments are properly negotiated.
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RE: Foreclosure Evictions Stopped in 23 States - 
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