Chain of title – proof of who really owns a house – underpins the entire U.S. system of real estate.
Broken chain of title due to slipshod paperwork was a serious issue uncovered in the nationwide robosigning scandal and again last month in a city report that found San Francisco foreclosure paperwork riddled with errors.
Those revelations draw new attention to title companies, which insure a home’s clear title for both buyers and lenders.
“If there is not a clear chain of title in the foreclosure process, how can there be a clear chain of title for the person buying foreclosed property?” said San Francisco Assessor-Recorder Phil Ting, who commissioned the audit. “Given our report, it calls into question whether entities selling a foreclosure really have the right to transfer that property to somebody else.”
It has been widely reported that MERS1 has broken or severely diluted2 the chain of title for real property records, but what does this mean? To understand the importance of the chain of title to a property and the complexities of land boundaries we need to look no further than the advice given to practicing attorneys.
“To properly evaluate a case, counsel and survey experts often must examine chains of title for all properties subject to the dispute. In the case of a boundary dispute, it may be necessary to search the chain of title back to a patent to determine paramount title or to locate true boundaries.” 3
As is readily apparent, a broken chain of title will have adverse effects on adjoining properties and in many instances the boundaries of properties within an entire neighborhood. Attorneys are advised to “seriously consider not taking the case or withdrawing from it.” If attorneys are advised to “seriously consider” withdrawing, how will the common victim of MERS (by proxy) get relief?
The complexity of the problem is obvious. As lenders and title insurers pass responsibility back and forth, property owners who purchased a foreclosed property that had been in the MERS system (and now have broken chains of title) and their neighbors will be forced into expensive and complex litigation in order to determine their boundaries.
Who will be financially responsible for the litigation to quiet title?
This White Paper documents the importance of a chain of title and the far reaching effects of a lost chain of title.
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