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88 Florida Minority Certified Business MIAMI-DADE & BROWARD COUNTIES 786-499-6994 www.REOPitStop.com Luis@ContinentalRealtors.com RESNET ID: 106089 | Equator ID: 272261 Luis F. Guzman Broker/Owner FLORIDA Making Assignments in the Dark By: Myron Finley e chain of title is the guy-wire that holds the home finance industry upright. Without some method to determine who owns a given parcel of real estate, it cannot be used as col- lateral for a loan. In cases where these loans go into default, a clear title is essential for a smooth foreclosure and REO process. Unfor- tunately, problems arise that cloud the title, increasing loss severity for investors. is occurs all too often. A case in point is provided by a transaction in California in which Washington Mutual (now defunct) made a $620,000 loan to a person named Sciarratta, which later went into default. When the dust cleared another top 10 bank had acquired WaMu's assets, including this problem loan. It would later experience a complete loss on this transaction due to a simple but surprisingly frequent event that could have been easily avoided had better information been available to the lender. ere is nothing very strange or exciting about the law relied on by the court in Sci- arratta. What is unique about the case are the facts on which it was decided. e bank first assigned the Deed of Trust, including all its rights, to Deutsche Bank on April 24, 2009. ree days after the assignment to Deutsche Bank, the Trustee (CRC) recorded a Notice of Default, identifying the bank as the successor in interest of WaMu. ere was no mention of the Deutsche assignment. In an apparently unrelated move, the plain- tiff homeowner then sued the bank, Deutsche Bank, and the Trustee (CRC) for quiet title. e bank then, a bare seven months after the Deutsche Bank assignment, purported to assign the same Deed of Trust to Bank of America (BofA). On the same day, the Trustee (CRC) recorded a Trustee's Deed upon Sale, identifying BofA as the "foreclosing benefi- ciary" in exchange for a "credit bid." is was the first of the void assignments. e following month, the bank attempted a "corrective" assignment of the same loan to BofA, effective as of the date of the original assignment to Deutsche Bank. is, of course, is also a void assignment. ere was, naturally, no mention of the Deutsche assignment. e court held that Sciarratta had standing to question the bona fides of the assignment to BofA, because the assignment was void, not merely voidable. In so holding, the court relied on the outcome in Yvanova v. New Century Mortgage Corp., a 2014 decision of the Cali- fornia Supreme Court that held a foreclosure by a third party to be actionable. BofA actually had no interest at all in this loan, and was definitely not (notwithstanding the allegation in the Deed upon Sale) the Beneficiary of the Deed of Trust. e assignment of the property to BofA was therefore void, so it did not acquire title to the property. It did not take the land. It took nothing. e striking reality of this case is that all these undesired consequences could have been avoided had the bank "known" about the as- signment to Deutsche Bank when it attempted to assign this Deed of Trust to BofA. A simple report disclosing the contents of the public record before the assignment to BofA would have prevented the costly error of attempting to assign the Deed of Trust a second time. e cost of such a report—and Nationwide Title Clearing, Inc. uses its own AVX report as an example—is not negligible, but with a population of loans a bank has acquired from another, for example, it is definitely warranted, especially given the fact that the bank in this case lost $620,000 on Sciarratta alone. Entities that are considering the purchase of someone else's loan portfolio might in many circum- stances consider factoring into the purchase price the cost of such a report. e knowledge obtained would act as useful insurance. e same risk would be present in a large bank that owns a large portfolio but also em- ploys enough people that someone else within the bank could assign a loan without it being general knowledge. In the Sciarratta case, for example, the confusion within the bank over who was the appropriate assignee arose entirely from within the bank. It was not another en- tity that assigned to Deutsche Bank, but likely another department within the bank. e same issue could arise in the context of a release of lien. If the release were inadver- tently signed on behalf of the wrong entity, it might raise the issue of whether the release is effective, and thus might cloud the title of the subject property. is could result in statutory penalties in many states, and to demands for the correct release from the homeowner in most of them. Executing an assignment without first knowing what the loan's title history looks like is akin to working in the dark. If the financial institution does not have sufficient resources internally to acquire this information, reports that cover the public record are available to provide that security. Myron Finley is Chief Legal Officer for Nationwide Title Clearing, Inc., Palm Harbor, Florida. He can be reached at myron_ finley@ nwtc.com. Black Knight's Paragon Ranks No. 1 in Clareity MLS Customer Satisfaction Survey For the fifth year in a row, Paragon, Black Knight's MLS software, ranked at the top THE LEADER IN DEFAULT SERVICING NEWS Help shape the next issue of DS News. Drop us a line at Editor@DSNews.com.

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