Tuesday, January 31, 2012
From the January/February issue
Cloudy title adds more rain to the foreclosure
By Grace Anne Glavin
The abundance of Florida foreclosures bring to light title problems because of errors discovered in the chain of title as a result of the preforeclosure examination of title by the law firm representing the plaintiff lender.
After the foreclosure is referred to a particular law firm, a title search is conducted to obtain all the correct parties to be plaintiff and defendant. This means the correct holder of the mortgage or an assignment of mortgage as the plaintiff bringing the foreclosure action and also the correct owner or owners of the real property as of the time that the foreclosure is commenced together with all of the junior lien holders (second mortgages; judgment creditors; HOAs; unknown heirs; etc.).
Matters regarding junior lien holders are not always erased by foreclosure action, as you would expect. If any are missed in the title search, or the law firm’s interpretation of the title search and preparation of the complaint, or if any of the numerous parties named in the complaint are not properly served, then the lien survives the foreclosure and will exist on the real property as it is being sold to the buyer from the bank of the REO property.
It is at this stage that a significant number of these properties are withdrawn from the market and contracts cancelled so that defective foreclosure actions can be "re-foreclosed.” Prospective buyers can avoid this headache by having a real estate attorney review the accuracy and sufficiency of the foreclosure action underlying the REO title, and then warn of any potential matters that would block a closing.
Grace Anne Glavin, Esq., is owner of Law Offices of Grace Anne Glavin, P.A., and Morgan Title Company and can be reached at firstname.lastname@example.org. She is also a founding board member of the Central Florida Real Estate Council. CFREC provides this column on real estate law issues as a service to ORRA members to provide a general understanding of the law on various topics of interest, not as a substitute for individual legal consultation, and should not be relied on in specific situations without consulting with a real estate attorney. For more information, please visit www.centralflrec.com