Mortgage Wrap-up Recording System Intro Prof. David Glazier Jan 30, 2007 PropertyProperty

Today’s Class Mortgage Foreclosure Review Installment Land Sales The Recording System - Title Searches Reading for Thursday

Foreclosure History Pay in full or forfeit Right of redemption Strict Foreclosure Sale Deficiency Judgment Right of redemption & anti-deficiency judgment statutes Deed of Trust Power of Sale

Modern Foreclosure Options Strict foreclosure Lien holder gets title to property upon default. Can sue debtor for deficiency, but no obligation to refund surplus (CT and VT) Judicial foreclosure Lien holder files suit and court orders sale if claim established. (Available in all states, only method permitted in ≈½) Power of sale Loan agreement grants lender private right of sale. Lender can conduct sale w/o judicial involvement. (Available in ≈½ of states) Deed of trust Borrower conveys title to third party as security for payment. Trustee can then sell property if payments not made (Available in ≈½ of states)

Foreclosure History Pay in full or forfeit Right of redemption Strict Foreclosure Sale Deficiency Judgment Right of redemption & anti-deficiency judgment statutes Deed of Trust Power of Sale Installment Land Sale ?

Installment Land Sale Contract Legal construct to avoid foreclosure issues Essentially seller (vice third party) financing - Seller holds title until all payments made - Buyer has no equity if they default Sellers justify as essentially “rent to own” - allows purchase by less credit worthy Courts often see as “strict foreclosure” - typically find equitable title in possessor

The Recording System American institution dating to 1640s Consists of indexes and copies of documents Facilitates preservation of documents Provides systematic means to research: - title to real property - mortgages and liens - covenants, easements, etc. Protects bona fide purchasers - BFP prevail v. unrecorded interests

Recording System Indexes Tract Index - shows all documents relating to a specific property 6/1/1962 – Subdivision plan approval for ABC Bldg Co. 9/1/1962 – Lot w/house sold by ABC to John and Mary Smith 9/5/ Mortgage recorded on behalf of First Natl Bank 4/3/1981 – Property sold by Smiths to Sally Jones 4/3/1981 – Satisfaction of First Natl Bank mortgage 4/3/1981 – Mortgage recorded on behalf of Nationwide Mort. Co. 9/1/1995 – Mechanic’s lien recorded on behalf of Ace Construction - easiest to use, but - not in widespread use

Recording System Indexes Grantor/Grantee Index - Separate indexes organized by name - Grantor Index identifies transaction originator -- sales -- gifts/wills -- mortgages/liens -- covenants, easements - Grantee index identifies recipients - Most common U.S. system

Conducting a Title Search – (1) Where do you start? - Work backwards through grantee index - Requisite timespan may be determined by: -- statute -- title insurer/grantee’s risk evaluation Information to extract:

Conducting a Title Search – (2) Work forward from earliest grantor to present Identify all transfers/liens/encumbrances during entire period of ownership Read documents identified in index to establish: - title held by current owners - any restrictions on property use - any outstanding liens/judgments

Title Search Example Grantee Index search for purchase from Dubek Dubek: 1977 deed from Cotter Cotter: 1952 deed from Barker Barker: 1934 deed from Anderson [1939] Anderson: 1915 deed from Oliver Oliver: 1900 deed from [ ]

Luthi v. Evans (Kansas 1978) What is the fundamental issue before the court?

Luthi v. Evans (Kansas 1978) How did we get here? 1971 – Owens et. al deed interests to Intl Tours - seven specific oil and gas leases, plus - “all interest of whatsoever nature... in Coffey County, Kansas” 1975 – Owens deeds Kufahl lease to J.R. Burris - title search failed to turn up previous deed

Luthi v. Evans What kind of recording system was in use? Could Burris have found first deed?

Luthi v. Evans Why did court decide for Burris?

Mother Hubbard Clause Old Mother Hubbard Went to the cupboard To give her poor dog a bone. But when she got there, The cupboard was bare So the poor dog had none

Mother Hubbard Example “The relatively recent precedent of Jones v. Colle supports the proposition that a general or Mother Hubbard clause can effect the transfer of small parcels only.” - Amici Brief to Texas S. Ct. in Moore v. Greer (2005)

Mother Hubbard Example “The judgment... contained a Mother Hubbard clause stating that “all relief not expressly granted herein by way of claim or counterclaim is denied.” - Compania Financiara Libano v. Simmons Texas S. Ct. (2001)

Reading for Thursday: Title Assurance Thursday Feb 1 Readpp Read Types of Recording Acts pp Messersmith v. Smith

Questions?