Mon, September 28th, 2009
The Great Foreclosure Mistake
Some would say that everything about a foreclosure is a mistake. Others wisely recognize that if you are a lender and you’re simply not getting reimbursed, a foreclosure may be your only, and best option. So what mistake am I talking about?
I’m referring to the mistake of NOT naming all persons or entities with a subordinate interest as defendants. In a judicial foreclosure, a common mistake made by some attorneys is to leave out the name of a person who holds a junior interest.
Many attorneys will order a litigation guaranty from a reputable title company; others rely on doing their own property title search prior to filing the complaint. Still, there are a few who don’t even bother. Now, if an attorney doesn’t search before filing, the easiest way to proceed is to search in the course of discovery and amend the complaint to properly add the new defendant. If there is no prejudice to the defendants or the proposed defendant, this would and should resolve the dilemna. But there are some who fail to conduct simple due diligence even at this point.
What’s the damage if an interested person is not named? That lien survives the foreclosure. That is, the plaintiff (on a credit bid, or a subsequent buyer, takes title subject to this “forgotten” lien. Not a pretty mistake. Not a pretty outcome.
Posted by Nick Yonano at 08:06
Labels: Mortgage Default, foreclosures, real estate
