When a homeowner starts going into the foreclosure process they start receiving a lot of copies of paperwork like; notice of default, assignment of mortgage/deed of trust, substitution of trustee, notice of substitute trustee sale, three day notice to vacate, eviction citation, and so on, and it can all be a bit confusing so we hit the internet to try to make sense of it all and usually one of the first issues that pops up in the term “Chain of Title”.
A borrower, now accused of a default (A – Notice of Default), who at closing appointed a trustee as per the DOT, and now the trustee has to auction something, so the trustee assigns the DOT (B – Assignment of Deed of Trust) to a substitute trustee to do the auctioning, but substitute trustee has no authority to auction until the record shows a substitution of trustee powers (C – Substitution of Trustee) has taken place.
Things to remember; – all the lower court needs to make a ruling is “color of title” and they lack jurisdiction to hear arguments regarding title; remember that “recorded” refers to a document or an instrument that is on record with a ‘county’ clerk, thus it is documented in the ‘public’ record, and “filed” refers to a document or an instrument that is filed with a ‘court’ clerk thus it is documented in the ‘case’ record.
Chain of Title can be defined as, “1. The ownership history of a piece of land, from its first owner to the present one. 2. The ownership history or commercial paper traceable through the indorsement.” Black’s Law Dictionary 2nd Pocket Edition (2001) Id. 92
The assignment of Mortgage/Deed of Trust and substitution of trustee are just the most recent ‘links’ in the chain of title. If you will pardon the analogy, right after closing your mortgage gets passed around like a joint at a Rolling Stones concert, and everyone who gets a hit should have a recorded assignment showing they got one. Some of these parties are the Originator; Sponsor/Seller; Depositor; REMIC Trustee, and a few others, where are they in the public record? If they are not there then there are the first breaks in the chain of title. Now that the chain is broken no party after this point can show they have proper authority to invoke the jurisdiction of the court (jurisdictional challenge).
Some states have no requirement for a party to record assignments, but the absence of a statutory requirement to record assignments and transfers, offers a party an opportunity to create a document on an as needed basis with the claim that the document always existed with no way of verifying the claim.
Anything offered is presumed valid until successfully challenged. It would appear that there is little left to challenge in a court of limited jurisdiction but there a few thing one can do. Procedural challenges can be made, but unless an error made in procedure is fatal to the claim, these challenges are usually allowed to be cured. In some cases this might buy some time by prolonging the inevitable if time is all one needs. A challenge to the jurisdiction of the court can be made and is often more effective.
Is there any order in which documents are supposed to be recorded? There certainly is, let’s look at some common procedural errors. In states that have requirements to record a notice of default there is usually a time in which an obligor would have to cure the default in order to avoid further action. This notice of default is usually recorded after a homeowner has received a notice of acceleration which means the bank wants all of it right now and that is what it will take to cure. The time to cure is usually based upon receipt of actual notice but a party can go to the public record and prove that constructive notice was also given.
Most states will not allow a party to sell real property until all proper notices have been received, and an opportunity to cure has been offered.
For example Texas Property Code § 51.001.4 states as follows;
“Mortgagee” means: (A) the grantee, beneficiary, owner, or holder of a security instrument; (B) a book entry system; or (C) if the security interest has been assigned of record, the last person to whom the security interest has been assigned of record.
51.002(d) Notwithstanding any agreement to the contrary, the mortgage servicer of the debt shall serve a debtor in default under a deed of trust or other contract lien on real property used as the debtor’s residence with written notice by certified mail stating that the debtor is in default under the deed of trust or other contract lien and giving the debtor at least 20 days to cure the default before notice of sale can be given under Subsection (b).
It is this 20 day time allowance that shows the intent of the Texas legislature was to have a “Notice of Default filed into the county clerk’s office prior to any sale.
California Civil Code § 2924(a)(1) provides, “The trustee, mortgagee, or beneficiary, or any of their authorized agents shall first file for record, in the office of the recorder of each county wherein the mortgaged or trust property or some part or parcel thereof is situated, a notice of default. That notice of default shall include all of the following”
Since an alleged default would occur prior to an assignment to, or substitution to a trustee and some states require the recordation of a notice of default, for a party to come forward with all of these documents all at once. In light of the above it appears that it just simply doesn’t work that way. If this is the case there may be some remedy in showing the court this procedural error, and a blatant disregard tor a states statutes.