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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Imperfected Interest - No Assignment Recorded Posted by Ted on April 28, 2008 at 6:32 PM Does anybody have news on "imperfected note holder interests" due to lack of "recording assignments" on title and how this may, or may not, effect a noteholder's interest in a BK? I've just heard from a local San Diego bankruptcy attorney who used to clerk for a San Diego BK trustee that 3 of the 6 San Diego BK trustees are pursuing a "legal theory" that will wipe out a note holders "secured" interest if after purchasing a note they did not record an assignment of their interest. In many cases this will enable a BK trustee to sell the house and use all proceeds to pay off debt pro-rata. Example: Johnny's mortgage shop makes a home loan to the Smiths and then Johnny's mortgage shop sells the note to another bank/investor. As is commonly the case, the new note holder does not record an assignment of their interest (talk to any escrow officer and you rarely find an assignment has been recorded by the new noteholder). A few years later the Smiths file bankruptcy and the BK trustee has invalidated the note due to the "imperfected interest" of the noteholder. The note then becomes an "unsecured interest" and therefore the trustee sells the house to pay all unsecured debtors pro-rata. Of course we all know the BK trustees work off commission relating to how much is "dispersed", so this "legal theory" is really an attempt by certain trustees to tap into a very large personal goldmine. What are the practical effects? I'm really not sure ... but if this legal theory becomes case law then many homeowners who may want to file BK to protect the home may eventually end up losing the home by doing just that. The safe harbor may not be so safe anymore. Just wondering if anybody is tracking this development or has even heard about it. Ted Follow Ups: Re: Imperfected Interest - No Assignment Recorded Jerry - Ca. 10:08 AM, 04/29/08 (0) Conspiracy Theory Tom 5:37 AM, 04/29/08 (1) Re: Conspiracy Theory Ted 9:05 AM, 04/29/08 (0) Post a Followup: Name : E-Mail : Subject : Comments: : Does anybody have news on "imperfected note holder interests" due to lack of "recording assignments" on title and how this may, or may not, effect a noteholder's interest in a BK? : I've just heard from a local San Diego bankruptcy attorney who used to clerk for a San Diego BK trustee that 3 of the 6 San Diego BK trustees are pursuing a "legal theory" that will wipe out a note holders "secured" interest if after purchasing a note they did not record an assignment of their interest. In many cases this will enable a BK trustee to sell the house and use all proceeds to pay off debt pro-rata. : Example: Johnny's mortgage shop makes a home loan to the Smiths and then Johnny's mortgage shop sells the note to another bank/investor. As is commonly the case, the new note holder does not record an assignment of their interest (talk to any escrow officer and you rarely find an assignment has been recorded by the new noteholder). A few years later the Smiths file bankruptcy and the BK trustee has invalidated the note due to the "imperfected interest" of the noteholder. The note then becomes an "unsecured interest" and therefore the trustee sells the house to pay all unsecured debtors pro-rata. : Of course we all know the BK trustees work off commission relating to how much is "dispersed", so this "legal theory" is really an attempt by certain trustees to tap into a very large personal goldmine. : What are the practical effects? I'm really not sure ... but if this legal theory becomes case law then many homeowners who may want to file BK to protect the home may eventually end up losing the home by doing just that. The safe harbor may not be so safe anymore. : Just wondering if anybody is tracking this development or has even heard about it. : Ted [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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