by Ryan McKeen
Lots is being written about sloppy practices by lenders in executing mortgage documents. The problem has been magnified in recent months as lenders come under intense scrutiny for foreclosing on mortgages without proper documentation.
Connecticut is in a little better position in the foreclosure mess than other states for a few reasons. First, real estate closings are conducted by attorneys and not mortgage brokers (unlike other states). Second, our foreclosure procedures require court supervision of the process.
As one judge told me, his job as a foreclosure judge is to protect the land records of Connecticut. If a foreclosure improperly gets ordered it can cloud title and render property unmarketable. As we get deeper down this foreclosure pit – you will be hearing a lot more about unmarketable title and owners who are unable to sell homes because no one knows if releases came from the proper parties or the plaintiff in the foreclosure action actually owned the debt.
It’s a problem and a big one at that.
Recently, a Connecticut Superior court held in a foreclosure action that a mortgage is enforceable between the original parties when the missing signature of a witness was added to the m0rtgage deed after the closing. Wells Fargo Bank, N. A. v. Craig (Connecticut Law Reporter Volume 50 No. 6 at page 22.)
The court relied on the validating act which statutorily cures technical defects (such as the missing signature of a witness) after two years of recording. The court further found that the signature was not fraudulent absent detrimental reliance by the borrower.
The court denied the homeowner special defense as to the witness signature that was added post closing and allowed the lender to proceed with the foreclosure.
This is a relatively simple case. I think the judge reached the right outcome under Connecticut law.
Look for more and more cases challenging lenders to be published in the Connecticut Law Reporter in the coming years. By all indications what’s happening now is the tip of the iceberg.