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Foreclosure, Public Records, and Title Companies: Part I
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If you want to find out something about a house, a piece of vacant land, or a high rise condominium complex, you can go to the Clerk and Recorder’s Office in the county where the property is located and take a look at the Record. You can find out: who owns the house; who has the mortgage on that house; if there is a second mortgage on that house; if there are other kinds of liens on the house; who the HOA is; and what kind of rules and regulations this property is subject to by the HOA.
Almost everything that would be important to know about the title to a house is on the public records. But most people do not have the time to go to the Clerk and Recorder’s Office and go through the public records. So they hire a title company to check the records for them. Title companies usually have their own computer systems that are specifically designed to find out all the information the public records contain about a particular piece of property.
What do the public records have to do with foreclosure?
Once a bank or mortgage company has decided to foreclose, one of the first things they want to do is find out what’s on the record. They need this information because, as I’ve said before, foreclosure is a very PUBLIC thing. Those who could get hurt by the foreclosure have to know about it—meaning they have to get notice of the foreclosure.
Who can get hurt by the foreclosure?
The owners, of course, but also the people or companies that hold liens (like a second mortgage or a mechanic’s lien) recorded after the foreclosing lender’s lien (the deed of trust).
For example, you may have gotten a loan to buy your house five years ago. Then, just a couple of years ago, you needed extra money, so you got a second mortgage on the house. The first lender doesn’t know about the second lender. When the first lender forecloses, the second lender will lose his deed of trust. You will still owe money to the second lender but he will no longer have a deed of trust to back up that debt. The second lender will be hurt if the first lender forecloses. So, the second lender must get notice of what the first guy is doing.
Why?
Well, the second lender may want to hold on to his own deed of trust by paying your arrears and adding the amount to his loan, or maybe he wants to buy the house at the foreclosure sale. There are many reasons why a second lender would want notice of the foreclosure of the first. Most of them are for his benefit and not yours. Whatever the reason, the law insists that those who came after the foreclosing lender (the subsequent lien holders, who have done the right thing and recorded their deeds of trust or other liens), must get notice of the foreclosure.
So, the lender needs to know if anything was recorded after his deed of trust went of record and turns to title searchers or title companies to find out.
Title companies, like First American Heritage Title Company, have a foreclosure department that checks the public records specifically for this purpose. I talked with Dean Ruybal, State Chief Title Officer, about the role of title companies in the foreclosure process. Tune in tomorrow for more on this.
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