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My wife and I recently bought a home, with a nightmare of a path from signing the contract to closing the sale. I’ll spare you the details, but it involved hailstorms, insurance companies, building contractors, a pending divorce (the sellers, not us), numerous banks, a tax consultant, the IRS, and MERS. Suffice it to say that much sleep was lost.
As if I hadn’t been persuaded earlier, the entire process convinced me of the need for a strong Consumer Financial Protection Bureau and someone strong-willed and committed to protecting consumers to run it, like Elizabeth Warren.
The crowning piece of evidence that demonstrated this need was in one single paragraph of the deed of trust presented to us at the closing (emphasis added):
15. Notices. All notices given by Borrower or Lender in connection with this Security Instrument must be in writing. Any notice to Borrower in connection with this Security Instrument shall be deemed to have been given to Borrower when mailed by first class mail or when actually delivered to Borrower’s notice address if sent by other means. Notice to any one Borrower shall constitute notice to all Borrowers unless Applicable Law expressly requires otherwise. The notice address shall be the Property Address unless Borrower has designated a substitute notice address by notice to Lender. Borrower shall promptly notify Lender of Borrower’s change of address. If Lender specifies a procedure for reporting Borrower’s change of address, then Borrower shall only report a change of address through that specified procedure. There may be only one designated notice address under this Security Instrument at any one time. Any notice to Lender shall be given by delivering it or by mailing it by first class mail to Lender’s address stated herein unless Lender has designated another address by notice to Borrower. Any notice in connection with this Security Instrument shall not be deemed to have been given to Lender until actually received by Lender. If any notice required by this Security Instrument is also required under Applicable Law, the Applicable Law requirement will satisfy the corresponding requirement under this Security Instrument.
Note the difference between those two bolded sentences. Giving notice from the Lender’s point of view means sending information (whether it is received is another question), but for the borrower it means the information has to be received. “Sending is fine for me but not for thee,” says the bank.
Sadly, it’s not just this one bank. It’s the way the system is set up.
At the closing, I think I scared the very nice person who handled our file and did a lot to help get us through the mess described at the top of the post. You see, I had read through the closing documents ahead of time, and arrived at her office with lots of questions scribbled in red ink in the margins. Including a big red circle around this paragraph 15.
“Why the difference?” I asked her. “Why does ‘notice’ mean one thing for the bank and another for us?”
“It’s a standard deed of trust,” she replied.
“Yes, I would imagine it is. But that doesn’t answer my question: why the asymmetry? Shouldn’t ‘notice’ mean the same thing for all the parties?”
“This is the way it’s always been,” she stammered. Knowing this is one of my least favorite phrases, Mrs. Dr. Peterr gave me a warning kick under the table. The closer went on, and pointed to the fine print at the bottom of each page. “This is a uniform deed, used on almost every single family residential property sale in the state.” The fine print read “MISSOURI-Single Family-Fannie Mae/Freddie Mac UNIFORM INSTRUMENT WITH MERS”.
“That’s nice,” I said, defensively moving my leg away from Mrs. Dr. Peterr. “But that still doesn’t make it right, does it? All this means is that changing banks for our loan won’t change the terms of the deed. All this means is that things are stacked to favor all the banks, no matter which one we choose for our loan.”
I paused, then turned to our lender and continued. “Look, I’ll sign the deed. We want to buy the house. But I don’t have to like the way the system is set up to protect your industry’s interests at my expense. By the terms of this standard uniform deed of trust, you can use a first class stamp to send us something, but I have to use registered mail. By the terms of paragraph 15, you can require me to report my change of address by carving it onto two stone tablets at the top of a mountain. We’re borrowing your money, so you get to make the rules. I get that. But if you want to know why people are angry with banks, that paragraph 15 sums it up.”
For those who are interested, here are the Fannie Mae/Freddie Mac Uniform Instruments. I have not been able to confirm this, but I have no doubt that they were written by banks and rubber stamped by the Department of Housing and Urban Development.
It’s the Wall Street version of the Golden Rule: Those who have the gold make the rules.
It’s also Reason 549 why we need a strong CFPB with a firm and Elizabeth Warren to head it up. Rules are needed, but they need to be fair.
_____
photo “Bit By Bit” h/t to Steven Lilley aka sk8geek. I sure hope the sculptor wasn’t working on a change of address form.
17 Comments
Wonderfull post, Peterr. Congrats on the house. Good luck with the lender(s), purchaser(s) of the note and so on and so forth.
My evil ex-bank underwrote a Heloc for me 6 months ago, then froze it a month ago. They said that a third party appraiser had found my property have decreased by a third and the federal government was requiring them to freeze the loan (they take no responsibility).
My cool new credit union appraised the house at exactly the same number that the evil bank did 6 months ago.
They are underwriting the loan for 95% ltv opposed to the evil bank’s 80%.
Evil bank charged me $650 early termination fee after they changed the terms of the loan.
Nowhere to turn for justice.
Strike the offending line, initial, and move on.
Thanks.
There’s a part of me that wants to tell my kid to plan on inheriting this house. It may be next week, next year, or fifty years from now, but I really don’t want to go through the housing purchase process any time soon, if ever again.
It makes moving look like a walk in the park.
Asked for copy of loan – seems most loans are not filed correctly and can not be retrieved. But the courts based on “equity concept” do not see this as a problem – just more lawyer fees at time of sale.
And the bank strikes their signature off the loan check. You sign their loan document as is, or you take a walk.
Tra la la…adhesion contract! http://legal-dictionary.thefreedictionary.com/Adhesion+Contract
Also too, as an old law prof told us years ago, “The first rule is ‘the banks don’t lose’ – start there in sussing out who ends up holding the bag.”
I’d be more interested in the details of the Title Insurance contract?
It would seem it’s getting harder and harder to prove the ownership of property these days since MERS entered the picture, and I would guess there’s no one more interested than the Title Insurance people.
First off…If any lenders says they have done an appraisal on your house, you are entitled to a copy of that report.
As far as peter goes..I would be worried about the price you just paid for the property. The appraisal that you paid for was probably shopped to the lowest bidder as experience and quality no longer matter. The Federal reserve has totally changed the language in the dodd – Frank lay concerning customery and Reasonable fees paid to the appraiser.
The Banks have created a new profit center called Appraisal Management centers where by they take 50 to60% of the appraisal fee and shop for the lowest bidder to perform the work.. Most of these reports are crap as most qualified appraisers will NOT work for 1985 fees.
Good luck with the house though,,,
On the one hand, you’re right. They’ve got a lot on the line with their insurance. Missouri is one of those states where banks are not required to file assignments of the mortgage with the county recorder, so the whole chain of title depends on MERS and its spotless recordkeeping.
(pause to let you wipe your monitor clean)
On the other hand, the title insurance companies are part owners of MERS, including First America, MGIC, PMI, Stewart Title, . . . They’ve invested in creating MERS and thus prosper when it does well.
Pretty soon, the title companies are going to have to pick a side in this mess — either fight against MERS and protect the insurance side of their business or defend MERS to try to sustain the securitization side of things.
Have you ever asked? I have and more often than not, I get what I want.
Yes Americans needs protection from corporations, as slaves needed the protection of law from Slave owners. Instead of protection of law, slave’s got fugitive slave laws protecting the interests of the slave owners to own people. Then the slave owner initiated a civil war to secede from the union in a desire to perpetuate their exploitation of human being for profit, their way of life.
Corporations who sole purpose to maximize profit, are amoral and now have the protection of law as did the slave owners, to continue the exploitation. Citizens United is the modern day “Dred Scott,” where just like the pro slavery Taney Court, the pro corporate Roberts Court, had given to corporations an advantage under the color of law, just Taney protected the institution of slavery. People are not Property and Money has nothing to do with merit! Nice repeat in history Roberts? Yes Americans do need protection from money grubbing corporations just as slaves and African Americans needed protection from slave owners and segregationists? No Silent American here!
“…the whole chain of title depends on MERS and its spotless recordkeeping.”
So who bought the legislature and the law in Missouri which does not require the recording of assignments?
Vomit for sure?
I agree; they do that to commercial loans all the time!
“We want to buy the house. “But I don’t have to like the way the system is set up to protect your industry’s interests at my expense.”
But Master Sir, I want freedom and liberty not a servile relationship with you. I want a life and protection of law. I want my life, for me, but I do not care for the laws and system set up to protect your interests at the expense of my life and my liberty! Yup servitude to corporate America, enabled under the color of “bought” law!
Yes, I asked — and I did not get what I wanted.
If they let you change the uniform deed of trust, then they can’t sell it to another bank or investor nearly as easily. “What? It’s not standard? We’ll buy another mortgage.”
Yup. I’ve never bought a house myself, and I’m not sorry.
On a light note, it’s amazing how amazed sales people are when the customer actually takes the time to read the papers being shoved in front of her with the instruction to sign.
The last time I bought a car, the salesman was somewhat upset with me for taking the time to read.