Unrecorded Mortgage = Secured Priority Claim?

[eloxley]

What is the name of your state? Ohio

Scenario:

Debtors obtain mortgage to refinance in 12/04 with Bank A. Bank A records mortgage with county. In 1/05, Bank A sells mortgage to Bank B. In 2/06, Debtors file Chapter 13 and are confirmed in 5/06, with mortgage to be paid outside the plan as well as mortgage arrears to Bank B to be paid within the plan. Bank B filed claim as secured priority and attached copy of Debtor's mortgage to Bank A as proof of claim, as well as notice that proof of assignment to Bank B could not be located.

In 4/07, Debtors become aware that Bank B never filed notice of assignment with the county, and Bank A is still the only lienholder.

Question:

If Bank A sold the mortgage to Bank B, and Bank B never recorded it, can Bank B have the perfected lien required to file a claim as a priority secured creditor? While there may still be a valid lien in place, isn't it actually still held by Bank A, who was obviously unable to file a claim as it had already sold the note? Wouldn't Bank B then qualify as an unsecured creditor and thus receive the same percentage as other unsecured creditors inside the plan?

Any and all loopholes welcome....!

 

[seniorjudge]

The assignment is valid when it is done.

Recording it gives notice to the world.

 

[eloxley]

So, there's nothing in Ohio law requiring mortgage assignments to be recorded? I would think that could make title searches somewhat confusing. I was reading several cases earlier involving Bank One and Fifth Third Bank where liens were avoided due to unrecorded mortgages, although the circumstances were different.

 

[eloxley]

Ohio Revised Code 5301.23(A):

All deeds, land contracts referred to in division(A)(2)(b) of section 317.08 of the Revised Code, and instruments of writing properly executed for the conveyance or encumbrance of lands, tenements, or hereditaments, other than as provided in division (C) of this section and section 5301.23 of the Revised Code, shall be recorded in the office of the county recorder of the county in which the premises are situated . Until so recorded or filed for record, they are fraudulent insofar as they relate to a subsequent bona fide purchaser having, at the time of purchase, no knowledge of the existence of that former deed, land contract, or instrument.

What am I missing?

 

[eloxley]

Oops. Actually this is Ohio Revised Code 5301.23(A):

All properly executed mortgages shall be recorded in the office of the county recorder of the county in which the mortgaged premises are situated and shall take effect at the time they are delivered to the recorder for record. If two or more mortgages pertaining to the same premises are presented for record on the same day, they shall take effect in the order of their presentation. The first mortgage presented shall be the first recorded, and the first mortgage recorded shall have preference.

 

[HomeGuru]

What is the name of your state? Ohio

Scenario:

Debtors obtain mortgage to refinance in 12/04 with Bank A. Bank A records mortgage with county. In 1/05, Bank A sells mortgage to Bank B. In 2/06, Debtors file Chapter 13 and are confirmed in 5/06, with mortgage to be paid outside the plan as well as mortgage arrears to Bank B to be paid within the plan. Bank B filed claim as secured priority and attached copy of Debtor's mortgage to Bank A as proof of claim, as well as notice that proof of assignment to Bank B could not be located.

In 4/07, Debtors become aware that Bank B never filed notice of assignment with the county, and Bank A is still the only lienholder.

Question:

If Bank A sold the mortgage to Bank B, and Bank B never recorded it, can Bank B have the perfected lien required to file a claim as a priority secured creditor? While there may still be a valid lien in place, isn't it actually still held by Bank A, who was obviously unable to file a claim as it had already sold the note? Wouldn't Bank B then qualify as an unsecured creditor and thus receive the same percentage as other unsecured creditors inside the plan?

Any and all loopholes welcome....!

**A: the answer is no. Generally, there is no law requiring a recording of an assignment for said assignment to be enforceable. The recording of the mortgage by A creates a lien, A sells the mortgage to B, B takes over A's mortgage lien position without loss of rights as a creditor. B is never an unsecured creditor unless its (or A's) lien postion is extinguished.
In an assignment of mortgage, the recorded original mortgage is never removed from it's original recorded position on title.
In this instant case, the BK Trustee would accept the lien of B in a BK 7 or 13 just as if B was A. The only evidence needed was the sale/transfer of mortgage from A to B and A's mortgage appearing on the petitioner's credit report, title report or BK schedule of secured creditors.

 

[eloxley]

Thank you for the clarification.

What if Bank B has not/cannot provide evidence of the sale/transfer? With their proof of claim, they only included a copy of the original mortgage with Bank A and a page that said something about not being able to find the notice of assignment.

 

[HomeGuru]

So, there's nothing in Ohio law requiring mortgage assignments to be recorded? I would think that could make title searches somewhat confusing. I was reading several cases earlier involving Bank One and Fifth Third Bank where liens were avoided due to unrecorded mortgages, although the circumstances were different.

**A: I believe those cases had to do with mortgages that were not recorded at all. In your case, you have a recorded mortgage, the fact that it was sold to another mortgage company does not lessen or extinguish your liability. In fact, read your mortgage document with A. There is a clause that allows them to sell the mortgage in which case your liability remans exactly the same.

 

[HomeGuru]

Oops. Actually this is Ohio Revised Code 5301.23(A):

All properly executed mortgages shall be recorded in the office of the county recorder of the county in which the mortgaged premises are situated and shall take effect at the time they are delivered to the recorder for record. If two or more mortgages pertaining to the same premises are presented for record on the same day, they shall take effect in the order of their presentation. The first mortgage presented shall be the first recorded, and the first mortgage recorded shall have preference.

**A: yes, but what exactly does this have to do with YOUR case? Your mortgage with a Bank A IS recorded pursuant to Ohio statutes.

 

[TigerD]

still trying to game the sysem

still trying to game the system.

Did you follow the advice danno gave you on this subject in October?

 

[HomeGuru]

still trying to game the system.

Did you follow the advice danno gave you on this subject in October?

**A: of course not. Why do you think he's back writing again looking for an out?

 

[eloxley]

**A: of course not. Why do you think he's back writing again looking for an out?

Wow, I'd forgotten how rude some posters are here.

Actually, we were contemplating filing a Chapter 7 at the time of my previous posting on that matter, and the advice given seemed potentially litigious and not really what I was looking for.

I came here looking for some insight, that's all. We're not looking for an out, just trying to gain enough knowledge of the applicable laws to have leverage with a bank that has been trying to screw us since the day they took over our loan. They have "lost" payments, filed false affadavits with the court, raised our payment by over $600/month, and are now trying to block a refinance for which the court has already given preliminary approval. We don't want to not pay what we owe, but we also don't want to have to pay more than what we owe either. Being armed with the right information is valuable, and I was hoping to get a little help with that here.

If I can find a legal loophole that we can use to get them to back off, then I'm all for it.

 

[HomeGuru]

Wow, I'd forgotten how rude some posters are here.

Actually, we were contemplating filing a Chapter 7 at the time of my previous posting on that matter, and the advice given seemed potentially litigious and not really what I was looking for.

I came here looking for some insight, that's all. We're not looking for an out, just trying to gain enough knowledge of the applicable laws to have leverage with a bank that has been trying to screw us since the day they took over our loan. They have "lost" payments, filed false affadavits with the court, raised our payment by over $600/month, and are now trying to block a refinance for which the court has already given preliminary approval. We don't want to not pay what we owe, but we also don't want to have to pay more than what we owe either. Being armed with the right information is valuable, and I was hoping to get a little help with that here.

If I can find a legal loophole that we can use to get them to back off, then I'm all for it.

**A: you got thousands of dollars worth of help just on this thread. There is no legal loophole. Reality check.....you owe the money. Either pay the monthly mortgages in a BK 7 or 13, sell the property or do a deed in lieu and move on.

 

[HomeGuru]

Wow, I'd forgotten how rude some posters are here.

**A: you didn't forget. The HomeGuru actually has not been around for awhile.

 

[eloxley]

**A: you got thousands of dollars worth of help just on this thread. There is no legal loophole. Reality check.....you owe the money. Either pay the monthly mortgages in a BK 7 or 13, sell the property or do a deed in lieu and move on.

Well, I don't know about thousands of dollars, since I have yet to read anything I didn't already know, but ... regardless.

We are paying the mortgage, and have been since filing the 13. Again, I'm not looking to not pay what we owe. I can't tell from your answer if what I wrote was not clear, or you just didn't take the time to read it.

Just one last thing --- I'm not an attorney, although I do hold another professional license. People who come here for advice are not all stupid. They're looking for answers to legal questions for which they, for whatever reason, are not asking an attorney. Almost every time I have come to this forum for advice, I have been put down, occasionally called names, and accused of trying to "get out" of a situation. Every time I have come to this forum, I have been simply looking for advice, and have on occasion, given advice as well. I subscribe to another professional forum, on which I am a frequent contributor. While the information provided there may be second nature to me, as it is my profession, I have never put down individuals posting questions there - no matter how obvious the answers may seem to me. IMO, that would be the demise of the forum.

Thanks anyway.