D.C. Mandates Public Filing of Lien Holders for Legal Foreclosures
By: Carrie Bay
Lenders cannot proceed with foreclosure sales in the District of Columbia unless the security, or ownership, interest of the lien holder has been properly recorded in public filings with the Recorder of Deeds office, according to Washington, D.C.‘s attorney general.
Under District law, in contrast to the laws of many states, each deed or other document transferring a mortgage interest must be filed with the Recorder of Deeds within 30 days of execution. This requirement is not satisfied by private tracking of mortgage interests through the Mortgage Electronic Registration Systems (MERS), Attorney General Peter Nickles stressed.
MERS was created to be a paperless property registry to facilitate the quick transfer of mortgages between lenders and the inclusion of the loans in mortgage-backed securities. In certain jurisdictions, MERS has the authority to initiate foreclosures on properties listed in its registry,
but in a number of cases, foreclosed homeowners have challenged the naming of the electronic system as mortgagee.
Questions surrounding the registry and assignments of noteholder ownership have garnered even more attention in recent weeks with the discovery of flawed foreclosure processing practices at a number of major servicing shops.
In a statement issued this week, District Attorney General Nickles noted that notices of foreclosure issued to defaulted homeowners requires identification of the noteholder, and he warned that when the proper recording of the deed is not followed by the foreclosing party, it is a blatant violation of the District’s Consumer Protection Procedures Act.
“A homeowner should not be misled into believing that a threatened foreclosure is supported by the District’s public records when it is not,” Nickles said.
The attorney general said he may consider bringing enforcement actions to stop foreclosure proceedings and seek restitution for consumers if foreclosures “continue to be commenced or pursued with deceptive foreclosure sale notices.”
The District of Columbia’s legislative Council is scheduled to deliberate a bill on November 2, which would mandate mediation sessions between lenders and delinquent homeowners before a foreclosure could proceed. The bill also includes language requiring lenders to rent foreclosed properties back to the borrowers on which they foreclosed.
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