First , let ’ s look at a simple situation where a $ 900,000 loan has been fractionalized into 9 different lenders [ each having $ 100,000 ownership in the loan ] and 8 of the 9 lenders signs the reconveyance paperwork in a timely manner but one chooses not to sign [ in time , or not at all ]. Why would the lone lender choose not sign ? What if the loan was very well secured and the note was yielding a higher than market rate of interest ? A naïve lender may think that they can enjoy the higher interest for longer than allowed [ not signing in a timely manner ]. This situation is not as far fetched as one might think . In the 1990s , first deed of trust notes yielding 12 % were not uncommon . When rates dropped dramatically , borrowers were quick to refinance . One investor tells the story of how a 12 %, $ 1.2M loan was trying to be refinanced by the borrower at 9 % with a new lender . The fractionalized note had 5 owners . Four of the 5 had their reconveyances notarized and delivered to the escrow company in a timely manner . The last investor had $ 500,000 in the note and did not
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want to lose his 12 % rate ; he was under the misconception that he could just keep coming up with excuses as to why he was not able to get to a notary [ he was a busy surgeon ]. After more than a month went by , the borrower sued all of the lenders for the difference in the rates [ 3 %] plus attorney fees . Although the lone holdout was ultimately responsible , all of the other lenders had to defend themselves , which put undue burdens upon the innocent 4 lenders .
Next , let ’ s look at a situation where a majority [ over 50 %] lender chooses to extend a loan when it matures , and a minority lender does not . Unless the minority lender requests a partition action so as to separate himself from the majority lender , the majority lender is in control of the fate of that loan .
Dealing with foreclosures by the lenders introduces an entirely new set of challenges ; first , who is going to front the money to pay the trustee fees for the filing and publishing of the foreclosure notices ? What if there are no majority owners of the note ? Even where there is a majority
Dealing with foreclosures by the lenders introduces an entirely new set of challenges ; first , who is going to front the money to pay the trustee fees for the filing and publishing of the foreclosure notices ? What if there are no majority owners of the note ?
owner , most title companies are not only requiring every beneficiary to sign ; powers of attorneys [ POAs ] may not be useful , as many title companies are stating that POAs are not valid unless they are signed within a small window of time that the reconveyance is to be signed [ you might as well have the beneficiary sign the reconveyances in front of a notary if you can get them to sign a POA in front of a notary ]. In fact , many title companies are not accepting service agreements that were set up at the time of issuing the note and deed of trust . Too many title companies have been sued by beneficiaries and , the only way to protect themselves , in their opinion , is to have beneficiaries sign their reconveyances ; even to the extent that the title companies will choose which notaries are acceptable for signatory verification .
Thus , foreclosing may not even be possible if the note holders cannot agree to their destiny or come up with the funds needed to file the paperwork to foreclose [ which can be many thousands , depending on the size of the loan ].
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