I always wondered why are bank owned (REO) properties sold with Special Warranty Deeds and what exactly does that mean. Recently after hearing about all of the alleged mortgage fraud I decided to look in to the question, "why are bank owned (REO) properties sold with Special Warranty Deeds?" After doing some research I set up a Q&A with a local Title Insurance Attorney. We did agree to keep his identity anonymous.
PhillyRealEstate411: What is the difference between a Special Warranty Deed and a Fee Simple Deed?
Atty: Your question is wrong Special Warranty and General Warranty are both types of fee simple deeds.
PhillyRealEstate411: OK, am I correct that with a General Warranty Deed the seller guarantees that the title is clear for all time prior to the sale but with a Special Warranty Deed the seller only guarantees that no defects to the title occured while he owned the property?
Atty: Yes and that is why you buy title insurance.
PhillyRealEstate411: That is good news. The concern I have is that, with all of the mortgage fraud in the news title insurance doesn't cover fraud.
Atty: Of course title insurance covers fraud unless the buyer committed the fraud. Didn't you say that you have Real Estate License?
PhillyRealEstate411: Yes, Associate Broker actually.
Atty: Well they must be giving them out like candy these days. Are we done?
PhillyRealEstate411: I guess so. I just want to be sure. I looked on the internet and read that there are cases today where commercial banks assigned the same mortgage to two different investment securities. After one mortgage was foreclosed and a new cash buyer was obtained a second loan servicer foreclosed on the same property. Now mortgage fraud has been alleged. Are you saying that I am covered by my title policy?
Atty: Well no. That isn't a bona fide sale.
PhillyRealEstate411: So what would happen?
Atty: A judge would have to decide. You would have to sue the lender.
PhillyRealEstate411: But they are just a loan servicer. They only owned the property from the day of the Sheriffs Sale.
Atty: Then sue the Commercial Bank who sold the mortgage twice
PhillyRealEstate411: But they no longer exist.
Atty: Well who foreclosed?
PhillyRealEstate411: The Pooling Service Asset Manager.
Atty: Then sue them.
PhillyRealEstate411: But they only manage a Mortgage Backed Securitized Financial Instrument.
Atty: Well I doubt that would happen.
PhillyRealEstate411: But mortgage foreclosure fraud is happening everyday. Could the loans servicers be offering Special Warranty Deeds instead of a regular deed like we use on every other deal because they know the title may not be clear?
Atty: No, you are not an attorney. Only attorneys know anything about Real Estate. Look at the time. I have a 1:55 Tee Time at the club. You know what? You ask too many questions Peronne.
PhillyRealEstate411: But does my policy cover me?
Atty: You have leave now!
PhillyRealEstate411: But, but.
Atty: Don't let the door hit your... SLAM!
So there you have it. I ask too many questions and I am not buying a foreclosed property.
Robert Peronne
Philadelphia Realty Exchange
1608 Spruce Street
Philadelphia, PA 19103
http://www.phillyshortsale411.com/
robertsells@gmail.com
215-545-6111
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