The high number of delinquent loans in Florida is spurring more borrowers to seek relief from land trust companies, the Palm Beach Post reported.
Land trusts operate by allowing underwater homeowners to sign over their deed to the trust and in return the trust sues the lender to have the mortgage canceled for supposed improprieties, like recording and paperwork transfer errors or servicing agreement violations. If the mortgage is canceled, the trust tries to push down the amount the borrower owes to the lender and then buys the note at a discount. Finally, the homeowner arranges a payment plan with the trust or takes out a new mortgage, thus keeping their home.
However, some attorneys worry that the stratagem is not legally sound and could hurt already cash-strapped homeowners. “To think you as a downstream interest holder can destroy a prior creditor or interest holder’s rights in the property flies in the face of logic,” Greg Clark, a Clearwater title and foreclosure defense attorney, said. “The basic premise is flawed.” [Palm Beach Post] – Christopher Cameron