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My Lender Lost My Deed in Lieu of Foreclosure

Mark Cappel
UpdatedAug 5, 2009

Am I obligated to resend my mortgage company another copy of my deed in lieu of foreclosure?

I submitted a D-I-L of application (signed and notarized for my first and second mortgage with Saxon Mortgage back on 10/27/2007. I recently got a phone call from Saxon Mortgage who advised me the D-I-L package (first mortgage only) was never recorded because the mortgage company "lost" it. Seems highly suspicious and unlikely since they recorded the D-I-L of for the second mortgage (which was included, and part of, the first mortgage paperwork) but failed to record the first mortgage. The entire D-I-L package was dated 10/7/2007. They now insist I complete the package all over again for preparation and recording of the first mortgage. I mailed them a copy of the package I have, but they indicate they must have an original. Do you think I am under an obligation to re-do this for them; or do you think that I need to get an attorney involved so that they can locate the misplaced package?

A deed in lieu of foreclosure is an agreement in which a homeowner voluntarily transfers the deed to his home to the lender voluntarily to prevent further foreclosure proceedings. Generally speaking, a mortgage lender who has filed a foreclosure action against a borrower will file a dismissal with the court to stop the foreclosure proceedings if a deed in lieu of foreclosure agreement is signed by the homeowner, as court intervention is usually no longer required.

I assume you reached a deed in lieu of foreclosure agreement with your lender. However, it sounds as if the mortgage company has not taken the final step in documenting the transfer of the property by filing a copy of the agreement transferring title with the county clerk's office. The fact that the lender has not filed the appropriate documents with the county clerk's office should not change the fact that you have entered into a deed in lieu of foreclosure agreement with your mortgage company and that the deed is now held by the mortgage company.

The information available in the county clerk's office is primarily for the benefit and protection of potential buyers, lenders, and other interested third parties, to help them determine who legally owns a property and what encumbrances (i.e., mortgages, equity loans, tax liens, judgment liens, etc.) have been placed on the property. However, the information in the county clerk's books is not a definitive statement of who legally owns a property, as there can be a significant delay between the time that a property is transferred and the time that the transfer is recorded with the county clerk. In your case, the deed in lieu of foreclosure agreement you signed with your mortgage company means that the lender owns the property, regardless of what the county clerk's office may say.

You have no obligation to update the ownership information with the clerk's office. Once you signed the deed in lieu agreement, your responsibilities regarding the reporting of ownership ended.

The fact that the home is still listed in your name at the county clerk's office should not cause you any significant problems, so my advice would be to not concern yourself over the property status reflected by the county recorder’s office. Unless you encounter some specific situation in which the information if somehow causing you problems, you should have little reason to worry about this issue.

Let's assume for the sake of argument that the mortgage company was evil, did not lose your deed in lieu of foreclosure and instead destroyed it. In other words, it did not want to enter into the deed in lieu of foreclosure agreement in good faith. If that was the case, then it screwed up by recording the second mortgage. By recording the second, the mortgage company established the existence of the October 27, 2007 agreement and acted on it. Any judge looking at the county clerk's records and the copy of what you sent the mortgage company will conclude that the mortgage company executed both deeds in lieu, and is trying to defraud you.

I am a believer in Hanlon's razor, which is "Never attribute to malice that which can be adequately explained by stupidity." My guess is that a low-paid clerk at either the county office or at the mortgage company misfiled the deed in lieu of foreclosure on your first mortgage, and it took almost two years for the mortgage company to discover the mistake.

Remember that if the mortgage company does try to do something underhanded, you have the evidence of a) copies of the first and second deeds in lieu you sent in 2007, and b) a recording of the second mortgage shortly thereafter.

However, if there is other evidence you did not include in your question that makes you suspicious of the mortgage company's intent, then you would be wise to heed your intuition about seeking an attorney's counsel.

If you would like to read more about foreclosure and options available to consumers, I encourage you to visit the Foreclosure Advice page.

I hope this information helps you Find. Learn & Save.