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| A Texas-based mortgage company is facing a class action lawsuit from as many as 40,000 California borrowers who say the lender failed to clear the title to their homes when they paid off their loans or refinanced.Temple-Inland is accused of violating the law by failing to request that the deeds of trust for homes that had been paid off either by refinancing or otherwise satisfying real estate loans be put in the homeowner’s name, court documents indicate. The lender is legally required to instruct the trustee to record the deed of trust in the homeowner’s name so as to remove the “cloud” on the title.
The Superior Court for the State of California, Los Angeles County, said plaintiffs, Joey F. Soriano and Michael L. Bean, presented “substantial evidence” that their claims were typical of the class and that Temple-Inland “appears to have failed to timely reconvey in violation of [California state law].” Reconveyance is accomplished by the lender signing and filing a “Request for Reconveyance” and by the trustee recording a “Deed of Reconveyance” in the office of the County Recorder. The trustee’s recording of the reconveyance clears the homeowner’s title. California state law requires that a lender deliver to the trustee the note, deed of trust and a request for full reconveyance within 30 days of payment of a mortgage. Violation of the state law calls for a $300 to $500 penalty for each transgression. Homeowners are often not aware that a cloud exists on their title long after they have paid off their loans. The lawsuit stems from a prominent lawyer’s discovery that he had been a victim of the alleged practice. Plaintiffs’ attorney Robert Brava-Partain said his Los Angeles law firm got involved in the case and similar litigation after one of the partners in his firm discovered that the deed to his house had not been reconveyed, causing the partner to lose the lower interest rate on a loan for which he had applied. The partner did some research and found out that failure to timely reconvey was against the law and started talking to other people to whom it had happened. “It was real easy for him to find 15 other plaintiffs,” Brava-Partain said. Explaining that his law firm has handled about “15 or 20” such cases against lenders, including some of the biggest in the mortgage industry, Brava-Partain said it is a widespread practice among lenders. He said the problem is that lenders are motivated to get their interest recorded the same day it arises, but once a loan is paid off, they don’t have much of an interest in getting title reconveyed. The reconveyance statute is a law the California legislature has strengthened three times in the past 20 years. Brava-Partain said California homeowners were finding that after six months or a year the title to their homes had not been reconveyed, showing two liens on the house from two different mortgage companies in spite of satisfaction of the loan and a $65 charge from the lender to reconvey the title. As a result, California state legislators increased the penalty and shortened the time for the lender to act. Brava-Partain said he discovered that he too had been a victim of the practice after he paid off a home equity line of credit last year and found out that his lender didn’t reconvey title for four months. He was dismissive of Temple-Inland’s legal defense. “Their position has been this is just a bunch of plaintiffs’ lawyers trying to drum up business and that they are not hurting anyone by violating the law,” he said. “But over 20,000 and as many as 40,000 people could have had this done to them by Temple between 1999 and 2004.” Temple-Inland did not respond to calls for comment. Brava-Partain said the lawsuit was filed in December 2000 and certified for class action last month. There have been no settlement overtures. “They just don’t care and these lawsuits are the only way to get them to care,” he said. Trial is scheduled for August 2007. |
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