Originally Posted by
Magic_Muffin
SBM,
It is not necessarily fraudulent in the sense that it can be done. Usually what you would see it that entity I is the holder/servicer/etc of the note/mortgage, and in a situation where it makes sense, entity I will foreclose and friendly entity II will bid at the sale and hold interest through the redemption period where applicable. Or, entity I will sell the loan portfolio to friendly entity II for the specific purpose of foreclosing.
However, this is not what Bella is doing, for example:
- In the event that Bella convinces the note/mortgage holder/servicer/etc to sell it short in a short sale, there is nothing to foreclose on as the mortgage is extinguished once the short sale is completed. If Bella financed this purchase with another loan or private funding and it is secured with the property, they are now at the back of the line as far as loan positioning goes. Loan #1 is now gone VIA the short sale and now all junior liens move up one place. I.E. the 2nd is now 1st, 3rd is now 2nd, etc, with the newest lien is last place. Bella can foreclose that position all they want and actually foreclose the owner(s) out, but all senior liens will remain intact. Basically, it is a foreclosure subject to all senior debt.
- From their stated process, Bella takes possession VIA quit claim deed and are now the title owners of the property. From some miracle Bella actually gets the note/loan/mortgage holder/servicer/etc to sell the position in a one off transaction. Well, now they are screwed. By holding title to the property from the deed and then taking ownership of the debt, they have now merged their interests and now have a worthless mortgage/note/whatever that cannot be foreclosed on. The only way around this is if there was specific anti-merger in the mortgage stating it would survive any merger of interests, which is a VERY specific thing. That is why a Deed In Lieu of Foreclosure does not allow the mortgagor to pursue a deficiency judgment in most cases.
Now again, this also assumes the 2nd mortgage (or any other jr. liens) do not decide to redeem their interest and payoff Bella, in which case EVERYTHING the Bella program is based on is thrown out the window. From the Q&A on the Bella page, you could reasonably assume that if this happens, Bella will not step up and redeem out the homeowners interest VIA the deed to keep the home. If the original homeowners somehow now have the money to do so, they cannot as they no longer have a right to do so since they signed their interest over to Bella. Which means the homeowners are reliant on Bella deeding back the house in a timely enough manner for them to be able to do something. Given how restrictive the timelines are in some states and the strict cutoffs to file paper work, I doubt it will happen.
In either case the homeowner(s) lose.
I honestly don't understand how they have even gotten this far?
MM
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