First, I'm not exactly clear on the status of title.  We no longer have "estates by the entireties" in Ohio.  I don't understand the remainder interest that was created.  Typically, a remainder interest follows a life estate and it doesn't seem that one was created here.  If you could explain the nature of the remainder interest, I'd appreciate it.

Second, assuming that the title deed does, in fact, create a remainder interest, it would seem to be a HUGE problem because the OWNER of the property was never served.  This isn't some random outstanding interest - it was the OWNER.  Am I misunderstanding something?  I would think that if the "junkie" had a remainder interest, it would have become a fee simple interest upon the passing of A and B. 

While I can appreciate the willingness of the foreclosure attorney to offer an indemnification, this doesn't seem to be a viable solution to me.  What happens when the new owner wants to refinance, or when he sells the property?  Will he be willing to indemnify everyone again?  Or will the title company be willing to indemnify the new owners so they can get a title policy?

I'm with you... I would not accept that solution if I were the buyer.  I'd insist on reopening the foreclosure case and publishing notice, or possibly a quiet title action.

Robert the title was vested in husband and wife, tenants by the entirety as life tenants, with full powers of sale and disposition and remainder to the "junkie". Wife predeceased husband, husband dies, title then reverts to the remainderman "junkie".  It was after the death of the last surviving life tenant that the foreclosure action was filed.  So yes the OWNER did not get notice.  A HUGE problem. 

The foreclosure attorney seemed to think this was just a "minor" problem and that's why he has agreed to indemnify my buyer. but yes, again, you are correct.  If my buyer ever goes to refinance or sell and this comes to light in that transaction, where does that put the buyer and will the foreclosure attorney continue to offer endless indemnifications until the statute of limitations has run, and for that matter, when will the statute of limitations end, if we assume that the "junkie"
 will claim disability prevented him from seeking recourse within the alloted time.

The only thing I can do at this juncture is to advise the buyer to seek independent counsel (I am not an attorney) and have them make a decision based on counsel's advice. 

My rant was not only to describe the problem I found in the title but to again bring to light the fact that not only are the foreclosure attorneys missing huge issues but they are not at all concerned about the consumer that ultimately purchases these properties. All they are interested in is whether or not they can someone to insure over their screw-up.  And, as in the instant case, if they can't get an underwriter to insure they offer indemnification.  I can't even imagine how many of these policies exist out there where the underwriter is not really the "insurer" but has in fact accepted an indemnification from the attorney who did the foreclosure.  I almost feel like its a fraud. The consumer thinks they have the full resources available to them from a huge entity whose financial information is readily available for review, when in fact they are reliant upon a private attorney, whose financial information is likely not a matter of public record and  who may or may not have the resources at the time a claim may get filed to litigate the matter or in the alternative pay out the claim.  I think its unfair to the consumer.

This could become a very long post if I continue to rant but I will leave it at this for now.

Thank you for your response I always appreciate your insight.

Buyer's attorney, after having been told the facts, told the buyer that the letter of indemnity from the f/c attorney would be sufficient IF the f/c attorney set aside, in a separate escrow account, a sum necessary to pay the entire policy amount as well as a sum of money to cover legal fees etc.  with said sums remaining in escrow for at least five years.  (the total amount around 250,000.00)

As stated the f/c attorney has agreed to "self insure" , but because we cannot be afforded any assurances that if a claim were to be made that he would have the resources necessary to defend the buyer's rights this was the way in which their attorney advised them.

I love this man!  :)

... that the foreclosure attorney won't be willing to do that and we get a real fix to the problem.  In my mind, even that is not good enough.  What happens if the next buyer isn't willing to accept the title with the defect?  At some point, could be ten years from now, someone might insist on a quiet title action to fix the problem.

I see no mention of the "junkie" remainderman signing off on the foreclosed mortgage or being otherwise bound.  In Illinois, a mortgage lacking this would be unenforceable.

Lee Zelle

I would usually have said that I would issue a report or commitment based on what was said here with a vesting in the remainderman. No lawyer-title agent is authorized to issue a so-called indemnity, secured or unsecured, or to issue a policy, based on an assumption of risk regarding record ownership.

The trump here is the meaning of  "full powers of sale and disposition".

The remainderman seems to have a vested future interest upon condition subsequent. This type of problem is an absolute delight to sadistic law school professors and a bore or a nightmare to the rest of us. In my 37 years, I have seen only one such interest (it included "power to consume") and I hope never to see another. The condition is the life tenants' power - whatever sale and disposition was intended to mean under state law at the time of the grant to the remainderman. The remainderman was divested by the life tenants' removal of equity and transfer by mortgage. The transfer was in two steps: One before death by the loan transaction, and the second after death by exercize of the power of sale.

Not having a title search in front of me, this is all just talk - but that's what weblogs are for! Nice to join you guys. Keep the Faith.

Larry Lacombe

We have had further discussion with the f/c attorney and with their underwriter and have come to the conclusion that in fact the f/c attorney is going to write, and the underwriter is going to accept, an indemnity from f/c attorney to underwriter.  Thus if a claim were to be filed the buyer would be filing claim with underwriter, underwriter will defend claim and they seek recourse from f/c attorney.  So at the very least the buyer has the resources from a large national entity at their disposal if a claim were to ensue.

Now with that all being resolved the buyer is still taking title to a property with a valid interest outstanding.  They have agreed to accept that fact and have been counseled by an independent attorney. They are fully aware that there is a possibility that this "junkie" may come crawling out of the woodwork some day and make claim to the property, but they feel like it's an unlikely situation. It  turns out that they actually live across the street from this property and personally know the "junkie". They feel like if the "junkie" were going to make a claim they would have done so already and thus are going to proceed.  

Now I would not personally take this position, but....  

Lee,

Thank you for your input. The "junkie" was not an obligor on the mortgage, but because the "junkie" was the record owner of the property at the time that the mortgage went into default and did not get notice of the foreclosure the foreclosure action is flawed. 

Are you saying that the mortgage is unenforceable under these circumstances?  I think I just don't understand the concept.  Can you expand?

I think it might make a difference if deed creating the remainder interest were filed before the mortgage.  If that were the case, "junkie's" interest would be superior to that of the bank.  If the mortgage was recorded first, then the bank's interest would be superior. 

I still think this should be fixed.  If I were the buyer, I wouldn't worry so much about "junkie" coming back to file a claim, but that some day I will have a problem refinancing or selling when the title search turns up the defect.  But... these days... everyone does current owner searches and nobody minds taking an indemnity letter in lieu of good title.  Sad, really.