Do banks lose track of mortgages?

Question

I came across a property that has been foreclosed on twice by the HOA.  The bank filed a LP years ago, but no further action regarding a foreclosure has ever followed.  The intermediate owner held the deed for about 4 years, it appears he/she was renting the property.  The taxes are paid in full, but they didn't pay the condo fees.  And recently it got foreclosed on again by the HOA.  And now the deed is transferred to another third party.  The property is a very nice property worth 300-400k, the mortgage was in the 300's.  So there is clearly a reason for the bank to foreclose.  I guess the second title holder could have contacted the bank and been paying the mortgage and taxes, but seems unlikely to me.  So, i guess my questions is do banks ever misplace properties in the shuffle between assignments and loan servicers?

Chris Mason · Answer

Back in the days of Machine Gun Kelly and other old-timey bank robbers, they would sometimes take the mortgage paperwork held in the vault with them while they were at it, and burn it. Great way to become a folk anti-hero!

Jeff Kehl · Answer

@Bob Chapin I bet that happens all of the time with bigger banks. Any time I have interaction with someone at one of the big 5 I get the impression that there is no real thinking or business acumen going on. The individual cogs in the wheel are very smart and know their individual piece very well and they are thinking, caring human beings. But what they can accomplish as an individual is very limited and a lot of it seems to be controlled by their 'systems'.

As a for instance, let's just say a chunk of properties got lost when a file was being exchanged between the lending department and the REO asset managers. Who exactly at the bank would be looking for it? No one because it's not in anyone's job description.

If you call them and manage to talk to a real person and point that out to them, they may get it to the correct person to get it back into the correct process in the system but I doubt it. More likely you will end up in a call center in India because that 'saves them money' while the $300k house disappears. Talk to one of the attorneys for the HOA and ask them how their attempt to notify the bank as required by law went.

But don't worry too much about it because you and I will support them with our tax dollars if they get into trouble.

Jeff B. · Answer

IMO, loosing track is impossible WHEN everyone does their job.

they file Request for Notice of Default

• A recorded notice made by the beneficiary of a trust deed that he be notified in the event that foreclosure proceedings are commenced by another party of interest.

when the TD is filed.  The County Recorder then informs the lender when/if there is a recordings like Notice of Default.

Why would they just "let it ride?"  Perhaps to have a new owner to go after who has assets.

Bob Chapin · Answer

Oh agreed!  But if the mortgage company has "lost" the property you could rent it indefinitely as long as you paid taxes and condo fees.