What rights do we have on our mortgage if it was fraudulently done?

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We bought a new construction home in July of this year. We found out this week that there are three liens on the house. The builder went bankrupt and didn’t bother to pay anyone. Here’s the fraudulent part – TWO of the liens are from before we bought the house. We have the Owner’s Affidavit that says the title is free and clear, which it obviously wasn’t. Not only that, the builder knew there were liens on our property and several other properties on our street. We also do not have title insurance – even though we wanted it and NEVER waived it. We have a VA loan, which requires a home warranty. The closing paperwork says the builder purchased one for us, but they didn’t. I’m so mad at these people. I would like to just get out of the house completely. If they sold us this house under these circumstances, can’t we claim the contract null? The Owner’s Affidavit says that the signer (the builder) acknowledges that the affidavit is to induce us to buy the home. If we had known that there were liens, we would not have bought it. I also wonder if the lawyer wasn’t in on it since the title search should have shown the liens. Sorry – babbling. Please advise ONLY if you know this area. Thanks.

4 Comments
  1. Reply
    wizjp
    August 23, 2011 at 7:16 am

    Time to file claims; hopefully you got an owner’s title policy; or if not, your lender will need to get one filed against their policy

  2. Reply
    MadMan
    August 23, 2011 at 8:12 am

    Obviously you need to get yourself a lawyer. BTW, what was your lawyer doing before the closing?

  3. Reply
    rickinnocal
    August 23, 2011 at 8:35 am

    You have the right to sue the builder and recover your losses from him.

    BUT…. if he’s bankrupt there may not be any money to recover FROM, so you may be stuck. If the builder knowingly lied on the sales paperwork then he may be subject to criminal penalties but, again, that may not help you.

    Your problem is that yes, from what you posted, you probably have good grounds to have the sales contract invalidated…. but that would not affect your loan contract with the mortgage company. At the moment you own a house, and you owe money to the mortgage company. If you get the sales contract invalidated, you’re entitled to your money back from the builder (which you could then pay to the mortgage company to clear the loan)

    But if the builder doesn’t HAVE the money….. you’d then no longer own the home, but you’d still owe the bank the mortgage.

    Richard

  4. Reply
    Pogolaw
    August 23, 2011 at 8:45 am

    This is rather complex and without seeing the paperwork it’s hard to ascertain just what the situation is but it sounds like you might have a cause of action civilly, breach of contract and criminally.

    The liens may not be worth the paper they are written on as far as you are concerned, they may be the builders problem. I’m not quite clear on whether you had a title search done or not, surely yes and if so you need to go to the title company and find out why their search did not disclose liens, that’s the purpose, if they screwed up they are bonded to cover your losses if any.

    You say it’s a VA Loan, they only guarantee the loan, go to your lender and tell them whats going on and see if they have some insight as to what the situation is, if they are aware of it yet and what they have done to protect their own interests as well as yours.

    It sounds like you have some criminal actions also, you have in a way a free attorney in the District Attorney’s Office, I don’t know what state your in but I would gather up all my paperwork and make an appointment to speak to an investigator at the DA’s office, he can advise you as to what if any criminal laws were violated because he will have everything in front of him and they might just be able to give a little insight to the civil side of it and point you in the right direction.

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