Investors Flipping Houses Need to Be Wary of Mortgage Assignments

 Buyers of foreclosed and bankruptcy properties, and even investors flipping houses, have become wary of purchasing such properties. This is because authorities have stepped up efforts to address accusations from homeowners that lenders are filing faulty mortgage assignments.

A recent case involving lender Citigroup has huge significance on buyers of Bronx foreclosures and bankruptcy homes in New York and the rest of the U.S. Citigroup has recently settled a case where a bankrupt New York homeowner has accused the lender of using fraudulent and questionable mortgage documents. The mortgage assignment or loan ownership transfer was reportedly signed by an Orion Financial Group Inc. employee, a firm that provides documentation services to Citigroup.

Although Citigroup has denied liability during the settlement, the case still has a lot of implications on property buyers, particularly those who are interested in purchasing homes under New York foreclosure listings and bankruptcy properties. Lawyers for the New York homeowner has alleged that the assignment's origin was questionable, arguing that Citigroup filed the document after proceedings have already started, allegedly because the bank would not have been able to prove that it had the right to legally collect the debts if it had done otherwise.

The case is just one of a handful of lawsuits that have been filed against lenders for alleged use of faulty documents. This has resulted in homebuyers and investors flipping houses to become more wary of purchasing bankruptcy homes and foreclosed properties. The growing number of such allegations also prompted attorneys general in various states to take a closer look at the issue of mortgage assignments.

News reports have revealed that Citigroup has settled four cases involving bankruptcy claims tied up with Orion documents last year. The lender reportedly paid over $80,000 worth of legal costs to settle cases related to bankruptcy claims. Other lenders in the U.S. are facing similar challenges from owners of bankruptcy properties and bank foreclosed homes, with most of them questioning the validity of mortgage assignment documents used in the cases.

According to real estate experts, the mortgage assignment issue is just one of several documentation concerns that discourage some homebuyers and investors flipping houses from purchasing bankruptcy properties and foreclosed houses. They stated that most buyers are concerned about getting dragged into lawsuits and investigations.