So something I saw in the last email - I think it was the zombie accounts article triggered a thought of a situation I went through a few years ago. It’s a tail of “don’t assume lawyers or bankers know what they are doing.”
Background
I’ve lived in my home since 1994, raised a giant family and now they keep coming back, so I doubt I will ever downsize 
Back in 2000, we HAD to have more space, so it was either sell and build, put trailers in the backyard, or add on. Because of my 9 year old sons’s observation - we elected to add-on. I was struggling with it, but it was Autumn and he and I were in the backyard raking. He pauses and says, “Dad, this is the best backyard ever.” Well fudge, that settled it. Addition it is.
Tale of Woe
So, I got a construction loan with the full purpose of rolling the current mortgage together with it when the addition was complete. 2 months into the project I’m served a mechanic’s lien because the builder didn’t pay the lumber bill. Turns out a month before my project started, he and his wife got into a nasty divorce. My project was about $100k, I was contacted by others that were out 500k. Anyway, we took over the process and plodded on. Eventually we had everything done and the house livable.
Note: if I were ever to do this again, I would require the builder to take out a performance bond.
Note #2: if you are buying new construction, you MUST have pre-inspections to make sure things are built correctly. The stuff they are slapping up and asking high six figures for is shocking.
Anyway….
Lawyers and Bankers
So the addition is complete, and it’s time to refinance. No big deal, we get it done, sign all the papers, etc. We’re starting to catch our breath. A few years later, rates are down, and we refi again. We’re past 2008 now (housing meltdown). Finally we’re in the age of ultra low interest, and I pull the trigger on a 15 year at 2%. Yes, thanks for the free money.
So to review, I have refinanced 3 times since 2002.
The Kitchen and WTF?
So the house is now needing some upgrades, and my better half and I decide to re-do the kitchen. One option is to get a home equity line of credit. So, I bounce down to my local bank that I have accounts with to discuss, and they have very favorable rates. Let’s do it. So, loan person starts the paperwork. And now we get to the punchline:
Bank on phone: “Sir, are you aware you have a lien against your property?”
Me: “Only for the 2% mortgage…”
Bank: “No, Wells Fargo.”
Me: “What?”
Bank: “Yes, you took a loan out on 2000 for home addition.”
Me: “Oh oh oh *****”
So, the group that gave me the construction loan no longer exists. I seem to recall they got out of the mortgage business. When I refi’d to combine the loans, US Bank bought the loan and they are gone. Remember, I’ve refi’d 3 times, and this never came up. I called the closing attorney for the first refi. Seems in 2008, real-estate law tanked and he switched to family law. He had all of his old computers destroyed (no records - what an idiot). To say his voice was stressed is to put it mildly.
So, the lawyer has no information, the original lien holder does not exist, multiple refi banks are no longer in business, the trail is cold. What happens? I call an attorney and she laughs, says this happens all the time, I’ll just write a letter and we’ll fix it.
She didn’t want payment (what?), but I insisted.
Conclusions
- If you’ve lived in your house a long time and have refinanced or encumbered your home from time to time, it might be useful to check your title records to make sure the attorneys and banks have done their jobs.
- For all you lawyers out there. You need to keep all of your records if you really want to be professional. I’m happy to consult with you and show you the joys of virtual machines and cloud storage or long term permanent storage. For a fee of course
