Law Blog

FORECLOSURE LAW: Taboo of Stripping a Mortgage through Quiet Title

There seems to be a certain amount of mystery and fear surrounding the topic of quiet title actions.  I always find that sort of thing disconcerting because it feels like propaganda promulgated by the lending industry.[1] Let’s deal with this issue head-on, shall we?  

If there is something wrong with asking the court to strip an unsatisfied mortgage, then fine. Let’s not do that.  But, let’s not be bluffed or bullied by the lending industry.

 What is a quiet title action? 

In the past, a quiet title action was used to clear a property of unenforceable encumbrances. So, for example, if you buy a tax deed and then foreclose on it, you may need to file a quiet title action in order to remove existing liens against the property.  A quiet title action, you probably will not be able to get title insurance until you have completed the quiet title action.

So, “clearing” the title of liens that should not be there is the basic purpose of a quiet title action.

This becomes relevant in today’s world of foreclosure litigation in a couple of ways. First, some homeowners have actually won their foreclosure cases.  By “won,” I mean the homeowner obtained a judgment in its favor, or the lender voluntarily dismissed its case because it feared the judgment would be in the homeowner’s favor.  This does happen. My firm has won on nearly a dozen occasions, and other firms have as well.

So, what should a homeowner do after winning the foreclosure case?  Obviously, the plaintiff is unable to demonstrate ownership of the loan, otherwise it would not have lost the case.  In reality, nobody knows what entity might actually own the mortgage, if anyone.

As a result, the homeowner could not pay off the loan even if he wanted to because he does not know whom to pay.

Naturally, most of these homes are upside-down, so it is pretty unlikely the homeowner would want to pay the loan off. However, the same logic applies to modification of the loan or, even, approval of a short sale.  If the homeowner cannot determine the party that has the legal right to make decisions affecting the loan, then the homeowner is somewhat dead in the water. 

Does the law require a homeowner to remain in limbo indefinitely? 

Two Options 

This is the analysis I give my clients when we beat the lender’s foreclosure.  They have two choices:

(1) do nothing and wait for the lender to start a new foreclosure action; or

(2) file your own complaint to quiet title.

Naturally, there are pros and cons to each approach.

Do Nothing and Enjoy the Savings

There is something to be said for doing nothing because the homeowner saves money each month. If we knew that situation would go on forever, it would be a near-perfect solution.[2]

Unfortunately, I think we have to assume the bank is working hard preparing its new foreclosure action. They are looking for documentation (or creating documentation) that will allow them to win the case next time around.

Doing nothing will be great for as long as it lasts but, presumably, the lender will be in a much stronger position when it finally does come around with the new foreclosure.

In the alternative, you can go on the attack. Without getting technical, you can think of the quiet title action as your own foreclosure. Essentially, you are filing a complaint that says there are no valid liens against your property, so the judge has to strip the mortgage lien. If the lender disagrees, it has to come forward with proof that it has a valid lien against your property.  If they cannot, then the mortgage will no longer be attached to your property.  The lender will still have recourse against you personally (which can be eliminated through a bankruptcy), but they will not be able to foreclose.

What are your chances of actually winning the quiet title action? 

Well, this is a good question. We have about five of these cases pending right now, so I cannot tell you that we have yet prevailed.  So far, we are having a tough time, but probably not for the reasons you would expect.  What is happening is lenders are putting their money and energy into technical arguments and setting up procedural hurdles.

Let me put that another way.  If the lenders could actually come up with proof that they own the loan, that would be the end of the lawsuit. We would have to dismiss the case. So far, none of them have been able to do that. So, instead, they make arguments about how the case is set up and whether we can do what we’re trying to do.

Look, we’re talking about giving somebody a free house. Nobody expects that to be easy. Certainly, judges are going to be reluctant to do that. I want to be honest with you about that.

That said, it seems to me we have the upper hand in these cases. So far, I do not see any reason why we could not win.


What happens if we lose the case? 

Nothing bad.  That is the beauty of being the plaintiff.  In a very real sense, you have nothing to lose.  If you see that the case is not going well, you have the option to voluntarily dismiss.  That is what the lender did with its foreclosure action, remember?

Even if we go all the way to trial and lose, nothing changes. That just means the mortgage will continue to be attached to the property.


Will filing the quiet title action be worthwhile if we do not win the case? 

In my opinion, “yes.”  If you go on the attack, then you will be in the driver’s seat.  You’re going to gain some important advantages.

First, it is like a preemptive attack. Instead of allowing the lender all the time in the world to get ready for its new foreclosure case, you are forcing them to come forward now.  We do not know exactly what is going on behind the curtain, but it is a pretty safe bet the lender is making preparations.  Nothing good can come from allowing the lender time to put together an airtight case.

Second, you will create tremendous leverage.  In every one of these quiet title actions I have filed, opposing counsel has always asked me “What does your client want?”  They are willing to settle.

So, the question is whether or not they will make you an offer that is sweet enough for you to drop your case.  Well, that is a good position to be in.  Up to this point, you have always been on the defense.  You did not have very much leverage. If you file a quiet title action, that will change.

You should give some thought as to what would be an acceptable settlement for you. Then, we will see how the case is going. If it looks like we can win, perhaps you will not want to settle. However, you can have your settlement offer as a backup plan.

That, to me, sounds like a pretty good deal.


Removal to Federal Court

There is one caveat you need to be aware of.  We have seen a couple of lenders use the tactic of removing the quiet title action from state court to federal court.  By my analysis, there is not obvious legal advantage for the lender in federal court.  I think the case precedent is about the same — or, possibly less favorable — for the lender in federal court as in state court.  However, there is an important tactical advantage.

Federal court is more expensive and the cases move faster.  In state court, you have much more control over the pace of the action.  So, if one month money is tight, you can slow things down.  Federal courts, however, impose rather stringent deadlines.  That means you will be forced to move the case along more quickly, which means paying attorney fees at a less leisurely pace.



I know of many law firms that will not bring quiet title actions because of certain unfavorable case law.  Personally, I cannot get my brain around the idea that an owner is required to forever suffer an unenforceable encumbrance.  That cuts against some fundamental tenets of American property law.  I just do not buy it.

So, my firm will continue to fight the good fight with these cases.  We will probably have to adapt our approach to the new case precedent and develop novel arguments along the way.  After all, this is new territory for everyone.  But, we are not ready to give up.

If you know someone in a position to bring a quiet title action in order to eliminate a mortgage from their property, please sent them to our website.

 ~ Jeff Harrington, Esq.

[1] I remember feeling the same way about the witch-hunt against loan modification companies a few years ago.

[2] The only disadvantage would be inability to sell the property and convey clean title.