Defective Foreclosure At Center Of REO Homebuyers' Dilemma; Discover They Acquired Crappy Title When Subsequent Refinance Attempt Failed

In Cape Coral, Florida, The News Press reports:

• Brian and Holly Barnhart thought they were home free when they bought their Cape Coral dream house from Wells Fargo Bank - but the bank didn't even own the house.



• Now the Barnharts, who emptied their life savings to buy the house for $153,000 cash and renovate it for another $80,000, are stuck in limbo along with their two small children and a baby due in July.

***

• At the heart of the problem is a mortgage foreclosure lawsuit filed by Wells Fargo in 2007 against Richard Riccobono for a mortgage he had on the house. The bank won the suit and then took back possession of the house, but moved July 30, 2009, to set aside its ownership.



• That caused ownership of the house to revert to Riccobono. But on Nov. 3, 2010, Wells Fargo sold the house to the Barnharts - who discovered two months later they didn't really own it when they applied for a mortgage.



• Their plight is the latest in a string of cases in which people are suffering the aftershocks of the wave of foreclosures that swept through the county after the real estate bubble burst at the end of 2005.(1)

For more, see Exclusive: Cape Coral family pays Wells Fargo for home bank didn't own.

(1) Unless they updated their owner's title insurance policy (assuming, of course, they obtained one when they bought the home in the first place) to reflect the additional $80,000 investment for renovations (or unless they have something in their existing policy that addresses market value increases - for which they would have paid an additional insurance premium), the Barnhart's may find that their title insurance coverage is limited to the $153,000 they paid for their home. (It may be possible, however, that the Barnhart's can go to court and request that a judge impose an equitable lien on the property for the $80K expended to fix the place up.)