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Court Finds Bank Of America Can Not Foreclose On Property Which Has Existing IRS Tax Lien

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Mon, 11/08/2010 - 12:05 | 708140 Obama2012
Obama2012's picture

about time the little guy gets some help.  won't last long with the good ol boys in charge.

Mon, 11/08/2010 - 13:26 | 708471 traderjoe
traderjoe's picture

You've been here for 1 week 5 days. It appears you are the new ZH resident troll. Are you paid by the post?

Mon, 11/08/2010 - 13:48 | 708599 66Sexy
66Sexy's picture

it's general knowledge that IRS liens take priority over any and all other liens against a property... even property taxes.

God is God, and thall shalt render unto ceasar that which belongs to ceasar.

Mon, 11/08/2010 - 14:30 | 708810 knukles
knukles's picture

Well, it was once known that senior secured bond holders had priority over all others in the capital structure during bankruptcy proceedings (excepting newly established DIP financing, but another story for another time) until the US Government came along with GM and Chrysler.

The Significance is Not that the little guy gets Shit or Shinola, but that Rule of Law has Been Adhered To, Applied As Intended.

Mon, 11/08/2010 - 18:40 | 709814 goodrich4bk
goodrich4bk's picture

There is nothing that the government did in either the GM or Chrysler case that hasn't been done thousands of times before by Wall Street investment bankers, DIP financiers and other private parties who provide the "new money" to confirm a Chapter 11 plan.  Yes, the bondholders were deprived up the upside of foreclosing on their assets and re-selling them to the Chinese for a profit, but that's what happens in every successful Chapter 11 case.  I see no reason for that "Rule of Law" to change just because the "new money" was, in the GM and Chrysler cases, the American taxpayer.

Mon, 11/08/2010 - 14:45 | 708893 Ripped Chunk
Ripped Chunk's picture

Indeed 66. Everyone gets in line behind Uncle. Everyone.

Mon, 11/08/2010 - 18:35 | 709804 goodrich4bk
goodrich4bk's picture

I don't know how "general" such knowledge is, but you're dead wrong.  A Fed tax lien is JUNIOR to all prior recorded consensual liens.  When a senior lien forecloses, the Feds have merely a "right of redemption" for a fixed time (I think it is six months) to buy back the property from the lender.  But to excercise that right, the Fed must pay the lender the full amount of its loan, provided it made a full credit bid at the foreclosure sale.


Mon, 11/08/2010 - 12:05 | 708141 Ratscam
Ratscam's picture

SHTF soon or a new Bill in Congress will be introduced with a delayed SHTF

Mon, 11/08/2010 - 12:06 | 708144 Oh regional Indian
Oh regional Indian's picture

Detonation People!

The Merchant of Venice. The bastard spawn of the illegal Fed will finally demand it's pound of flesh, exactly from where it hurts most.

Nail one, upcoming window of 9th through 14th.

CERN has a critical "Stranglet" test tomorrow as well.

Let us wish them ill-luck.




Mon, 11/08/2010 - 12:18 | 708171 A Man without Q...
A Man without Qualities's picture

I wonder how much POMO money is being used to prop up BAC?

Mon, 11/08/2010 - 12:18 | 708172 Lazarus Long
Lazarus Long's picture

ok it's official the American people are nothing more than a piece of meat to be fought over

Mon, 11/08/2010 - 12:45 | 708265 Mariposa de Oro
Mariposa de Oro's picture

Exactly!  I had a mental image of two hyenas fighting over a carcass, only the carcass wasn't quite dead yet and was observing the spectical.

So sad....

Mon, 11/08/2010 - 12:19 | 708173 Panafrican Funk...
Panafrican Funktron Robot's picture


Full ruling link.


Go go gadget - link!  Please, and thanks.

Mon, 11/08/2010 - 16:26 | 709325 Panafrican Funk...
Panafrican Funktron Robot's picture

Yeah, this is going to have some pretty substantial implications on the commercial side as well.  I think what we'll see is continued price stability coupled with a further dropoff in sales.  Quantity of qualified buyers is only part of the problem; wait and see will continue to be the order of the day until "foreclosure liquidity" returns to the marketplace and we see true price discovery.

Kind of reminds you of the stock market, eh?

Mon, 11/08/2010 - 12:20 | 708176 shushup
shushup's picture

Bullshit. They will just pay the lien and then foreclose.

They pay the tax liens after the foreclosure anyway.

Stupid that this is even an issue. The taxes always get paid.

Mon, 11/08/2010 - 12:36 | 708233 goodrich4bk
goodrich4bk's picture

You're frickin wrong, dead wrong.  Under normal circumstances, a Fed tax lien is JUNIOR to a prior recorded consensual lien.  When the consensual lienholder forecloses, the Feds have a "right of redemption" for a fixed time (I think six months) to buy the property back from the lender by paying the lender its lien claim IN FULL.  So this case is huge.  It says that the Feds jump ahead of Merrill's prior recorded consensual lien because Merrill did not record the later assignment back. 

Mon, 11/08/2010 - 21:00 | 710137 StychoKiller
StychoKiller's picture

So, the way I read this is that by relying on MERS instead of using the county Recording process(es), the bank in question ended up screwing themselves in another fashion and opening themselves up to raids from the IRS barbarians!  Too bad, so sad! :>D

Mon, 11/08/2010 - 12:21 | 708180 Yikes
Yikes's picture

The wheels are coming off. What a cluster.

Mon, 11/08/2010 - 12:22 | 708184 DonnieD
DonnieD's picture

This would seem to be a major problem for banks looking to foreclose since I would guess that a lot of people going through foreclosure are behind on their taxes.

As a side note, I spoke to a tax specialist who said the number of small businesses and proprietorships that are behind on their payroll taxes is very high.

Mon, 11/08/2010 - 12:26 | 708194 Waterfallsparkles
Waterfallsparkles's picture

If they could not Foreclose while there is a Tax Lein then the People could be in their house for 10 years without paying a Mortgage.  In most cases the IRS does not Foreclose on a Tax Lein.

Mon, 11/08/2010 - 12:30 | 708212 LowProfile
LowProfile's picture

Hmm...  Sounds like a backdoor forclosure moratorium to me!

New strategy:

Quit paying everything, go to (physical) cash & PMs, and alert the IRS that any future payments will have to be extracted from your home equity.

Mon, 11/08/2010 - 12:26 | 708198 plocequ1
plocequ1's picture

I hope this isnt the same type of court Unicredit used


Mon, 11/08/2010 - 12:28 | 708202 Mad Max
Mad Max's picture

On August 2, 2010, Merrill Lynch submitted its Motion for Summary Judgment, attaching as an exhibit an allonge documenting the transfer of the Note and Mortgage from Deutsche Bank, as successor trustee to Banker’s Trust, to Merrill Lynch. [ECF No. 123]. That same day, the Defendants also submitted Motions for Summary Judgment. [ECF Nos. 119, 122]. On August 25, 2010, this Court granted Merrill Lynch’s motion to file its Amended Complaint, which was duly filed on September 2, 2010. [ECF No. 138]. The Amended Complaint does not reference the allonge.

The allonge seems a little bit fishy to me.  Let's see that original note where every possible space to record transfers and assignments was used up by prior written transfers.

Mon, 11/08/2010 - 12:28 | 708204 apachecadillac
apachecadillac's picture

It's pretty safe to say that there will be an unending pattern in disputes between competing creditors and competing lienholders that the party that failed to record properly, or that is relying on documentation that is otherwise defective in some respect, will be poured out.  The politics of a living, breathing homeowner victim/deadbeat are simply absent in these situations.  The servicers, the trusts and the MBS holders are all going to pay the price for the shortcuts taken during the boom, and of course they are already turning on one another.

But the competing interests are too diverse to permit a one-off legislative solution.  Particularly with a gridlocked Congress.

Mon, 11/08/2010 - 21:03 | 710144 StychoKiller
StychoKiller's picture

At this rate, the SCO vs IBM case will be dead and buried before the M^3 (Massive Mortgage Mess) enters Act II!  Time to stock up on popcorn here.

Mon, 11/08/2010 - 12:29 | 708206 Rainman
Rainman's picture

It's hard to escape the irony of the banks and IRS fighting over the same dead carcass. While they're busy trying to screw each other, the jackal lawyers make off with the prized pieces of meat.

That's life in the jungle of fraud, I guess.

Mon, 11/08/2010 - 12:31 | 708215 treemagnet
treemagnet's picture

TD - any guesstimates on when all this shit actually matters to Mr. Market?

Mon, 11/08/2010 - 12:41 | 708246 w a l k - a w a y
w a l k - a w a y's picture

Now that a broke Uncle Sam is involved, and realizes he can pick nickels and dimes ahead of the banks, we certainly expect all hell to break loose.


Rube Goldberg would be proud of this contraption

Mon, 11/08/2010 - 14:39 | 708840 fallst
fallst's picture

Regulatory capture. And Bubbilicious Fed. Now Greenspan even admitting bankRICO, to deflect.

Must still repeal both Gramm "Moderization Acts" from late 90's. They are loaded with lots of goodies. Especially the "Enron Loophole", or gas will go back to 150/BL.

Mon, 11/08/2010 - 15:02 | 708971 iPood
iPood's picture

A recorded bank lien is not automatically subordianted to an IRS lien, although the IRS retain redemption rights. The general rule follows the order of recording.

Mon, 11/08/2010 - 16:30 | 709342 Panafrican Funk...
Panafrican Funktron Robot's picture

Right, but if you can't produce the wet ink note, then the order of recording is irrelevant, you are officially the bitch in any discussion of who gets paid, and when they get paid.

Mon, 11/08/2010 - 21:06 | 710158 StychoKiller
StychoKiller's picture

LOL!!  Precisely right!  Oh, what a tangled web we weave, when first we practice to deceive!  By trying to automate the process of Recording titles, they completely  screwed the pooch, decapitated it and left it for dead here!

Mon, 11/08/2010 - 21:26 | 710203 Buck Johnson
Buck Johnson's picture

Uncle Sam needs money, and they have to get their pound of flesh from the little guy because the big banks and corporations have paid so little but gotten so much.  And in this catch 22, the banks on the back end is paying more by being denied this if they would have paid taxes up front.  They have spun a web so intricate and so large, that even the spider can't get out of it.

Tue, 11/09/2010 - 03:46 | 711077 Dokemion
Dokemion's picture

I had my home financed with Bank of America. I sent extra payments to be applied to principle (trying to pay off home early) No matter how I labeled payment slip, wrote on checks, and made several phone calls. It was posted incorrectly over and over. It took a lot of my time to get corrections each month. Corrections were then posted to account sometimes with a 2 week delay. I have sent complaints, but have had no resolutions. I spoke with Tiffany Stephenson Operations Consultant Office of the CEO and President Executive Customer Relations. I sent information she ask for, but instead of getting a resolution. My emails are now returned as undeliverable and phone calls are not returned. So just becareful and watch your account closely if you choose to use this bank. I learned the hard way. They are not interested in customer only the dollars.?




Tue, 02/22/2011 - 16:32 | 986274 2lasi
2lasi's picture


All the rules have changed in the last couple of months. Lending banks are now being held accountable for the trap they set, borrowing money they didn't themselves have, while using loose and illegal practices in the process. The massive lawsuit against Wells Fargo / Wachovia, Indymac / OneWest bank, Citibank, Bank of America, JP Morgan Chase, GMAC..............can actually, not only put a stop to your foreclosure, but also pause your house payments with no loss to you............


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