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A cloud on titlle is any claim to the title on a property that puts another claim into question. That is, one may own a property that another person claims with some (though by no means clear) legal justification.
Example would include an easement that hasn't been recorded. Another example is if the originating bank puts a Lien against the property, but then sells the loan and the new bank, instead of buying the NOTE and putting a Lien on the property, instead is merely a Servicer,not a Lender, and records the Lien in MERS, an electronic registration system for ability to trade Mortgage Backed Securities, but not in the County Tax Records. In order to be a trustee and a beneficiary party in interest, the party must have put money up to the game in order to have legal standing. MERS is merely a recordation system and is not an assignee as no Deed of Trust has ever been assigned to it, nor has it ever put any cent in any real estate transaction.
It gets very complicated as a result of Pooling and Servicing Agreements, that hold a collection of NOTES together, for the purpose of selling on the secondary market as Mortgage Backed Securities. Once a NOTE changes form from a NOTE to a STOCK, it changes form irrevocably. Therefore, the chain of title is broken and a broken chain of title can not be fixed. Once it is broken, it is broken.
To answer your question,no a LIEN is not a cloud on the TITLE in any way. Clear and marketable title is not necessarily a title free of LIENS. A title can indeed have a lien against it. That by itself is not a cloud on title. Instead, if there is a broken chain of assignment of the NOTE and the LIEN, than that is instead a cloud on title. A cloud on title makes a property very un-marketable, as the property can not be conveyed with clear and marketable title, to a new buyer and therefore, any previous claims against the title have to be paid by the new owner, whether or not they were part of the situation that caused it.
In other words, once a property becomes bank owned, a foreclosure, the foreclosing bank pays off all Junior Lien holders, such as a Home Equity Loan or a Mechanics Lien, so that all legal issues of the previous home owner don't fall upon the new home owner.
What else can I help you with?
Can a lien lead to foreclosure?
Check this post, it talks about liens and foreclosure. http://www.foreclosedpropertiesdata.com/blog/foreclosure-help/how-liens-can-lead-to-foreclosure/
Why does the title company looks for judgments against the buyer?
A judgment lien that is recorded becomes an encumbrance on the real estate. It means someone else has a security interest in the property until the lien is paid off. Once a lien is recorded it constitutes a cloud on the title. Title insurance companies want to know exactly what they are insuring so they want the title examined to disclose any other entites that may have any interest in the property.
If your first original mortgage is current can a second mortgage foreclose?
Yes. Any lien holder can initiate foreclosure proceedings when their lien is in default.
Type of lien that takes first position in foreclosure?
Real property tax liens(s), followed by the holder of the oldest recorded lien.
What is the difference between a foreclosure and short sale?
A foreclosure is the surrender of the property to the lien holder for nonpayment of the debt. A short sale is the sale of the property before the completion of the foreclosure in an attempt by the home buyer and the lender to avoid foreclosure proceedings.
Assessment is disputed on fully paid condo mortgage - what would a lien do?
The effect of a lien is to cloud title based on monies owed. The title cannot change hands without the removal of the lien, meaning the lien amount is paid before title is clear.
What are the basic for Foreclosure process?
Foreclosure laws vary from state to state and also between lien theory and title theory states. You need to research your particular state.
How do you correct a cloud in the property title?
Depends on what the lien is for. It has to be satisfied and released by them-usually with money.
What does it mean when a homeowners association places a lien on a house?
This lien clouds your title of ownership, probably because you owe the association money. To clear the lien, pay the debt, then ask their attorney for a Release of Lien, which you can file at the local county courthouse. This clears your title.
Can the finance company repo your car when you have a title with no lien?
Yes. The note creates a lien, regardless of whether it is officially recorded on the title. If the lien is not on the title, this will merely create some extra work for the repossessor when they try to sell the car.
If you have a lien on the house going into foreclosure will you get your money?
No
Can a lien lead to foreclosure?
Check this post, it talks about liens and foreclosure. http://www.foreclosedpropertiesdata.com/blog/foreclosure-help/how-liens-can-lead-to-foreclosure/
How does a judgment lien affect a title search and can you get tiltle insurance if you have a judgment lien against you?
A judgment creates a cloud on the title. Any buyer, lender or title insurance company would require that the lien be paid before they will complete any transaction with you relating to your property.
What happens to a tax lien on a property lost in foreclosure?
Tax liens are not wiped out by a foreclosure. They must be paid in order to clear the title to the property so that it can be sold. If the lender has to pay them it will add that amount to the amount you owe.
What happens to to second lien if borrower defaults on first lien?
It may be accelerated and payable from the excess proceeds of the auction held by the first lienor in foreclosure, if there is any excess. --- improve the answer: If seond lien is not a superior lien (e.g. Tax lien is superior than MGT lien), when the first lien is foreclosured the second lien will be washed out --- Not exists any more. However, a superior lien, even a second lien, will still survive the foreclosure process which means the property owner (who has bought the property during foreclosure) still needs to pay.
Can a recorded lien be sold or assigned?
Yes. It can be sold and then an assignment of the lien must be recorded in the land records so that anyone checking the title to the property can contact the lien holder. If mortgages are not properly assigned as of "record" and the owner by an unrecorded assignment forecloses that foreclosure may be deemed defective.
Who holds the title to the property in a lien theory state?
In a lien theory state, the borrower holds the title to the property while the lender has a lien against it as security for the loan. This means that the borrower retains ownership and the right to occupy and use the property, but the lender has a claim on it in case of default. If the borrower fails to repay the loan, the lender can initiate foreclosure to recover the owed amount.
