
A million-dollar brownstone that no one owned - bhl
https://theoutline.com/post/5807/the-million-dollar-brownstone-that-no-one-owned
======
dzdt
If you ever bought real estate in the U.S. you probably paid title insurance.
This is insurance that covers the value of the loan in the case faulty or
fradulent documents are found making the chain of ownership invalid.

It costs like 1/2 of a percent of the property value.

That is how YOU pay because of shenanigans like in this article.

~~~
tantalor
Why don't we have a proof of custody (chain of ownership) instead of insurance
against fraud? Wouldn't that be stronger & cheaper?

~~~
jasode
_> Why don't we have a proof of custody (chain of ownership) _

In the USA and most developed countries, we already do have a "proof of a
chain of ownership". And, we've had it for hundreds of years. For example, the
title deeds and transfer of title documents saved at the county courthouse.

The issue is whether the so-called "proof" is : authentic or forged, and/or
conflicting with other prior claims. (E.g, is the title transfer document
faked? Are the signatures from the real owners? Was the previous person who
transferred the title the actual rightful owner?)

Ultimately, "proof" of ownership is a social consensus that sorts out the
claims and converges on agreement of who owns what. (I made a previous comment
about this.[1])

You might notice that "proof" is recursive: if we "prove" that the "proof" was
valid, how do we know _that_ proof is valid? Well, things like "title
insurance" and/or a court case with a judge/jury to render a final judgement
is the process to break that infinite cycle of "proof of proofs".

[1]
[https://news.ycombinator.com/item?id=14553867](https://news.ycombinator.com/item?id=14553867)

~~~
dingaling
In the UK the banks and property agencies are moving away from title deeds in
a process called 'dematerialisation'

My deeds, dating back to 1949, no longer exist. They were shredded by
Nationwide. I have a certified copy but they are considered of academic
interest and 'proof of ownership' is now recorded by a database row. Which is
terrifying, as a simple clerical error or a system failure could ruin so many
lives.

~~~
bena
I mean, before a simple fire could have ruined those same lives. Also, paper
isn't proof against clerical errors.

~~~
chii
Paper, if recognised legally means you have the responsibility to hold and
present it as proof. You could keep the paper in a safety deposit. You can
make certified copies.

If proof is electronic, you have no recourse if computer error causes a
dispute, since you do not hold any proof yourself to present as evidence!

------
arthurofbabylon
I live in a town that's a haven for hiding illicit funds in luxury homes
(cryptocurrency fraud). There is a vacancy rate of about 5% - housing costs
are up greater than 5% as the vacant homes' impact has a compounding effect.

I bring this up because it highlights an underlying trend shared between the
article and my anecdote: fraud conducted in supply/demand markets hurts buyers
and generally legal participants.

Even if your deal is 100% legal and proper, the supply/demand dynamics have
been altered by those committing the fraud and you're getting screwed.

~~~
jimrandomh
A vacancy rate of 5% is not abnormally high.
[https://www.census.gov/housing/hvs/files/currenthvspress.pdf](https://www.census.gov/housing/hvs/files/currenthvspress.pdf)

~~~
ebikelaw
Understatement! 5% vacancy is a signal of “housing crisis” as currently
experienced in many American cities. People carping about tiny vacancy rates
has become some kind of NIMBY meme: we don’t need to build new homes because
look at the minute fraction of existing homes that are vacant!

~~~
acranox
I live in a city that is in crazy high demand. Prices climb 10% a year. Demand
is huge. There are two vacant homes on my block. (And another one two blocks
away) But not because no one wants to live there. But because of stupid
practices by the banks that have left these homes in a limbo state where
someone left, and it’s not on the market at all. It’s just vacant. This is so
stupid. People need housing. I wish the city would just take over the homes
and let people live in them. And that’s just the three homes I’m aware of.
There’s probably tons more.

------
iaw
Well this could be a fun data science project. How much real estate fraud can
you find in ACRIS?

~~~
mikeyouse
Fun story; when the financial disclosures came out for the new administration,
I wrote a quick script to compare Trump's LLCs to property records in NYC's
ACRIS and then looked over the results by hand to see outliers. It took
literally 30 minutes of my time and I found the Trumps trying to evade like
$500k in taxes.

Eric Trump had used two anonymous LLCs to buy properties from his father's LLC
for far below market rate. He was going to combine the units with another he
already owned which actually made them more valuable than simple comps
suggested. There were several opportunities to disclose the related party /
family transaction but they both affirmed that it was at arm's length in the
paperwork that they signed.

Propublica & The WaPo both published articles but I wasn't sure at the time so
I remained anonymous publicly. Turns out that corruption doesn't matter and
nobody cares that our president constantly commits financial crimes, so meh?

The propublica article: [https://www.propublica.org/article/heres-how-trump-
transferr...](https://www.propublica.org/article/heres-how-trump-transferred-
wealth-to-his-son-while-avoiding-usual-taxes)

~~~
intended
No, people care - but they are usually busy dealing with other news they are
currently being overwhelmed by.

~~~
mikeyouse
It’s just amusing that if I had found something similar about the president 3
years ago instead of 1 year ago, it would’ve been front page news and would’ve
likely resulted in impeachment hearings. Instead.. crickets and a couple
lightly read articles.

I always regarded moral relativism as a lens to judge modern culture against
historical cultures and norms. It turns out that it’s much, much worse to be a
‘good’ person committing a moderately bad act as compared to a ‘bad’ person
who regularly commits much worse acts. That’s a bit depressing.

 _Edit to clarify my point:_

It was a major scandal when Tim Geithner had to pay $20k in back taxes that he
owed from his time at the IMF, similarly when one of Clinton’s nominees for
the AJ position withdrew when it turned out that she owed taxes on the salary
she was paying her housekeeper, similarly again Spiro Agnew _resigned from the
office of the Vice President of the US_ over something like $8k in taxes on
income he didn’t report (as well as some other corruption involving bribes and
kickbacks). But millions of dollars of illegally shielded income depriving the
treasury of hundreds of thousands of dollars in tax revenue during the
campaign merits a shrug because there are so many other scandals.

~~~
lotsofpulp
Trump’s voter base would champion those actions, it’s not like it’s unknown
that he’s a scumbag developer that takes every effort to cheat everyone he
deals with. But the important thing is that they believe he’s on their team or
one of their tribe, which allows him a lot of leeway in his behavior compared
to someone on the other team or tribe, for whom even a minor indiscretion is
unacceptable.

Similar mechanisms are at work when a popular athlete is caught doing
something, or priests, etc. Once someone’s ego becomes invested in you, you
can more easily take advantage of them and that’s an important thing to learn
(and wield for yourself).

------
Zanni
Apologies, but I can't let this go: "Adrian sold another property around this
time, a big house in Flatbush with a driveway and a copula for $100,000 to
another LLC."

Pretty sure that house had a cupola[0], not a copula[1].

[0]
[https://en.wikipedia.org/wiki/Cupola](https://en.wikipedia.org/wiki/Cupola)
[1]
[https://en.wikipedia.org/wiki/Copula](https://en.wikipedia.org/wiki/Copula)

~~~
algorias
Maybe he backed a security with the house and sold that instead...

------
jim-jim-jim
Off topic, but can anybody explain why mobile scrolling is so weird on Outline
articles? It's like there's way less friction when I swipe up and down.

I have javascript completely turned off. Is there something else that governs
this behavior? Because I want to block it too.

~~~
agret
I dug into the source code and I believe it's caused by this:

ui-path-scroll .post__article{-webkit-transition:height 1s;transition:height
1s}

They set a transition length in the css so your browser is just obeying the
style sheet. Doubt there is any way to override this without a browser
extension.

------
rblatz
You’d think after 10 years they could claim the property through adverse
possession and clear up any “cloud” over the ownership.

~~~
logfromblammo
Some states allow a civil suit against all known creditors, lien-holders, or
anyone else that may have an interest in the property, forcing them to show
proof of their interest, then the judge makes a declarative judgment stating
who owns the property, and the obligations the owner may have to the other
parties.

Statutes enabling such suits are custom-tailored for removing clouds. If the
lenders don't have their paperwork in order, the judge can sever the mortgage
from the note, turning it into an unsecured debt.

~~~
CPLX
For anyone curious this is typically called an action to "quiet title"

------
rb808
I love stuff like this, I always assumed everyone lived normal lives and
played by the rules but there is so much that is the wild west still.

In my friends building the largest penthouse's tenants were paying $6k/mo then
the Chinese (mainland) owner disappeared - hasn't been seen for a few years
now. Someone bought the tax lien so I guess they will get a huge condo for
some token amount. (No mortgage)

------
pjc50
The UK is about to deploy a measure against this kind of thing:
[https://www.fladgate.com/2017/06/register-of-beneficial-
owne...](https://www.fladgate.com/2017/06/register-of-beneficial-ownership/)

(Article says "UK" but the UK has two separate property law regimes and title
registries, so they may not include Scotland)

~~~
tialaramex
This builds on the Persons with Significant Control rules for UK companies. In
theory the rules for companies registered with Companies House require that
they disclose human individuals who ultimately exercise significant control.
For a public company there won't be anybody like that (individual shareholders
aren't allowed to own enough of a public company to trigger "significant
control"), but for private companies there's often just one or two real humans
behind it, even if they own or control it via a trust fund with shares in an
off-shore corporation that has special rights in a different off-shore
corporation.

In practice Persons with Significant Control is not adequately enforced.
Lawyers routinely write in things that aren't people in the PSCs field (e.g
foreign company names) for a company and there haven't been any negative
consequences for that.

I believe a willing government can and should enforce these rules by
concluding that if, in fact, this company has assets but it's controlled by
non-human entities, well then the government will seize its assets and add
them to the treasury. No humans will be deprived of any assets by doing this
so that's fine. When invariably an actual human squawks that their stuff is
being taken we've found the actual Persons with Significant Control, they're
welcome to pay some token fee, say, £100 000 for the wasted time and effort,
and fix their records or we'll keep their stuff.

~~~
88
Unfortunately it’s usually rich and powerful people who go to great lengths to
obfuscate their ownership of assets, so this is politically unviable.

------
aqme28
Why is half of this article a summary of the Big Short?

------
valuearb
The outline.com is almost a very readable site. But then I zoomed in slightly
to make the text actually legible, and it fell apart. I could no longer
scroll, and eventually some random ads appeared and blocked all access.

~~~
e_proxus
Try outline.com instead:
[https://outline.com/jFDKt7](https://outline.com/jFDKt7) ;-)

It even features keyboard scrolling (in Safari on macOS) which theoutline.com
doesn't do.

------
bumholio
So he stayed for years in a below market house then received a nice wad of
cash for the key. All courtesy of the US taxpayer who ended up on the hook for
the massive Wall Street bankruptcies that made walking away from a $1 million
dollar property a thing.

It reads like he was quite ready to undercut Rosa and Adrian and take up
payments with the original lender, only that he was unable to untangle the
mess, and Adrian beat him to the punch by essentially forging some documents.

------
rwmj
Are deeds in the US still physical documents? They used to be in the UK, but
not for a few decades (they are now electronic records held by the Land
Registry).

~~~
mcherm
The US doesn't have deeds. Instead, there are 51 different state policies. And
many of those states don't have a state-wide policy, but instead operate
county-by-county. So SOME of those support electronic records while others
don't.

~~~
zeveb
> Instead, there are 51 different state policies.

That would be truly remarkable, given that there are only 50 states (the
District of Columbia is _not_ a state). I don't know if each U.S. federal
polity is governed by different title rules, but it wouldn't surprise me,
since areas such as American Samoa, Puerto Rico & Washington, D.C. have
radically different histories: American Samoa was ceded by her native rulers;
Puerto Rico was conquered from Spain & the District of Columbia was ceded by
Maryland, ultimately from land granted by a royal English charter.

I think it's important to note because the United States are more complex than
commonly understood.

~~~
vorg
> there are only 50 states

Many people refer to Australia as "the 52nd state".

~~~
mcherm
As far as I know, only people from Australia say that.

------
8bitsrule
A sad, amusing, enlightening article.

~~~
asdfasgasdgasdg
I didn't find it all that sad. Some people got to live in a house paying below
market rate for a long time. Some dude pulled one over on some dumb banks and
managed to extract a lot of money from their shareholders. Some fraudulent
documents got filed, but the victims of the fraud are the owners of those
failed financial institutions. I guess, if any part of it is sad, that is,
since ultimately that's people's pensions and retirement funds. But that's a
kind of faceless and diffuse group of entities to really feel sorry for.

I agree it was fascinating, though.

~~~
arthurofbabylon
You're lacking in creativity.

It shouldn't be too hard to put a face to the victims: take a look around you.
This kind of disparate fraud impacts all of the non-beneficiaries. That
includes me, you, your aunt and uncle, etc. etc.

~~~
asdfasgasdgasdg
In fact, I pointed out the exact effect you mentioned: that this fraud caused
diffuse losses. It's well documented that most humans have trouble feeling
empathy in the face of statistical harms, so in that sense I'm just a normal
person. It has nothing to do with creativity or understanding. I am
comfortable with my emotional stance on this article.

Also worth noting that, broadly speaking, the same general class of folks
harmed by this practice were also helped by other "bank errors" in their
favor. (By that, I mean the wealthy. People who can afford to be shareholders
in banks.) So it's doubly hard to feel bad, since, by and large, the wealthy
have never been doing better.

~~~
intended
Man, when people get inured to out and out corruption in _America_ , and not
some third world country, you know its bad.

The most likely answer though is not a lack of creativity - because its very
hard to imagine the harm caused by these, relatively, arcane legal
instruments.

There is a harpers article linked in the story, it should be illustrative of
the clear harm being done to normal people, and how corporations made a
calamitous end run around legal procedure - the same issue which is happening
today (the "two-fer" paragraph).

If you need faces, realize that people were foreclosed on when they should not
have been, those deeds were NEVER legally owned by the banks because the banks
and their intermediaries didn't follow up on the paper work.

Yet those people got evicted, and banks claimed ownership.

An economy is largely predicated on working systems of assessment and legal
redressal, more so for First World economies.

And this happens because, as you said, its hard to imagine the harm being
caused.

~~~
scatters
> people were foreclosed on when they should not have been

That's not what happened here, though; the homeowner managed to avoid
foreclosure despite not servicing the mortgage, precisely because the banks
messed up the paperwork.

There are victims in the overall saga: people who were missold mortgages that
they were never going to be able to service, at rates higher than they were
entitled to, who lost their savings as a result. But they don't feature in
this story.

~~~
intended
Right, this is NOT that story, and I am not saying it is.

But that story has been written, as have pages upon pages of what happened.

Reading through it all and being well informed will likely be the realm of a
few people, the best we can hope for is to be directed to other resources.

------
ajdlinux
After reading this, I'm glad to be living in a country which uses Torrens
title.

~~~
FuriouslyAdrift
A few states in the US use Torrens...

~~~
ajdlinux
And it's such an eminently sensible idea that I wonder why it's only a few.

------
subpixel
Help me understand, were the blank fields on the mortgage and the separated
note a part of the fraud? Or just enabling factors?

------
cannabisceo
My take on this is that it has nothing to do with the housing market collapse
of 2008. It smells of money laundering.

------
dwighttk
Author paid by the word, I guess

------
blastacon
If ever there was a perfect moment for a TL;DR...

------
rrcaptain
We really should have locked up every single banker on Wall Street after 2007.
The meme of private property has caused so much harm in the world. We have
messes like this house sitting, rotting, festering, on society. We should
excise the cancer of capitalism before it has fully matastisized and killed us
all.

~~~
solotronics
Replaced by what exactly? A free market is the natural way to allocate scarce
resources. It is easy to say "allocate to those in need first" but who
decides? Yes there are other possible systems but I don't think any of them
have been remotely as sucessful overall as capitalism.

There is a natural equilibrium found in a free market. Those who can produce
cheaper and better quality make money.

------
intended
This was worth the read.

In stark contrast, one should walk into an econ forum, and see how people
discuss the economy.

Its about jobs, or labor figures, and compliance and regulation are things
which just "work", or are to be avoided due to additional costs.

I've come to the conclusion that

1) Economics is currently only as usfeul as the soundbite it generates

2) Economists are people with excellent working compasses, when people are
looking for where they lost their keys

------
sonofblah
Do people in general understand how incredibly rotten, rigged, and broken
everything is?

Imagine buying your dream house (a figurative one only coincidentally related
to the article), turning the doorknob and it comes off in your hand. You flick
the light switch but no lights, and it collapses into the panel. Touch the
wall, and your finger pokes through. Completely broken, disintegrated, nested
with termites and other creepy crawlers. The "inspectors" told you everything
was fine.

That is our world, and this life.

~~~
Waterluvian
Your part of the world, maybe. But there's remedy to everything you described
in most of the modern world.

~~~
fatbird
Exactly. Notice how no one in the story has clean hands, even the reporter who
knew that paying below market rent in cash without a lease meant that
something funny was going on. It's not that hard to avoid shady business
(though in fact, I laud the reporter, and maybe even Eddie and Rosa, for
squeezing a bit of blood from a stone).

