[quote=walterwhite]I don’t understand your explanation and I am an attorney. Give me the non-basic one. I don’t see how a servicer’s right to foreclose is different than servicer’s right to shortsell. In both cases, the buyer wants to know the right party is selling 9or foreclosing). How are these two different. Why is it just a “remote” possibility? it sounds at least in the news like this remote possibility is coming soon…[/quote]

The servicer’s contract to service the loan is generally never in question. That servicing contract is generally part of the sale of that note.
So Aurora lends the money and Fannie Mae buys the note.
The borrower defaults.
Based on Fannie Mae’s direction, Aurora either approves a short sale or directs the trustee to foreclose.
In this sense you are correct.
Permission to sell could be given inaccurately just as a trustee’s deed could be filed inaccurately.
However, in a short sale (or a regular sale), the person with a deeded ownership interest is the one selling with the permission of servicer.
However, the difference is this:
In borrower-to-buyer sales the question is of legitimate permission.
In lender-to-buyer sales the question is if the seller ever actually owned it.
That is a order of magnitude in risk difference.
That is why several title insurers stopped covering certain foreclosures.
By “remote” I was referring to whether end-users in borrower-to-buyer sales would have to deal with this.
Currently it has not been asserted that a buyer of an REO will now have to give it up.
I doubt that will change.

I think it more likely that the banks will be forced to:
-give money to people where their paperwork was inadequate
-may have to try to repurchase the houses they sold (probably at a hefty premium)
-find new housing for illegally foreclosed borrowers
-remove the foreclosure from credit bureaus

Since this will happen only on a small percentage of REO’s (which is a significantly higher risk) I stand by what I said that buyers or sellers on non-REO sales are unlikely to ever have to deal with this.

Think about it this way.
It is very easy for me to demand that a lender show me the note.
It is hard (every time) for them to produce it.
It is easy for me to state who my loan servicer is (hey look at the statement).
It is easy for me to get a payoff.
It is very hard for another lender to challenge that (they would have to produce a note–which is hard).
If they are so far outside the loop on that I never knew who they were, then they are not going to notice that I have sold the property until after closing.
Even if this unlikely set of circumstances were to occur, it would now fall to title insurance to settle it.
That would leave me (the seller) and Bob (the buyer) not having to deal with it.
Ergo: the possibility of the end user dealing with this is remote.
It is yet more remote that any deal would be undone.