Danny Shedd's nightmare began with some cows.
When Shedd, a 12-year veteran with combat experience in Iraq and Afghanistan, finished up his military service at Fort Benning, Georgia, he and his wife, Jacinda, wanted to move to the prairie. The house they settled on in Big Cabin, Oklahoma, was perfect: a 5,400 square-foot, four-bedroom spot built in 2006, which mortgage giant Fannie Mae purchased in a foreclosure auction and was selling for one-third of its appraised value.
After inspections and appraisals, the Shedds closed on the house in June 2015, paying $172,425 cash—the product of years of saving. "They said congratulations on your new home," Shedd told me.
The vet's honorable Army discharge didn't come through until that August, so Shedd settled his wife and kids in the new digs before returning to Fort Benning. But Jacinda soon began complaining about the neighbors' cows lurking around the place at all hours. They would pass through a broken fence and eat the backyard grass, according to Shedd, with cow shit littering the space where his kids wanted to play. Shedd decided to rebuild the fence himself, enlisting a surveyor so he knew exactly where to place it.
The surveyor came back with bad news: According to the deed, the property Shedd paid for was actually ten wooded acres to the north, in a flood plain. The house his family was living in wasn't even on the property they had the rights to.
Worst of all, the neighbors are now saying the house belongs to them and are trying to get the Shedds evicted.
The bizarre situation speaks to a potential time bomb lurking behind an untold number of US residential mortgages. During the housing bubble that went bust in 2007 and 2008, mortgage companies routinely ignored longstanding property records laws. So defects—whether due to inaccurate deeds or fraudulent transfer documents—have sown chaos in county recording offices and foreclosure courts. These defects create ruptures in the "chain of title," confusing who holds true ownership over properties.
Shedd's plight shows the potential consequences for unsuspecting homeowners, who can become innocent victims of a housing market assembled on a mountain of fraud. The only question is how far the ruptures have spread.
In Shedd's case, the defect dates back to the original construction: The Careys, his neighbors, deeded the land to their daughter and her husband, James Stampes, to build a home, and Stampes took out a mortgage to pay for construction. But the legal description in the deed always reflected the wrong parcel—not the land the house was actually built on.
Stampes and his wife slipped into foreclosure in 2008, a protracted process eventually finalized six years later. Fannie Mae picked up the house at auction and sold it to Shedd. But for years, no one seemed to notice that the deed was inaccurate, and the wrong legal description of the property carried through. "Nobody put boots on the ground and figured out where the home is," Shedd told me.
When he got the bad news, and on advice from a real estate attorney, Shedd asked the Careys for a swap. The Careys would get the ten wooded acres, and Shedd would get the acreage under and around his new home. And initially, according to Shedd, the Careys agreed, only to change their minds a few days later. "The wife says we're not deeding you this land," Shedd told me. "This is a windfall for us."
The vet figured his title insurance company would resolve the matter, because title insurers are supposed to protect policyholders from defects in their titles. But when he appealed to American Eagle Title Insurance Company, the insurer retained an outside lawyer, Mark Kuehling, to review the claim. "The mistaken possession of the wrong parcel does not constitute a defect to the insured land," Kuehling wrote to the Shedds.
In other words, Shedd buying ten wooded acres instead of the house he thought he was getting wasn't the title insurer's problem.
Kuehling also pointed to an exception in the title-insurance policy, which said that the insurer does not have to pay claims if there are "any encroachments, overlaps, discrepancies, or conflicts in boundary lines, shortages in area, or other matters which would be disclosed by an accurate and complete survey or inspection of the premises."
In Shedd's closing documents, he did sign a "hold harmless" form certifying that he did not conduct a survey on the property, and that the title insurer would not be liable for "any damages due to any such discrepancies." But he appealed anyway, arguing he did have an inspection done, as per the title-insurance policy. In addition, all the marketing materials referred to an actual home, and the purchase contract was a residential contract—not a vacant lot contract with no residence. The improper contract constituted a title defect, Shedd argued.
But Kuehling insisted there was no title defect to the property described in the policy—a.k.a. the ten wooded acres. "I am sorry that this problem has affected your use and enjoyment of your home," he wrote. (Kuehling did not return a request for comment. Eric Offen, president of American Eagle Title Insurance Company, declined to comment.)
James Surane, a foreclosure defense attorney in North Carolina, is bewildered by the title-insurance company's decision. "The closing attorney and the title company are supposed to ensure the legal description is accurate, not the surveyor," he told me. "A survey would have disclosed the problem, but that doesn't shift responsibility to the homeowner."
Meanwhile, the Careys hired attorney Mark Reents and posted a notice to vacate on Shedd's door on January 6 of this year. "Be advised that you are a trespasser upon the Property," the notice read. The Careys gave the Shedds until February 15 to leave. When the Shedds refused, the Careys filed suit in May, seeking $20,000 in punitive damages in addition to the home. (Reents, the Carey family lawyer, did not respond to a request for comment.)
Through a caseworker in his local congressman's office, Shedd reached out to Fannie Mae, the quasi-governmental company that sold him the home. Fannie offered to intervene in the case against Shedd, and rescind the purchase contract: Shedd would get back his $174,425, plus additional expenses and up to $2,500 in legal fees, and Fannie Mae would get back the home. The intervention officially took place on May 31.
But when Fannie Mae sent out the settlement agreement to the Shedds in July, the company had changed the terms. The Shedds would have to continue to fight the case against the Careys and pay their own legal fees. Other parties involved in the case—the title insurer and the closing agent—would also be released from liability under the settlement. Plus, the agreement would be confidential, with a non-disparagement clause that would block the Shedds from saying anything negative about Fannie Mae in public.
"I said I will not sign that," Shedd told me. "Other people need my story." The veteran's then-lawyer subsequently tried to get all parties to go to mediation, but Fannie Mae refused, saying they would only take back the house and give Shedd his money.
Brent Rodine, current counsel for Fannie Mae, did not return a request for comment. Rosemary Clinton, an attorney with the closing company, known as Buffalo Land & Title, told me, "I can't answer any questions," citing pending litigation.
Shedd says he can no longer afford an attorney, and the family officially owns only an empty lot, with nowhere to live if and when they are evicted. Increasingly desperate, Shedd released a video on YouTube describing the entire story in detail, asking viewers to share his ordeal. "How many people are living in a home that they don't own?" he asked.
It's impossible to determine how many other residential properties have significant defects like this—but it would be a mistake to assume Shedd is the last homebuyer who's going to experience this kind of disaster. "From doing foreclosure defense work, 50 percent of the time I'll find defects in title, maybe more," said Surane, the foreclosure lawyer. "Lenders and underwriters were overburdened and made mistakes."
Central to Shedd's dilemma, it seems, was the cash purchase. "If this were financed, the bank would have done a minimal survey to draw the lot lines," according to Tara Twomey, an attorney with the National Consumer Law Center. "The fact that he paid in cash meant that he didn't have a second person doing due diligence."
American Eagle's insistence that they exclude a bad property description from claims raises the question of how bad this could get the further we get from the foreclosure crisis. While the survey exclusion is standard, could title insurers similarly refuse to pay out for all the mistakes that clouded properties throughout the 2000s? "Insurance agencies only make money if they don't have to pay out," Twomey said. "My guess is most people have no idea that this is excluded in their policy."
Shedd says he's working with state legislators in Oklahoma to require mortgage holders to conduct a survey prior to foreclosure, and to file that survey with the county land records office. That would have prevented his own nightmare.
"This consumes our conversation," Shedd said of his current life in the place he calls home. "Every time I mow the yard, I feel like I'm mowing the neighbor's yard."
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