Monday, November 03, 2014

What? No owner policy!

Hi Diane, 
I moved into a house and thought my lawyer had included a buyer's title insurance policy because I asked for one. However, it turns out the lawyer was in a conflict of interest situation as he was also the lawyer for the mortgage company. The lawyer had had me pay for title insurance for the mortgage company and admitted as much when I questioned him about it at a later date.
I need to make a claim because an inspection of my home by a city inspector found several building code and by-law infractions in renovations, construction and structural work that was done before I purchased the house. I was presented with an order to have them remedied. 
This would be a huge expense expense for me so was glad I had purchased title insurance - or so I thought I had done.  I purchased title insurance after I received the order from the city and the policy date is my possession date for the house. 
 
Will the policy still cover these violations? Or, is my only recourse to sue my lawyer?
Thanks in advance for your help,
J

Morning, Jim:  Well, I guess the good news is that there's a good chance these items would not be covered by an owner policy.  I think it depends on whether you would have purchase enhanced coverage and what type of enhanced coverage is available in your state.  Zoning violations and by-law infractions are often exceptions to coverage.

I think you should have an attorney review your transaction.  I wouldn't think too much about the conflict of interest angle as this is very common with the attorney's serving both the buyer and the lender.  I would mainly look at his fiduciary duty to take care of you with the same level of care that he gave the lender.  In PA a buyer has to sign a hard worded waiver to skip the owner policy. Perhaps your state has a similar document.

Good luck.

Diane

Wednesday, August 20, 2014

scheduling your closing

When a sales contract is negotiated the contract typically contains a target date for closing.  In most cases it is an "on or before" date.  If this date is very important to you, please make sure you make that clear to your mortgage lender and your title insurance agent.

Most dates are wishy washy and subject to change and so these professionals will not consider that a hard target unless told.

As you approach that date, do not assume that you have been scheduled for that day.  You must speak directly with the title insurance agent to verify the status of your scheduling.  Do not make all of your moving plans until you have a firmly scheduled closing confirmed.

Note that if you are getting a mortgage, the title insurance agent will need to wait for the mortgage lender's "clear to close" permission before scheduling.  This sometimes happens within a few days of the target date so things can be very last minute.  Just stay calm and your job is to make certain you provide any requested information or documents quickly.  Any delay can postpone your closing.

Getting to the closing table is a team effort and you are a member of that team along with the seller, real estate agent, mortgage lender, and title insurance agent.  Everyone must do their part to move the transaction forward and meet the goal.

The actual time of your closing will be set by the title insurance agent and if you have selected a date that is popular with many consumers, then timing is a first come first serve proposition.  Keep that in mind and again, confirm the closing schedule before making moving plans.


Thursday, June 26, 2014

foreclosure error discovered before closing brings transaction to a halt

Diane,

I have begun to do some research in regards to a delay in my house closing because of an error from the sellers title company. Here is the scenario:

I am purchasing a home that is bank owned and was listed under a real estate company.  I went thru my agent who I have been dealing with for the past 7 years.  We looked at the house 1 day after it was listed, liked it and made an offer which was held for 7 days  to see if there where other offers.  We got the house.  we began the purchasing process.  Had all documents necessary to close on the date of 6-20 including financing in 17 days.  The day before the close the title company states they do not have record of the mortgage holder being served to sign the deed over.  What there is record of is the sheriffs office served papers to a tenant that was living there and not the mortgage holder. 

The issue now is finding the owner.  My agent is telling me they may need to do a quiet title and that could take additional month or two.  I want to know if I seek compensation from the title company for there mistakes.  In the contract from the selling agency. It states that if I am unable to close on the date noted that for each additional day after that they would collect $50 per day. 

I have several appliance that are to be delivered and they will not hold any longer after this week. I am looking to get into the house as we have just added a new baby to our home.
Let me know your thoughts.
S

Hi, S:  This is unfortunately not so uncommon.  Title examinations performed on behalf of a buyer and.or their lender for properties sold after foreclosure often find foreclosure errors.  This is why it is so important to use your own title agent, not the one being used by the REO seller.

The problem in this scenario is the expectation of timing.  Think of the title examination as you would a home inspection.  You want the results before you make definite plans because any big problem discovered in the process might cause a delay or even a desire to get out of the contract.

Most buyers and real estate agents have not experienced the finding of serious title problems and so they ignore the risks of moving forward with plans before the result of the title examination is revealed.

On the seller side, expect them to agree to an extension but don't expect them to cover any damages you may have due to the delay.  Your choice at this stage is to wait it out or get out of the contract and look for a different house.

Sorry for the bad news but the title examiner did what they were hired to do and that is to vet the title.

Diane

Saturday, June 21, 2014

If you want your name on the deed, you need to verify at closing that it's on the deed. Don't trust anyone else to check that for you.

Diane,

In 2007, my husband and I purchased a home.  Due to student loans, the mortgage was obtained only by my husband.  At closing both of us were present as I was to sign the deed.  My husband passed away three years ago and without a will.  His death was ruled a suicide and no insurance money was paid.  I am still in the home and would like to keep it.  Since my name was not on the mortgage, the bank will not communicate with me.

I went to the records department at the courthouse and have discovered that the title company wrongly put my name on the deed of trust and only put my husbands name on the deed.  Is the title company liable?  How do I correct this?

Thank you,
L

Hi, L:  I am not an attorney and cannot give you legal advice.  You may wish to consult with an attorney to be sure you are protecting your interests.

The suggestion I have is to read the deed of trust carefully and look for the language that says "heirs and assigns" because this is how you will tie your authority to the document and thus to your lender.  If you did not raise an estate for your husband, talk with the Register of Wills at the courthouse and explain that he died without a will and ask them how you can open an estate to deal with his assets.

My father died without a will and what I had to do was to take a death certificate to the Register of Wills and take an oath to administer the estate.  Once an oath was taken, I received what is called a short certificate.  The short certificate tells whomever needs to know that I am the official representative of the deceased. You should have a similar procedure in your state which I do hope helps.

As for title insurance, the policy is unlikely to offer you assistance for this situation because your husband was the insured, not you, if you weren't on the deed.  You can always file a claim to see what they say. The way something like this is viewed is that you have an obligation to read the documents you sign to protect your interest.  If you wanted to be on the deed, you should have checked that at closing.  If you did not have an attorney representing you at that time, then you were acting in your own interest without representation.

If you have evidence that you gave written instructions to the title agent that you were to be included on the deed or even if your name was on the sales agreement and you did not agree to remove your name as buyer, then you should consult an attorney and discuss suing the title agent for negligence.  This might also be a basis for a title insurance claim. An attorney can help you to weigh options.

Good luck and I am sorry for your loss.  Hope you can get the lender to work with you.  If all else fails, you can contact the CFPB [Consumer Finance Protection Bureau] to see if they can intervene with the lender to work things out for you.

Diane

Wednesday, May 28, 2014

M has an interesting question about a shared retaining wall. Who is responsible for fixing it?

Hello Diane,

I just saw your blog and it caught my eye on a situation I am going through.

Last summer 2013 I closed on a house.  A couple months ago, my neighbor (who's backyard faces up to mine --- I'm on a hill, her yard is at the bottom of it) started complaining about a retaining wall that divides her backyard and mine.  This wall is deteriorating and buckling on her side.  She says the wall is 100% my property and I need to fix it.  The wall is made of concrete cinder block and runs from one end of the block/street to the other, dividing all the houses on my block from the houses on her block.  The wall is connected so there is no "stop and end" in each person's yard.

My survey didn't indicate this wall.  I contacted my surveyor about this and he revised it to show the wall.  He said it now shows the wall is on the property line both hers and mine.  My neighbor showed me her survey and hers shows the wall is all on my property.  (No history of this wall's construction can be found as it was built in the mid 1950's.)

I went back again to my surveyor and he is revising the survey yet again (for second time since my closing in 2013).  

My question is: who is responsible for fixing this wall if both surveys are different ? Regardless of this, wouldn't I be able to file a claim with surveyor or title insurance because my original survey did not represent this wall on it ?  Had I known about this wall before my closing, I would have waited on purchasing this house.

Trying to avoid an expensive lawsuit here and my neighbor is starting to get everyone involved that lives on both sides of both blocks.

Thank you,

M
Hi, M:  Thanks for sending your question.  I am always interested in these types of situations.If this is an old plan chances are that the developer constructed the retaining wall for the benefit of lot owners above and below the wall.  It may have been a requirement of the local government who approved the plans but in any event, I think you are unlikely to find someone to take responsibility for the maintenance of the retaining wall. It's just one of those things that no one pays attention to until there is a problem. It's sort of like a private road.  Many have no maintenance agreements, they are just there.  Once the road falls apart, then lot owners have to come to an agreement or let the road go to pot.

I would pursue - with the help of a competent attorney - finding an agreement amongst all of the lot owners above and below the wall.  Afterall, if the land slides, the houses on both sides will be damaged and it serves no good purpose to let the wall fall for lack of agreement when some shared cost of maintenance will help everyone.  I hope this helps and good luck.

Diane

Tuesday, May 20, 2014

too bad the seller did not have title insurance

We have a title insurance order in process and our examination revealed that the seller bought the property from a bank who had foreclosed.  As usual, the our title examination included a review of the foreclosure to make certain that the bank had done everything correctly.  They did not.  Crap.  The bank's attorney had failed to give good service to a lien holder.  Crap.

The prior owner had a 2nd mortgage with Beneficial Consumer Discount Company. For some crazy reason the bank's attorney gave service to Household Realty Corp.  Now these two entities were under the same corporate family at the time, however, they are still two different entities.

Our seller is an estate. The deceased purchased the property from the bank for cash and did not opt to purchase title insurance.  Too bad.  If he had, someone might have noticed the flaw and fixed it a long time ago.  The estate attorney says his client probably thought the bank knew what they were doing and opted to forego any title examination - with or without title insurance.  Not a smart move. A buyer must always be savvy and have title examined and covered by a competent title insurer - even when paying cash for real estate. The first and primary purpose of title insurance is RISK AVOIDANCE. Look for problems and fix them before you buy.

Let's say the seller had purchased title insurance and his title insurer had missed the error in the foreclosure.  That's certainly possible.  A secondary - and just as important - reason for title insurance is that HUMANS MAKE MISTAKES.  The bank's attorney made a mistake and it's possible that a title examiner could miss it.  You could have a situation in which you are trying to sell real property and a problem isn't discovered until your buyer has a title insurance examination performed.

If our seller had an owner policy, we could have asked for indemnification and closed.  This is a reasonable circumstance for indemnification.  The error involved an entity under the same corporate umbrella.  Several years have passed and there has been no collection effort on the Beneficial mortgage.  It is reasonable to presume that Beneficial thought they had been served and were divested.  This is a technical flaw in title but a flaw none the less.  Indemnification coverage from a prior owner policy would have done the trick, but we have no title insurance to fall back on in our transaction, so what do we do?

In this case we offered our buyer - who is also paying cash - an option to allow us to put an exception in their owner coverage.  We did this with a suggestion that they negotiate with the seller for an escrow to be held pending the attorney obtaining acknowledgement of good service from Beneficial.  I don't want to insure over this because I'm not certain that the attorney will be successful.  Our buyer, however, is free to assume the risk.  The buyer decided to go for the escrow. They asked the seller to put $6000 aside for a few months during which the seller's attorney would attempt to get the acknowledgement.  If at the end of the period, the attorney could not, the buyer would get to keep the money.

Our seller stands to lose $6000 if this matter is not resolved.  They are lucky that they have a cash buyer willing to assume the risk.  Too bad the seller did not have title insurance.


Tuesday, March 25, 2014

news from the American Land Title Association - thought you might be interested

On Friday, President Obama signed the Homeowner Flood Insurance Affordability Act of 2014 (H.R. 3370) into law. H.R. 3370 helps ensure that property owners have access to affordable flood insurance and rolls back large flood insurance rate increases seen by many homeowners this year.

Most importantly, the law prevents the Federal Emergency Management Agency (FEMA, which manages the flood insurance program) from increasing premium rates when a property is sold or a new flood map is developed. The legislation also calls for refunds of some of the recent rate increases homeowners have paid. Further, it limits premium increases to 18% annually. To pay for these fixes, the bill requires policyholders to pay a $25 surcharge on residential policies and a $250 surcharge on the premiums for policies covering non-residential properties and non-primary residences.

Friday, March 21, 2014

I know you are getting sick and tired of hearing about Act 93, but I have news.

Examined a title in Somerset County yesterday and we have our first transaction impacted by Act 93 of 2013.  Our seller owns 5 properties in the county that have delinquent taxes owing for 2012 and 2013.

Since the 2013 taxes haven't yet reached the "claim absolute" stage, we aren't concerning ourselves with them.  The 2012 taxes, however, are claims absolute and therefore are "reduced to judgment" and must be paid in order to clear the title for our buyers.

Total additional tab to our sellers?  They are paying roughly $6000 to clear 2012 taxes on the 4 extra properties so that they can convey the 1 property to our insured buyer.

We can mark this one as a win for the municipality since the deal did not fall thru.  The sellers are elderly and own the property free and clear.

Friday, March 14, 2014

another unintended consequence of Act 93 of 2013

As we have discussed in previous posts, PA Act 93 of 2013 creates a system by which municipalities can file personal judgments against property owners who also have in rem delinquent property tax liens. I have been arguing that this new law will set in motion a whole lot of unintended consequences never envisioned by lawmakers.

Here's another one.  HOW DO JUDGMENTS IMPACT FICO SCORES?

Google that and you'll find that personal judgments are found in the FICO process and impact FICO scores, even when the judgment has been paid.  If you have a bad debt and a judgment related to one incident, they both impact the FICO score so theoretically if FICO has the ability to see an in rem property tax lien - possible in some counties - and also sees the Act 93 personal judgment, the property tax obligation has a two stage punch on the property owner's FICO score.

Judgments, whether satisfied or not, impact FICO and sit on a credit report for up to 7 years.

QUESTION:  How will lawmakers react when constituents start calling to say they can't get a new mortgage because Act 93 judgments - even if paid - are sitting out there lowering their credit scores?

Thus far most of my arguments against Act 93 of 2013 have been on behalf of consumers who own more than one property.  This FICO angle is a concern for EVERY property owner who gets into temporary financial difficulty.  Who doesn't know someone who had a bad financial set back beyond their control?  If a consumer gets behind on their property taxes for more than one year in PA, even if they pay the tax in the second year, their FICO credit score moving forward for the next SEVEN years will be lower.

Lower FICO credit scores .... what are the long term consequences?

Act 93 of 2013 was born in good intentions but the more we think about it the worse it looks, eh?

Wednesday, March 12, 2014

Are non-vested spouses obligated as borrowers?

Hi!!! 
I found your email address through a Google search I had made regarding being non-vested on a mortgage and what exactly that means.
 

I was married for the second time in 2011.  At that point, my husband had a house and a mortgage.  Last year, we re-mortgaged.  He stayed with the same bank and took a slightly higher interest rate than what is out there today by doing a re-mortgage for the same $ amount, without any fees and no points.  At that point, he told the bank he was now married.  I co-signed the paperwork and believe I am listed as non-vested on his mortgage.  I'm still not 100% sure what that means for me???  Now he is thinking of doing a totally new re-mortgage with a different bank for a lower interest rate, however, this time he would like to add a line of credit he has to the mortgage and possibly some other debt HE has.  Of course, he wants this to be a joint mortgage, but I have some concerns.  As a quick background, I left my first marriage with debt and finally am back on my feet again.  I don't want to go there again as I am almost 50.  He says this will help both of us because it will give us a lower interest rate and free up money for us.  I'm having difficulty trying to have him see my concerns.  I don't really want to assume additional debt.  Anything you could suggest? 

Thanks, 
M

Good question, M.  

If you are asked to sign the NOTE, you are a "borrower" and thus obligated to repay the debt.  That's the question to ask. Is the lender expecting that you will sign the NOTE?  If the answer is no, then they will have you sign the mortgage and perhaps a couple of other documents as a non-vested spouse just as you did the last time.  These documents simply allow the lender to place a lien on the property that takes priority over your marital rights.

A lender wants first position in the event of the worst case scenario, a foreclosure. They do not want you to have the ability to stop the process.  So, you'll be required to grant permission for the lien but you would not be required to be a "borrower" for this purpose unless your husband needs your income to get the new loan.

Diane

Friday, February 28, 2014

What happens when an old mortgage is insured over?

Hi Ms. Cipa,

We came across your web site about title insurance and it very helpful. We have an urgent situation that we'd appreciate your help with. We are purchasing a property and the title search found a $45,000 mortgage on the property. They are not able to get a letter of indemnity because the mortgage is very old. The title search is handled by a real estate attorney who is an agent for Stewart Title. Should we be concerned and hold off the settlement?

Below is from attorney's office -
There is nowhere to go for a Letter of Indemnity. I spoke with our Underwriter when the title came in. He said that considering this is a 52 year old mortgage which was due and payable 32 years ago, Stewart would insure over it.
I am attaching a copy of the first page of the mortgage where you can see that this mortgage had a 20 year term ending in September of 1982."


Hi, T: When there are old unsatisfied mortgages the title insurer assesses the risk and then decides whether or not to insure. Stewart is willing to insure over it so you don't need indemnification. I offer this advice as a title insurance agent and not an attorney. The way title insurance works is that Stewart insures that if someone comes to you and asks for the money or attempts to foreclose, you'll be covered.

You should know, however, that this question may come up again should you decide to refinance or sell the property. The mortgage will be discovered once again and another decision to insure or not will take place. I personally wouldn't worry about that because the owner coverage purchased from Stewart will provide a basis moving forward for indemnification if your buyer is getting title insurance. If for some reason you get a buyer who is unrealistic about risk and wants a perfect title, they may not buy the property. Those types of folks are rare but we do come across them.

So, I would say, bottom line, if you are getting an owner policy with no exception for this old mortgage, as a title agent, I'd say that's a low risk scenario. Make sure you get a copy of the title insurance commitment to review prior to closing to make certain this item is not shown as an exception. Hope this helps. ;)


Diane

Thursday, February 20, 2014

economic impact of Act 93 - making it harder to sell distressed properties in Pennsylvania

In an effort to raise revenue for municipalities, Pennsylvania lawmakers have passed a law that will have a major impact on how distressed property owners - including REO holders - liquidate their assets.

This law, Act 93 of 2013, was meant to target slumlords and other property owners who have the ability to pay their property taxes but are unwilling to pay.  The law, once fully implemented, will allow in personam judgments to be filed by a municipality - without a court proceeding - against any property owner who has failed to pay taxes and has reached the stage when the tax is considered a claim absolute.  The claim absolute status would normally be reached one year after the tax goes delinquent.

How does Act 93 change tax collection? It removes the barrier of a court proceeding for the approval and filing of an in personam judgment. Since the law sets no further restrictions beyond claim absolute status for selection of property owners, we have to presume that some counties, if not all, will file such judgments against ALL property owners vested in title with such delinquent taxes, including Fannie Mae.

That's right. It is important to note that Act 93 does not distinguish between types of property owners.  Mortgage lenders and other market entities who routinely acquire property through foreclosure are treated in the same manner as all property owners under this new law.

What happens when an in personam judgment is filed against an individual or entity? The judgment automatically attaches to ALL real estate owned by that individual or entity in the county. This means that one property could not be sold without also paying the judgment or judgments.  It's an all for one and one for all method of delinquent tax collection.

This is perfectly fine for targeting so called slumlords and others who have the ability to pay, but what about properties were the owner doesn't have the extra cash or equity?  What about owners who are close to break even or underwater because they are in financial distress? How do they liquidate assets to avoid foreclosure or get out from under a bad situation?

Tying one property to others in these cases, I argue, will cause harm.  If an owner is able to liquidate the asset, the good old fashioned in rem tax lien will cause delinquent taxes to be paid.  If an owner is not capable of covering an additional judgment caused by Act 93, then taxes aren't paid, the property remains distressed and if mortgaged, a candidate for foreclosure.

Let's talk about two techniques used by mortgage lenders and property owners to avoid foreclosure - short sales and deed in lieu.

In the case of a short sale, the property owner negotiates with the mortgage lender to accept less than what is owed on the mortgage loan making the case that the property value is insufficient to meet transaction costs and the unpaid balance on the loan. As part of these negotiations, mortgage lenders typically allow payment of normal closing costs including a real estate commission and delinquent taxes owing on the mortgaged parcel.  It is inconceivable to me that a mortgage lender would also allow the payoff of an Act 93 judgment for taxes owed on a different parcel so in cases where we have a property owner in distress and subjected to Act 93 rules, I would argue that they no longer have a short sale as an option for foreclosure avoidance.

The same is true with deed in lieu in which an owner would negotiate with a mortgage lender to simply take back the property rather than to foreclose.  If there are Act 93 judgments attached, the owner and lender are forced into foreclosure because it is only with good notice in a foreclosure that such judgments can be divested and cleared from the title to this distressed property.  I would argue then, that owners and mortgage lenders faced with Act 93 judgments lose the option of avoiding foreclosure with a deed in lieu.

Act 93 impedes the ability of distressed sellers liquidating assets to avoid foreclosure, thus delaying the payment of delinquent property taxes.  Once unable to avoid foreclosure, the property then is subjected to a lengthy proceeding which if done properly will divest the Act 93 judgments making the entirety of the exercise seem ludicrous if not simply sad.

Now we must take the Act 93 scenario one step further and consider what happens after foreclosure. Once a sheriff has deeded the property to the mortgage lender, now the mortgage lender itself may find this property attached with other properties owned by the mortgage lender in that county by Act 93 judgments. Stay with me because I know this might be confusing. Remember that no restrictions exist as to what kind of entities might be subjected to such judgments. Take Fannie Mae for instance.  In the normal course of business Fannie Mae owns multiple REO properties in every county and many of these properties have delinquent taxes. The same is true for all mortgage lenders.  Each would be a target for Act 93 judgments which would cause at minimum, a need for REO managers to change the way they do business and pay delinquent taxes as they acquire the property rather than when they sell the property. This may be easy for some and not so easy for others but it certainly would be a change. The question is, how big of a change is it and does it make doing business in Pennsylvania more onerous than doing business elsewhere?  How does that impact the business of mortgage lending?

Frankly, it's the long term impact on mortgage lending in Pennsylvania that scares me the most. There are all sorts of possibilities and I'm sure I haven't considered them all but here are a few:

Escrow waivers:  Will mortgage lenders continue to grant waivers so that consumers can pay taxes on their own?

Second homes and investment property: Will mortgage underwriters consider multiple property ownership more risky in Pennsylvania and what will that mean to these types of transactions?

Pre-qualification:  How do mortgage lenders and Realtors change the way they uncover information about buyers and sellers to avoid Act 93 transaction killers?

The bottom line is that Act 93 will fundamentally and negatively change the market mechanism for moving distressed properties in Pennsylvania and in the process have little, if any, positive impact on tax revenue.

Monday, February 17, 2014

economics in one lesson

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
—Henry Hazlitt, Economics in One Lesson


Read more: http://www.fee.org/the_freeman/detail/a-slogan-worth-your-bumper#ixzz2taMvAbaw

Sunday, February 16, 2014

birth of Act 93...I found this on Rep. Parker's web site. It gives insight into the intention of lawmakers.

"Representative Parker will be introducing a bill to provide the City of Philadelphia with additional authority to collect delinquent property taxes.

Philadelphia needs additional tools to effectively collect delinquent property taxes from speculators who own vacant, blighted tax delinquent properties and from investors who purchase and rent properties and fail to pay their property taxes. An analysis of delinquent property taxes shows that many non-residents own ten, twenty or more properties that are tax delinquent, vacant or abandoned. Non-resident investors own rental properties that not only have code violations but are delinquent in paying their property taxes.

Simply putting a lien on the specific property that is delinquent has not been sufficient to cause payments to be made. The City needs the lien to be placed against all of the property owners’ real estate located within the Commonwealth. Then, when the property owner attempts to sell any of his/her property located within the Commonwealth, the lien must be satisfied."

PAR article on Act 93

Confusion regarding a recently signed bill has created some misunderstandings about how it will affect real estate and transactions.
“Act 93, originally House Bill 388 (Parker, D-Philadelphia), only changed how municipalities reduce property tax claims and tax liens to a final judgment in that county,” said PAR legal counsel Brett Woodburn. “As a result, municipalities no longer have to incur the expense of suing delinquent property owners to get a final judgment. This really expands the arsenal of weapons that municipalities have at their disposal to collect delinquent taxes and fees.

http://www.parjustlisted.com/archives/20537/comment-page-1#comment-2867

Be sure to read the comments.  Here is my response to Brett Woodburn's comment:


I agree that the laws enforcing money judgments have not changed. Presuming - as I have been told - that municipalities are on board and filing money judgments against delinquent property owners, what we have is a massive new overlay of money judgments attaching to real property.  It does not take an execution of a money judgment to make the judgment attach to real property.  It automatically attaches.  While these liens are attached to parcels, they cannot be refinanced or conveyed with good title until the liens are satisfied.  The unintended impact of Act 93 is to make distressed properties harder to sell, and in some cases impossible to sell.

The unintended consequence of allowing municipalities to forego the thought process involved in suing for final judgment is to take out of the mix review by the court and an opportunity for defense by the property owner.  The old system might have been costly and time consuming for municipalities, however, review by a competent attorney prior to filing suit would help municipalities consider which individual collection circumstances would be helped by the filing of such money judgments and which would be impeded.

Thursday, February 13, 2014

PAR, MBA & PLTA members...... We need to fight for a repeal of PA Act 93 of 2013.

I come from a family of Realtors. My mother, now retired, was a broker. I cut my teeth in real estate. In 1973 one of my 3 jobs was working as a secretary in a real estate office. I eventually got my license, became a Realtor, and after selling for awhile I took a position as a loan originator in 1978.  For 16 years I made mortgage lending my career, got involved in the MBA and eventually had the privilege of serving as president of our local MBA. When I transitioned into title insurance, I joined ALTA and PLTA.

Through these years I have had a chance to watch these trade associations in action and how they choose what to champion, fight or accept from state and federal legislators. Normally trade associations fight on behalf of their members.

I am having a hard time understanding why PAR, MBA, and PLTA did not fight against passage of a law that will take a certain percentage of transactions out of the hands of their membership who frankly need every transaction these days to make ends meet.

Even if you did not initially recognize the impact this law would have on those of us who deal regularly with short sales, distressed properties, REO, second home buyers and investment property buyers, now you do know.  Why aren't you fighting for a repeal?

Every property owner, potential buyer, Realtor, lender, and title agent who deals in these properties will be impacted by this new law in a negative way. Local governments will be impacted when they are faced with properties that can't be sold because of the addition of new liens as judgments in personam overlay and crisscross over multiple parcels.  What happens to properties that can't be sold?  Lots of them go derelict and become blights in neighbors causing all sorts of problems for local officials. This is not good.

I understand PLTA is now focused on pushing for an amendment to clarify the process of lien discovery.  Well, PLTA seems to have given up and granted to the state the ability to take money out of the hands of members who count on PLTA to protect them from government actions that destroy their business.

If these trade associations do not step up to the plate to fight for their members against a law that is ill conceived, who will?



PAR, MBA and PLTA understand real estate more than any other organizations in this Commonwealth. You need to lead this fight.  Please fight for repeal.

Tuesday, February 11, 2014

ain't lawmaking fascinating?

Had a chat with the legal counsel behind the drafting of legislation creating a new type of judgment for the collection of delinquent property taxes.  Would it surprise you to know that she did not understand that judgments attach to real estate?

I admit to being pretty darned surprised.

Monday, February 10, 2014

Delinquent taxes on one property creates lien on all of owners' other properties in that county

Under a new Pennsylvania law that will affect many real estate transactions, property owners who get behind on their taxes on one property will have a lien slapped against all their other properties in that county.
I admit to being blindsided by this new law. I can’t comprehend how it was passed without being blocked by Realtors, mortgage lenders and title insurers.
I can only imagine that they didn’t see it coming, or couldn’t conceive that the legislators would give it credence. Maybe they didn’t understand the full complexity of its unintended consequences.
- See more at: http://www.inman.com/2014/02/10/new-pennsylvania-law-will-affect-many-real-estate-transactions/#sthash.1v0LfDyz.dpuf

Tuesday, January 28, 2014

A wants to know why she should have to pay a tax that the title company missed.

Diane,

Thank you for answering this email in advance.

I closed on my home 10-30-2013.  A clean Title was transferred.  I am now getting contacted by the title company stating I owe some property taxes.   The property taxes in question is from a sewer and recycling bill that was not paid in July (a bill I did not receive because I was living out of state) that automatically was applied to property taxes at the end of the year.  
Here is my issue; On the HUD-1 Settlement statement, #404 there is a credit for 2 months November and December (The bill comes out once a year in July).  The title company knew about the taxes owed, why did they not say anything about it at the time of closing?  Is it not the Title Company's responsibility to exercise Due Diligence?  It is not the title company's responsibility to investigate into the property and disclose what they find?  They found it, just didn't disclose it. I, the seller, should not be held liable for non-disclosure of information that was not discovered in the process of that investigation.  The  finding of the unpaid portion of the property taxes was not addressed at the time of  closing therefore would not be my responsibility.  Isn't that why we pay a title company and why we buy Title insurance?  Since the title was transferred free and clear at the time of closing The title company  is liable for anything that comes up Correct?   I, in no way, shape or form knew anything about this until January 4th 2014.  And the only reason I am being contacted is because the title company doesn't want to pay for their error.    If the research was done correctly this would have been noticed.  

A

Hi, A:  Thanks for letting me help you with this issue.  You are expressing the frustration that many consumers share when confronted with an error discovered after closing.

Let's start with the basic function of title insurance.  The insurance is for the benefit of the insured.  In the case of most purchase transactions the insured are the buyer - new owner - and their mortgage lender.  The insurance is not issued for the benefit of the seller.

Human error is one of the most common sources of title insurance claims.  Mistakes can happen at any stage of a transaction.  There may be mistakes at the courthouse, in the pre-closing examination, at closing or after closing.  The job of the title insurer once an error is discovered is to rectify it under the terms of the title insurance policy so that the "insured" parties are not injured.

The fact that the taxes were missed in the closing process does not negate the fact that you owe the tax.  It's a bit like a clerk giving you the wrong change.  You can't say gotcha and keep the extra any more than you would expect a clerk who shorted you to do the same back to you.  If the title insurer had made an error by charging you too much tax, you'd expect a refund, right?

So, here's how this is playing out.  The title insurer is making a demand to you to pay the taxes that you rightfully owe.  If you fail to pay the tax, they will pay it so that the insured are protected and then they will go after you in court.  In the end you will pay the tax.  Paying it now is the least expensive way to handle it. 

If you are in a bind and don't have the money, ask them if they will accept payments.  Some will, some won't.

I hope that answered the question.  Best wishes and I do understand your frustration.

Diane

Thursday, January 16, 2014

M wants to know if there is any way to get out of an escrow shortage caused by oversight in refinance.

Diane: 

We refinanced in August. The bank just sent us the dreaded escrow shortage letter. I called the company that handled our refinance and we tracked the error. The title company (so the guy says) only put our school tax on the paperwork. Then the refinance company missed that error and it all went through. The full tax amounts were all correct on all paperwork until title company missed the other taxes and sent paperwork back to company, then the company ALSO missed it. I feel that they are both at fault. 

      Fast forward to right now and by February 1st we either pay $1893 and our payment will still go up $100 (I understand that it must go up because they didnt factor all of the taxes.) or our payments go back to just $5 short of what they were before the refinance. This is a rental property so we refinanced to get a smaller payment and hope to sell within a year. (We are military and renting to prior military and we have an assumable VA loan). So, my question is, is there anything we can do besides scream from mountain tops which title company and refinance company not to use?

     The biggest issue I have is that we paid the title company $2,000 and they didnt do their job properly. The refinance company made money off of us as well and they also didnt find the error and processed the loan with incorrect numbers and we are the ones now paying for it. Do we have any recourse?

M

Good morning, M:

Here's the situation.  As the owner of the property you have personal knowledge of what the taxes are and should have been on the paperwork.  There are three parties responsible for reviewing the documents used at closing - the title agent, the lender, and the borrower.  Sometimes all make a mistake and miss an error.  It is always unfortunate but the taxing authority won't reduce the tax liability and you are the one who must pay it.

You could consult an attorney to see if there is any other option because you are military but I don't think in this case there is because the payments would have been higher from the initial estimates you had from the lender.  In any event, please check with an attorney, just in case.

Sorry this happened but I do believe the dreaded shortage is real and must be resolved.  Best wishes.

Diane

Wednesday, January 15, 2014

degradation of legal descriptions

Oddly, we had 2 title examinations last month in which the current deed contained a crappy legal description.  In both cases we looked to the prior deeds in the chain to see if we could restore clarity and found some quirks.

In one case we found that a perfectly good metes and bounds description which had moved forward from an old plan.  Wondering why the last deed was prepped with such a crappy description, we found our clue in the tax assessment.  At some point the tax assessor had changed the shape of the lot by removing from the assessment a portion of land that abutted a river and by adding land that was not a part of the lot as described on the plan.  This extra land in a hillside next to a curve in a road and the developer didn't convey it to anyone.  We think the person who prepped the deed got confused with the tax map and decided to make the description vague enough to cover the extra land that the people thought they owned.  We discussed the description with the attorney representing the seller and said we would only insure the lot as it had been described in the plan as we could insure ownership based upon the 60 year chain. We wanted that description restored in the deed.  He agreed to restore the old description and per the buyer's request added language in which the seller quit claimed any rights to the hillside land.

In the other case, there was no description, just a reference to a deed that was older than 60 years.  We asked the abstractor to go back to the old deed so we could recite that description and guess what?  When she went back beyond the 60 year period to pull that old deed she found an outsale!  One of the three lots our seller was conveying had been sold back in 1945.  The seller thankfully has owner title insurance and has opened a claim.  The seller has an old unrecorded survey showing that no improvements are on this third lot so the buyer decided to move forward with a purchase of the two lots and a possible future acquisition of the third if they fix the title.  Looks like a quiet title situation as the folks who bought the property in 1945 seem to have disappeared. 

Thursday, January 09, 2014

Will FICO scoring incorporate social media?



The practice is being used largely by startups that grant smaller loans, but the concept seems likely to spread. Fair IsaacCorp., which provides the credit scoring used in more than 90% of lenders decisions, says it is weighing possibilities for incorporating social media.

"There could come a time where certain social media could be predictive and we're looking at that, but it isn't yet," said Anthony Sprauve, senior consumer-credit specialist at FICO.




http://online.wsj.com/news/articles/SB10001424052702304773104579266423512930050

Tuesday, December 31, 2013

Nisha wonders if a post closing request for proration of HOA fees is out of line.

Hi Diane,

I came across your blog while finding any answer for my recent issue.

I closed on my home on Jun 24, 2013 as buyer. 

As per the listing agent of the seller, she told us that seller has paid HOA due in advance for 2013 and we don't need to pay for this year. This was our verbal understanding.

Same reflected in HUD statement. 

But now almost after 5-6 months, we got an email from seller asking for us to prorate this amount. Can you please advise us. They are saying that they did not notice this during closing. They are also saying that they will go to lower court if we did not pay.



Thanks & regards,

Nisha

Hi, Nisha:  It is customary to prorate the HOA fee but not required.  Take a look at your sales contract.  Typically the contract will include language in which the parties agree to prorate taxes and items such as the HOA fee.  

This is one of those unfortunate situations in which everyone would have preferred it to be done correctly at closing but the error isn't discovered until later.  If you are unable to pay the seller the prorated amount, offer to make payments.  Most courts would see this as an act of good faith especially if the title agent failed to do an agreed proration at closing.

If you truly believe you should not have to pay the proration, ask the seller to show you where in the sales contract a proration agreement was outlined.

Thanks for checking in.  Good luck and Happy New Year!

Diane

Friday, December 13, 2013

We stand our ground and we do business with lenders and real estate brokers who want quality of service.

Quality of service means that we all work together to maintain integrity of standards to protect consumers, the mortgage lender and the title insurance underwriter.

This sometimes does mean that we choose to not do business with providers who have a different idea.

About a month ago we received a title order from a mortgage broker that we thought had gone out of business.  It was a sub-prime shop known to bend rules.  I was leery but we agreed that they might have cleaned up their act and that we would watch the transaction closely so we processed the order.

Turns out the transaction is a FHA mortgage and the mortgage broker - with the help of an employee of the mortgage lender - were coaching the buyer on how to avoid the FHA prohibition against using funds to acquire a separate but adjoining property which is also a commercial property. They expected us to close a concurrent transaction for the adjoining property being sold to the buyer by the same seller for $1.

NOT GOING TO HAPPEN.  We explained the hows and whys of mortgage fraud to the consumer, real estate agent and mortgage broker. This transaction could only take place if the mortgage lender put in writing that they were aware of the concurrent transaction and approved of it.  The mortgage broker, of course, said the mortgage lender "didn't want to know" about the concurrent transaction so that would not happen.  I said that we would refuse to close and insure the deal.

Interestingly when the real estate agent and I discussed the details of the structuring of the transaction to this point, the real estate agent said she was conferring with her broker who told her to make certain that the mortgage lender was approving everything.  What they hadn't considered was a rogue employee. They thought they had lender approval for the concurrent transaction and were shocked when told the lender "didn't want to know" about it and thus would not actually approve the transaction as is was truly structured.

I am sorry to know that there are employees on the front lines of FHA lending operations who don't get the reality of compliance with the FHA guidelines.  It's not okay to "not know" about something that you clearly know about. It's not okay to direct people to handle things "off HUD" or in a separate transaction. It's not okay to hide material facts from your employer or the mortgage underwriter.  You put your whole organization and everyone's jobs at risk because the FHA can shut you down.

We won't be accepting any new title orders from that mortgage broker.  We only deal with honest companies, not fraudsters.