query: relying on mortgage payoff letter Pennsylvania

Well, give yourself a fighting chance.

1. When possible, request payoffs in writing - including the recording information.
2. Compare the information on the payoff letter to the title file. Make sure the payoff reasonably matches the mortgage on record and is for the correct property.
3. Read the payoff letter and adhere to its terms.

By doing those three things you give yourself a fighting chance of getting help should the mortgage lender attempt to change the terms after closing. If a payoff has been refused and you have diligently followed all instructions, work your way up the chain of command until you get a supervisor who will work with you. Though the lender may not honor the payoff letter, they may at least assist you in resolution.

If you can't find a solution within 24 hours contact your title underwriter without delay. They will review the matter and advise how to best handle it.

Do you like math?

Well, if you like math and you'd like to know how the heck lenders come up with the AGGREGATE ADJUSTMENT in the tax and insurance section of the settlement statement, grab a piece of paper and pull up a chair.

In my neck of the woods we have two annual payments for property taxes. In most areas we pay local & county taxes in the spring and school taxes in late summer. You can use your own property taxes figures or just follow along with mine. We'll also factor in hazard insurance.

Assumptions:
$800 local & county tax next due at discount 3-30-08
$2000 school tax next due at discount 8-30-07
$450 hazard insurance next due 4-30-08
We are calculating escrow for a purchase transaction closing 4-30-07.
The first monthly payment for the mortgage will start 6-1-07.

Count the number of mortgage payments you will make between closing and the due date of each item. [It's okay to use your fingers. I do.] Ok, we have 10 for local & county tax, 3 for school tax, and 11 for hazard insurance.

The mortgage lender needs a full 12 monthly deposits into the escrow account to have sufficient funds on hand to pay the bill, so how many months do we need to collect at closing to make certain the lender has 12 months when the bill is due? We'll need to collect 2 for local & county tax, 9 for school tax, and 1 for hazard insurance. so, if we are preparing a HUD-1 those are the number of months we will collect in the escrow section.

To calculate the aggregate adjustment we've got to lay out the initial escrow account statement. We'll start by figuring out how much we collected on the HUD-1 and call that our starting deposit to escrow. Divide each tax and insurance figure by 12 then multiply it by the number of months we are collecting. If you're with me so far, we have 133.34 for local & county tax, 1500.03 for school tax, and 37.50 for hazard, giving us a starting deposit total of 1670.87.

Next we lay out proposed escrow activity for the next twelve months starting with the first mortgage payment. So, on your piece of paper write out a column with the first twelve months of mortgage payments starting with June.

The next column is deposits into the escrow account - each one is 1/12 of the taxes and insurance - or in our case, 270.84. [I'd really like you to write all of this out. Yes, I know computers do it for us now, but writing it out once in your life will really help you to understand how the escrow account works.]

The third column is expected payments out of escrow. We will have three payments, 2 for taxes and 1 for hazard insurance. Find the appropriate month and put the payment on that line.

The fourth and final column will have the running balance of the account. It will start one line up from our other columns with the starting deposit of 1670.87. These are your running totals:

1670.87 start
1941.71June
2212.48 July
483.32 August
754.16 September
1025.00 October
1295.84 November
1566.68 December
1837.52 January
2108.036 February
1579.20 March
1400.04April
1670.88 May

Take the lowest figure in this column and that's your aggregate adjustment. In this case it would be 483.32, which by putting a credit on the HUD-1 in that amount would cause the escrow account to zero out in August.

The lender has the right to cushion the escrow account by up to two months and most lenders do, so in reality, the aggregate would be 483.32 minus 541.66, or -58.34.

HA! Now with MW's revised figures we have a classic conundrum. Since the aggregate adjustment is really a credit on the HUD, showing up as a negative figure in a list of costs, theoretically we could stop here and our negative 58.34 would switch to a positive aggregate of 58.34. There is nothing wrong with a positive aggregate adjustment under the regulations. We have only bumped up the escrow to cover the two month cushion. BUT, in real life a positive aggregate adjustment just freaks out all lenders. There is a pervasive misconception that a positive aggregate adjustment is just plain wrong so to compensate for the misconception, you have to go back to the initial starting balances and jack them up until you get the aggregate into the negative. At this point, you could bump up any of the number of months as much as you want and recalculate the entire grid. The aggregate will adjust itself accordingly. Most lenders will be happy with any aggregate that is negative on the HUD.

The extra 541.66 left in the escrow mix protects lender and borrower from shortages when taxes and insurance go up, as they surely will over the life of the loan.

I hope this helps and I hope my math is okay. I was making it up as we went along using a really tiny calculator. It's not hard stuff. It's not rocket science, but if you see a mistake, PLEASE let me know. Thanks! [See comment. MW did put out an error which has now been fixed.]

Just one more thing. The interesting thing about escrow is that the formula will always balance out the actual starting deposit provided the dates and the underlying tax and insurance figures are correct. If you increase the number of months on the HUD, the aggregate will go up to compensate. It's a simple seesaw.

In the case of my positive aggregate that would freak out lenders, the actual cash going into the escrow would have been 1729.21. If I bumped up the HUD by adding another month to all the categories and ran the formula again, I would get a negative aggregate but the actual cash going into escrow would still be 1729.21.

This is why it's a misconception that the aggregate must always be negative. It will be negative if you have no cushion but if you elect to retain a cushion it is entirely possible and correct to have a positive aggregate adjustment.

That being said, just make it negative or all your lenders will freak. ;)

what is a townhouse?

Anyone who has ever worked with me has gone through this training session over and over again. I guarantee that they are chuckling if they are reading this post.

Why do we go over this subject so often? Because there's some sort of built-in automatic misconception that's really hard to cure. People make assumptions about the form of ownership based on their past experience with townhouses. That kind of an assumption may cause you to go down the wrong path when setting up a title file.

A townshouse is nothing more than an attached dwelling. It's an architectural style and the style does not denote any form of ownership.

When I ask the question, what's a townshouse, I am really leading into a discussion about condominiums and planned unit developments (PUDs).

So, picture a row of five beautiful townshouses. What different forms of ownership can we consider? It may simply be a single family dwelling with no connection in ownership other than party wall rights or there may be a more complex connection requiring further documentation.

First, determine if the land underneath the home is being sold as a lot. If you are buying a specific lot, even if the lot only sits under the walls of the home, you are NOT buying a condominium. The townshouse is a single family attached dwelling that may or may not sit in a PUD.

How do we determine if the plan is a PUD? Is there a MANDATORY membership in a homeowner association (HOA)? If yes, it's a PUD. If no, it's not a PUD.

A townshouse may be a condominium. If so, the deed will identify the home as a unit in a plan that has been declared a condominium. The declaration will be on record. The land is owned jointly by the condominium association and the unit owner has a percentage ownship in the land and other common elements.

So, a townshouse is simply an architectural style and though knowing that is a red flag prompting us to dig deeper, the fact that it's a townhouse alone does not determine the form of ownership.

[As an aside, beware the hybrid. Some attorneys failing to understand the difference between a condominium and PUD prepare deeds that lead you to believe you are working with a condo when in fact it's a PUD and visa versa.]

query: can a PA notary notarize a New Jersey POA

Yes, if it is signed and acknowledged in PA.

TIRBOP Polices and Rates, continued

5.6 MORTGAGE LOANS

A. When a loan policy is to be issued within four years of the date of the previously insured mortgage or fee interest, and the premises to be insured are identical to, or part of, the real property previously insured, and there has been no change in the fee simple ownership, the Charge for the loan policy shall be calculated in accordance with subparagraph B below. Evidence of previous insurance in accordance with the provisions of Section 2.8 of this Manual must be considered in order to apply this Charge. Insurer shall comply with the written notice provisions of Section 2.9.

The provisions of this Section are not applicable to the Approved Attorney Procedure.

B. The Charge for the loan policy shall be calculated in accordance with the following applicable rates:

Up to 2 years.....................................................................70% of reissue rate

Over 2 years to 4 years...................................................80% of reissue rate

query: does a foreclosure divest a mechanics lien

In my opinion, yes, so long as good service/notice was given to the lien holder.

query: will insure anything because we won't pay anyway title insurance

Well, this goes down as the most disturbing query received thus far by Title Insurance Talk. It's especially disturbing because it was posted by an employee at a major underwriter who must have been having a bad day.

I hope you feel better and take heart that I have worked with your company over the years and yes, you do pay claims. I was quite impressed by your claims department when I had those two outsale issues a few years ago.

So, it sure doesn't seem to be a company issue. Maybe there's one too tough staff member that needs re-training. You should discuss this with upper management.

Title underwriters and their willingness to pay claims are under a microscope these days. It would be foolish do reject claims that have merit.

query: when preparing a foreclosure law suit an attorney will review the title for what purpose

Well, I'm not an attorney but a I play one on TV.....hmmmm, sorry, that's not even close to being funny........ I meant to say ....

as a title agent, I review lots of foreclosure actions. I look at foreclosures in the chain to determine if they were done properly, all liens divested, etc., so I have a reasonable handle on what an attorney would look for in the title review. As ususal, comments from our attorney readers are most welcome.

First, the attorney must confirm that the mortgagors, the borrowers, are the vested owners. Right from the get go, sometimes the search will reveal that the mortgage is not a valid lien. If that happens, the mortgage lender will make a claim on the loan title policy. If the lien isn't valid, the attorney can't proceed to foreclosure.

We once had a transaction like that. I had a heart attack when I got the request from the title company for the file. My review showed that we had searched and mortgaged the correct property, however, my staff skipped one very critical step..that's when I had a big sinking feeling......our staff examiner neglected to check the legal description in the deed prepared by the seller's attorney. He checked everything else on that document. I could see his checkmarks on the scanned faxed copy, but there was no checkmark next to the lot number.

[Some folks get peeved when we ask for the proposed deed ahead of time. We require that an on-staff title agent do the review. Obviously, when I saw the oversight on this transaction, we had a "training opportunity" in the office.]

Thankfully, in this case, the seller owned both lots and was willing to sign a corrective deed which the title company promptly recorded, allowing the foreclosing attorney to proceed with the action.

OK, now moving on, if the mortgage is deemed valid, the foreclosing attorney is looking for other liens and encumbrances. The attorney must be certain that all parties who may have an interest are served good notice of the foreclosure action. If any one of the parties who may have an interest are not served, their interest will not be divested and that lien will stay with the property and survive the foreclosure.

Now, other than the occupants, and vested owners, who will the attorney want to serve? Well, let's start with any subordinate mortgages. Those lenders must be notified and given an opportunity to protect their interest.

We also have government agencies. If the owner of the property has any outstanding lien with the federal government, the USA must be listed as a defendant in the foreclosure suit.

In Pennsylvania, we have inheritance taxes to consider, so if the attorney finds an estate in the chain for which inheritance taxes may still be owing, the PA Department of Revenue must be notified.

Then, you have the types of liens that won't be divested by the foreclosure action. These typically include property taxes and municipal liens. The attorney must identify these liens as the lender must have a complete understanding of the equity or lack thereof in the real estate before moving forward.

There are many potential parties and issues that must be considered. These are just a few. That's why it's so very important that the attorney selected by the mortgage lender is one who specializes in foreclosure. Even the most knowledgable and careful attorney will make mistakes, but you reduce the number of mistakes by using an expert.

I hope that helps.

query: do you need a cashiers check at the time of closing

You need to take "good funds" to the closing.

A cashiers check is the most common form of good funds, but you can also make arrangements to wire your funds to the title agent. If you plan to wire, try to have the funds there a day ahead of time to avoid complications.

There are options for good funds. You can use a money order, official bank check, or teller check. Title agents who wish to avoid risk will not take cash or certifed checks.

If you are selling a home and buying a home at the same time, have a chat with the title agent handling the sale. Make certain they will provide good funds. They are required to do so, however, some will argue the point. Expect to pay a small fee for the wire or cashiers check.

Oh, and BTW, make the cashiers check payable to the title agent or to yourself. Do NOT make it payable to the Realtor or the mortgage lender. No matter how many times we remind folks, we still have to send some back to the bank to have their check reissued.

We're closing our first Choose & Save Program transaction today.

The TCS Choose & Save Program is our answer to the new competitive marketplace. We are giving consumers the ability to close without paying a signing agent, courier, settlement, or document preparation fees.

query: if I pay for title insurance policy can I choose closing

The answer is probably.

If you are paying cash, of course you may choose.

If you are getting a mortgage, the lender has the right to choose the closer except in the case of an affiliation. If the lender has an interest/affiliated business relationship in the the closing company, they may not require use. You have the right to choose the title insurance company under either circumstance.

Now if you are being told by a seller that you may not choose the closer and you are paying for title insurance, tell them to mind their own business.

buying property at sheriff's sale

Dave Wirsching in his Clearing Title blog raised this issue today. The message is a good one. Please don't rush in and be a fool. Get expert advice.

If you are wholly inexperienced, you may wish to hire and attorney to advise and walk you through the entire process. If not, at the very least, have a title agent examine title and issue a title insurance commitment.

The rules vary in each state, so be careful.

I had a buyer of owner title insurance a few years ago who had just moved up from Florida and purchased a few properties here in Cambria County through the tax claim bureau tax sales. He was shocked and dismayed to find that the sales only covered the unpaid taxes and that he had purchased the properties subject to liens and encumbrances. He had presumed the sales would be judicial sales in which the title would be cleared. He was mistaken.

Purchasers who choose to go to a sheriff's sale may make a similar misjudgment.

So, I repeat. I recommend you hire an attorney.

We have a procedure in our office for consumers who wish to have the property vetted for title insurance before they attend the sheriff's sale. You must move quickly because we need time - ususally 7 to 10 days - to fully examine the title.

We will search title, review the foreclosure or tax sale process thus far, and report back to you in the form of a title commitment any and all items that title insurance will not cover. That means we will report to you liens we have found that will survive the foreclosure or tax sale.

We will also report any contingencies that must be cleared before the title insurance can be issued, redemption periods, for instance.

So, you will have in hand a commitment to insure title that is not the usual sort. It will have plenty of information that you and your attorney should review before you go to the sale.

We will issue an invoice to cover the costs of search, examination, and lien letters. The title insurance commitment is good for six months. If you are the successful purchaser of the property, with the new deed in hand, we will do a final bringdown, record the deed, then issue an owner policy. You'll have to pay the balance of the premium and any costs to update title, if applicable.

So, don't be a fool. Be very careful and get the advice of a good real estate attorney and the expertise of a title agent.

TIRBOP Polices and Rates, continued

5.5 MORTGAGE TITLE INSURANCE

A. A loan policy cannot be issued in an amount less than the full principal debt secured by real property unless it is issued in an amount equal to the fair market value of the real property securing the debt. A policy may be issued in an amount in excess of the debt where agreed to by the Insurer and the Insured.

B. A loan policy insuring a mortgage on a loan which provides for negative amortization may not be issued in an amount less than the maximum principal amount (including interest which may be added to principal) which may be secured by such mortgage.

C. When a loan policy insures a mortgage of real property, personal property and personal property affixed to the realty, the Charge shall be based on the amount of the mortgage loan attributable to real property and personal property affixed to the realty as certified by the mortgagee.

D. Where a loan policy and owner's policy are issued simultaneously on the same property, they shall be treated as a single policy and the Charge shall be based on the policy with the highest limits.

E. When separate loan policies are issued simultaneously, insuring two or more mortgages on the same property, there shall be one Charge for all policies which shall be determined by the aggregate liability of the policies.

F. When more than one loan policy is issued simultaneously to insure multiple properties securing a single loan, the Charge for these policies shall be aggregated and based upon the amount of the loan.

query: insurance I want a human being

I hear ya.

Our last phone system upgrade included an auto-attendant. We were real excited because now customers could more efficiently get to individuals by using extension numbers. Bypassing a chatty, though really nice, receptionist seemed like a good idea.

We included an option for new customers to get a human and so we thought we had our bases covered.

After some time, I noticed the level of frustration in the voices of customers. This was especially due to our having THREE DIANES in the office. YOI!

Finally, I threw in the towel and turned the auto-attendant off during the business day. Almost everyone appreciated the move.

We have e-mail for those who want to be super efficient and not chat. For everybody else, we have real live human beings answering the phone, including me. Guess what? I like it.

TIRBOP Polices and Rates, continued

5.4 SUBDIVISION OR CONDOMINIUM REGIMES

When title insurance has been issued to an operative builder and within 10 years of the issuance of the title insurance policy, the operative builder sells completed units out of the subdivision, planned unit development, cooperative or condominium, the Charge shall be 90% of the reissue rate. Evidence of previous insurance in accordance with the provisions of Section 2.8 of this Manual must be considered in order to apply this Charge. Insurer shall comply with the written notice provisions of Section 2.9.

For the purpose of this Section, an "operative builder" shall mean one who assembles and sells:

(a) group of at least five units on a single tract or series of contiguous tracts;
(b) or a group of at least five units developed pursuant to the Pennsylvania Uniform Condominium Act or pursuant to a cooperative regime.

The provisions of this Section are not applicable to the Approved Attorney Procedure.

TIRBOP Polices and Rates, continued

5.3 REISSUE RATE

A purchaser of a title insurance policy shall be entitled to the reissue rate if the real property to be insured is identical to, or is part of, real property insured 10 years immediately prior to the date the insured transaction closes. Evidence of previous insurance in accordance with the provisions of Section 2.8 of this Manual must be considered in order to apply the reissue rate. Insurer shall comply with the written notice provisions of Section 2.9.

The Reissue Rate is set forth in Section 5.50 of this Manual.

The provisions of this Section are not applicable to the Approved Attorney Procedure.

query: do I need the owner of the property to give a signature if I do a quiet title

Huh? Well, correct me if I am wrong but I believe you have to be the owner of the property to start a quiet title action. Any attorneys out there who disagree, please comment.

An action to quiet title is a tool used by homeowners to eliminate interests of parties who cannot be found. How do you do it? Well, you hire an attorney - preferrably one who practices real estate law. The attorney will review the matter at hand and work with you to identify parties whose interests must be extinguished, then put the matter before a judge. The judge will order that advertisements be placed in publications likely to be seen by said interested parties. If no one comes forward to claim their interest, the judge would order the matter settled and thus quiet title.

If you have an issue requiring a quiet title action to obtain title insurance, the title insurer will determine whether or not you may proceed and close with an escrow guaranteeing the quiet title action OR you have to postpone closing pending completion. Each case is unique and the decision whether or not to close will largely depend on the severity of the problem and if it's impacting actual core title or simply certain rights.

How long does a quiet title action take? That really depands on the attorney handling the case. A diligent attorney moving the case along as quickly as possible will have it done in a matter of weeks. On the other hand we've seen attorneys put the case on the back burner and let it go unattended for months or years before a disgruntled homeowner goes crazy. As with anything else, choose your attorney wisely and you'll be in good hands.

query: seller liable for silent second mortgage fraud

Yes. All parties who collude to defraud the first mortgage lender are liable. Never believe anyone who says it's not fraud. Never believe anyone who tells you everyone does it.

If you are a seller providing a second mortgage for the buyer, I suggest you get written verification from the buyer's mortgage lender that they are aware of the second mortgage and that they have approved of it. You may be able to simply review the buyer's mortgage commitment letter. The approval of the second should be acknowledged in the letter. Also, make sure the HUD-1 Settlement Statement discloses the mortgage and its recording fee.

If someone tells you it's none of your business, tell them to jump in a lake.

query: is title insurance necessary on brand new home

Yes. Remember the home is simply an improvement on the land. You are purchasing the land plus any improvements. The land is not "brand new", right? So, you are having the ownership and marketability of the land examined and insured.

You may be eligible for a reduced premium for new construction. Be sure to ask. In Pennsylvania we have an Operative Builder Rate. Homebuyers of builders who qualify pay less for their coverage.

query: can you get owners title insurance after having lenders title insurance

Yes. You can always buy an owner policy. It's cheaper to buy it at the same time as a loan policy to avoid additional search charges. Each time a policy is issued it must be supported by an up to date title search.

query: must unreleased mortgages be listed in the title commitment

Yes.

Here's another good topic. APR

I found this post in a Google Alert this morning. I understand the frustration of many when they attempt to explain the APR. I really think my comfort level with the form comes from having to manually prepare them for years. Now computers do the thinking for everybody and you miss the chance to really learn the process and understand the hows and whys of disclosures.

Whether its the TIL - Truth in Lending form or the initial escrow account statement, I had to manually prepare both in my day. All of my closers must be able to dissect these forms. I make sure each closer has calculated the aggregate adjustment manually so they fully understand what the figures really mean on the HUD.

If the closer doesn't understand the APR or escrows, how can we expect the consumer to understand them??

I should probably start a school for industry professionals called "Here's how old fogies used to do it." LOL Truly - I'm not kidding. Now that software does everything, very few really know WHAT its doing or why. ;)

Anyway, back to APRs. Here's the comment I posted:

"Great topic. I come from the old school when we had to calculate the APR ourselves. For years I had a cheat sheet label on the back of my HP calculator.

Truth in Lending is not a bad form and it’s really not confusing. The APR is simply the cost of borrowing when you include the interest AND any required finance charges including those paid at closing and those paid during the life of the loan, such as mortgage insurance.

The definitions are pretty clear for which fees are considered finance charges. The differences in interpretations between lenders are usually for insignificant fees such as courier charges. I have yet to meet a lender who doesn’t understand the big ticket items, so unless you have an absolutely unscrupulous lender with intent to deceive a borrower, the TIL is a valid method of comparison shopping.

Even with an ARM, it’s a good comparison. The APR for an ARM assumes that the index will not change at all moving forward. It’s a really good way to compare different ARM products. It allows you to compare margins and rate caps in a way that is fairly easy to understand.

I recommend that all consumers ask for this information and consider it before making their final choice of loan programs or lenders.

Thank you for raising such a good topic."

query: triple reconciliation trust account

Excellent query. I hadn't thought about discussing the process of reconcilation of the trust or escrow account. Remember, the money in this type of account is "other people's" money. It's a great responsibility. Triple reconciliation is the only way to be sure the funds all match up to individual transactions AND bank records.

First, let's just remind everyone that double reconciliation is what you do for any bank account reconciliation. Just follow the guidelines you receive from your bank if you're not sure how to do it. You know, comparing your register balance against the bank statement and accounting for any uncleared deposits or checks. All accounting software will guide you through this most critical step.

Once your trust or escrow account is reconciled to the bank account, you can do the third step, checking to make sure each transaction is tied to the money and there are no loose ends. Each title transaction should balance to zero. Any shortages must be covered and any balances accounted for.

I use Quicken for all my escrow accounts. After the bank reconciliation, we run an escrow trial balance. In Quicken each title filename is the "class". We run a summary transaction report and subtotal each class. Be sure the date parameters are set to include the earliest date.

You want each file to equal zero. That means checks and deposits balance and there is no shortage or overage in the title file. In Quicken you will see at the end of the report a subtotal for any "unclassed" transactions. Check these first and make certain each transaction is tied to its file or class.

Once you have every transaction tied to a file, verify the overages against real escrow balances. If you are holding $1000 for taxes on a title file, you should see $1000 instead of zero for that file. Any unaccounted overages should be resolved. Before you refund money to the consumer, make certain it's not there for some other reason. Once you have issued a refund check, it's hard to ask for the money back. When you are certain the money is not needed, refund the excess to whomever it belongs.

Shortages must be dealt with immediately. Identify the error, cover the shortage with funds from your operating account, then send an invoice to whoever owes you money.

You must make sure you check the bank reconcilation report for uncleared checks and deposits. Resolve anything more than 120 days old. Pay special attention to uncleared payoff checks, tax payments and recorder checks.

Good post closing procedures for confirmation of funding and issuance of any checks will help enormously.

If you've never done a triple reconcilation, the first time will seem like a huge job. Do it yourself. Only someone totally familiar with office procedures and title can understand the components. Once you have your account in order, make time to resolve the account each month. Even with good procedures in place you will be surprised how many problems will surface. Better to fix them sooner than later.

query: title company settlement statement mistake error

Here's a good one. Who is responsible when there is an error on the HUD-1 Settlement Statement? There's no real rule here, but I'll give you my opinion. Whoever was responsible for paying the item in question in the first place should take care of it when the error is discovered.

I believe each party to the transaction bears responsibility for review and approval of the HUD-1 prior to closing. The title company or agent preparing the HUD-1 has less personal knowledge of the transaction than the seller, buyer, Realtor, or lender. The person preparing the HUD-1 is gathering instructions and data from numerous sources and using the best information available. They are typically receiving this data last minute and finishing the statement in a compressed timeframe, under a lot of pressure. They are likely to make an error or two - even the best make mistakes.

Once the HUD-1 is prepared it is the responsibility of the title company/agent to distribute the statement to ALL parties for review and approval. Each person should carefully review the final figures against their personal knowledge of the transaction.

If you find a mistake, you must bring it to the attention of the title company/agent.

If a mistake slips through and isn't discovered until after closing, the title company/agent will contact the parties and work out a plan for correction.

Here's an example. Last year a member of my staff prepared a HUD-1 with a seller assist of $3000. She was new to HUD prep. She gave the buyer the $3000 credit and failed to hit the button that deducted the $3000 from the seller. Her checks balanced because the computer software created a deposit of $3000 to offset the credit to the buyer. She did not notice the odd deposit on the report. The transaction closed and the seller walked out of closing with $3000 more than expected. She said nothing.

I discovered the error during our monthly escrow account reconciliation. I noticed the odd $3000 deposit in uncleared items. We contacted the seller and she refused to pay because she thought we should eat the mistake. It took three months and a court date with a magistrate before she finally listened to reason. She called her attorney to prepare for the magistrate and upon hearing the facts of the case, he told her the $3000 was her responsiblity and she should pay it immediately. She did.

Oh happy day.

query: difference between title commitment and preliminary title report

Well, some people use the terms interchangably so it's confusing. Just remember that title commitment has a specific meaning while preliminary title report does not.

Here's the TIRBOP definition of a title commitment:

“Commitment”, as used herein, is the agreement of an Insurer to issue its policy or policies of title insurance to a proposed Insured, as owner or mortgagee of an estate or interest in the land described therein, all subject to the provisions set forth in the Schedules and Conditions and Stipulations of said Commitment. The Commitment sets forth the requirements including payment of premium and Charges, that must be complied with prior to the issuance of the policy or policies.

So, a title commitment is like a mortgage approval or commitment letter, but it's for title insurance. It tells you the title insurance agent has approved the property for title insurance subject to certain conditions.

When someone uses the phrase "preliminary title report" they might mean title commitment or title abstract or even an attorney's opinion of title. So, when you hear someone use that phrase, ask them to be more specific.

query: examine title commitment

Good question. The title insurance commitment is really divided into three important parts.

The first identifies the proposed insured, the proposed policy amounts and the property being insured. If you want an owner policy, make sure they have you listed as a proposed insured and your name is just like you want it on the deed.

As for the property, you want to look at two things.

Check the current vesting. The title insurance commitment will tell you who the vested owner really is and when they took title. If the current owner recently acquired the property, you should ask how much they paid for it. It's public information so don't be shy. If you are paying $250,000 for a property that the current owner purchased two months ago for $100,000 wouldn't you like to know?

Check the legal description very carefully. Don't assume the title agent got the right property. Mistakes are made and this is your chance to review and approve the proposed conveyance. Make sure the legal description is right. If you do not have a survey, it may be hard to visualize but give it a shot. Look at street names, any information you can use to be sure they are insuring the correct parcel.

Now, go on to Schedule B1. This is the stuff the title agent must clear BEFORE they issue the title insurance for you. Most of it is boilerplate, but often you'll find real title problems outlined in this section. Review it carefully and if you have any questions, call your title insurance agent. If they give you any grief about answering your questions, fire them and find a new agent. This is their job. You are paying for their services and you deserve their time and attention.

Finally, carefully review Schedule B2. These are the exceptions to your coverage. You'll see some boilerplate items and some that are specific to your property. If you see restrictions, covenants, reversionary clauses, conditions, get the details. Basically, anything you see in the exceptions that you think might affect your use and enjoyment of the property, you need to consider NOW before you buy the property.

Here's an example. Let's say you have a recreational vehicle and you intend to park it on the property. Your title commitment shows an exception for restrictions and conditions as set forth in Deed Book 3500, page 456. Well, how will you feel if you find out later that one of those restrictions prohibits you from parking your RV on the premises? Take your time and ask questions. Do NOT be afraid. An honest title agent will appreciate the fact that you actually reviewed the title insurance commitment. We think we're doing important work and we sure like it when you do, too. ;)

query: Pennsylvania agents examination for title insurance

I presume you have already found the PLTA web site that discusses how to apply to become an agent.

As for what's on the test, I don't think you'll find an example anywhere on-line. I suggest reading the TIRBOP Manual and the jackets for Commitment, Owner and Loan Policies. That material along with your base of transactional knowledge will likely get you through the test.

The jackets are really important. Now, here's the big question, have they updated the test for the 2006 ALTA policies? I don't know. To be safe, I would study the old jackets AND the new jackets.

query: does title insurance cover unopened streets

Maybe yes, maybe no. It really depends on how the policy is written and the laws and court actions governing your neck of the woods.

Is there an exception in the policy for the unopened street or streets in general? If so, your title insurance likely does not cover it.

Is there an exception in the policy for matters covered on a recorded plan? If so, your title insurance likely does not cover it.

Unopened streets in some areas are abandoned automatically after some time, but in other circumstances they may remain as rights of way available to others.

In any case, if you haven't yet closed and purchased the property, get a clear statement in writing on the issue from your title insurer. Is it covered or not?

If you already own the property and are having some kind of trouble with the unopened street, file a claim with the title insurer in writing. If you've reviewed the policy and find no exceptions and are unsatisfied with the response, contact your state insurance department for assistance.

TIRBOP Polices and Rates, continued

5.2 LEASEHOLD TITLE INSURANCE

When title insurance is issued for a leasehold estate by the issuance of an owner's policy and/or loan policy with Endorsement PA 1130 and/or Endorsement PA 1140 attached, the amount of insurance shall be equal to:

(a) the aggregate of the total rentals payable under the lease; or

(b) the aggregate of the total rents for the 6 years immediately following the settlement or closing of the lease transaction; or

(c) a reasonable statement of estimated rents on percentage leases; or

(d) the appraised value at the time of insuring the premises as established by an appraiser acceptable to the Insurer; or

(e) the land and total projected costs of such proposed improvements in the case of proposed construction; or

(f) the purchase price of the estate when insuring an assignment of a leasehold estate, including all obligations assumed.

The Charge for the issuance of an owner's policy with Endorsement PA 1130 attached or the issuance of a loan policy with Endorsement PA 1140 attached shall be the same Charge for the issuance of a policy insuring fee simple estate under this Manual. Where an owner's policy and loan policy are issued simultaneously on the same property with Endorsements PA 1130 and PA 1140 respectively attached, they shall be treated as a single policy and the Charge shall be based on the policy with the highest limits.

Where a leasehold estate is to be insured simultaneously with the interest of an owner and/or mortgagee of the fee simple estate, the Charge shall be the applicable rate for owner and/or mortgagee plus 30% of the applicable Charge for the leasehold interest. The Charge for any insurance in excess of the face amount of such owner's and/or loan policy shall be determined under the applicable Schedule of Rates.

ho hum.........Are you still awake? ;)

Choose & Save Program

Hey, we just launched our Choose & Save program. Check it out at www.tcsclosing.com.

recommended reading

shades of grey, part 1

TIRBOP Polices and Rates, continued

5.1 OWNER'S TITLE INSURANCE

A. An owner's policy issued at the time of the purchase of the property shall be based on the full consideration, including the aggregate unpaid principal sum of any mortgage(s) or other liens, claims, taxes and any other municipal charge not being paid. A policy may be issued in an amount in excess of the full consideration where agreed to by the Insurer and the Insured. In a transaction involving the sale of real estate, an owner's policy must be issued unless the new owner has waived, in writing, the purchase of an owner's policy in accordance with 31 Title Pa. Code 126.1. (See Supplemental Form TIRBOP - 31 PA Code 126.1 Waiver of Owner's Title Insurance (01/01/02).)

B. Where an owner desires that an owner's policy be issued after acquisition of title, the rate shall be based upon any amount the owner may request but not less than the present fair market value of the property as of the time the owner's policy is issued.

C. When the lender insured under a loan policy acquires title to the land by foreclosure or by voluntary conveyance in extinguishment of the debt and requests owner's title insurance, such lender may be issued an owner's policy and the applicable Charge shall be based upon the fair market value of the property at the time the owner's policy is issued.

TIRBOP Manual updated 4-1-06, General Rules

This is the only change to General Rules. A new rule has been added:

2.10

(a) When a Commitment has been issued by an Insurer or Agent that is dated prior to April 1, 2007 ("Effective Date"), any policy or endorsement forms available to be issued to an Insured immediately before the Effective Date may be issued at the Insured's request. The Charge for the issuance of a policy or endorsement form no longer available as of the Effective Date shall be the Charge as set forth in the Manual as of the Effective Date, unless the endorsement form is not available as of the Effective Date, in which event the Charge shall be the amount last set forth in the Manual immediately prior to the Effective Date.

(b) Any policy issued prior to the Effective Date may be endorsed by an Insurer or Agent at the request of the Insured with an endorsement available as of the Effective Date or, if no longer available as of the Effective Date, with an endorsement available immediately prior to the Effective Date. The Charge for the issuance of an endorsement shall be as set forth in the Manual as of the Effective Date, unless said endorsement is not available as of the Effective Date, in which event the Charge shall be the amount last set forth in the Manual immediately prior to the Effective Date.

Holy Moly, taking a break to watch 24. Will be back to try to rephrase this and make it a little easier to understand.

OK, so we can issue new or old endorsements to old ALTA policies, but if the endorsement is one available after the Effective Date, we have to charge the new fee. Did I get that right?

2006 ALTA policies

Well, Pennsylvania has adopted the new ALTA policies. We'll start to use them soon as they are required for all transactions having a title commitment date of April 1, 2006 or later.

The nice thing about the new policies is that the language is a bit easier for consumers to understand.

We also have a new TIRBOP manual. This week I'll start typing sections of the Manual and 2006 ALTA polices so you'll have a chance to absorb and understand them.

My mom's been sick and I'm watching her dog so I haven't had the time to keep the typing up for you. She's feeling better now, so things should return to normal and we can continue our exploration of TIRBOP.

Precious is "precious" but she's a needy little canine friend. ;)