Thursday, April 05, 2007

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.


Anonymous said...

Thanks Diane. I have an issue where the lender collected escrows 6 months for property taxes, and the gave an agg adjust for that amount plus $.06. Our instructions didn't tell us to pay anything else, like 6 months of taxes. In any case, the lender's escrow account was short, presumeably, the loan was transferred twice since last summer and the taxes haven't been paid. Now, the lender is telling the borrower that it is discontinuing T&I escrows for him, and that his unpaid taxes are my company's fault.

Looking at the HUD, its clear that the lender instruction are probably a mistake, and that maybe our closer should have also pointed this out to the lender's closer/funder/HUD approver. Since she's no longer employed with us, I don't know what she did or did not do/say, but it's highly likely, given my experience with that lender that we got docs after 5pm, that no one would have been able to change the taxes and/or agg adjust at that time, and that the lender on having this issue pointed out would have told us not hold up the signing because of that.

Bottom line is that this guy owes the taxes, even though he wanted the lender who did screw up to pay them - that is, not our problem.

Anonymous said...

Hi Diane, I've been reading for a while now, all the way out here in the soggy Pacific NW.
You hit the nail on the head with this one. Why is it that people believe if we make an error, we suddenly owe their taxes, mortgage balance, city lien?
Self responsibility has gone the way of ethics.

Keep up the good work!

Diane Cipa, The Closing Specialists® said...

Your situation with taxes is fairly common. Here's how we handle it. We look at the initial escrow statement to see when the lender intended to pay the tax. You'll almost always see the tax payments set up correctly in the month they are due.

As an example, let's say you closed in April and the next tax was due and payable in July. If the initial escrow statement clearly shows the lender anticipated making a payment in July and they failed to do so its real easy for the borrower and the lender to see that you had nothing to do with the problem.

Make sure your borrower has a legible copy of the initial escrow statement and point out the scheduled tax payment.

The borrower will still have to pay the tax but at least they will understand that you had nothing to do with the problem. Your job here is one of helping them understand what happened and why. The lender made a mistake.

Now what happens if you look at the initial escrow account statement and do NOT see the tax scheduled for payment when it should have been? This gets kinda sticky. Look very closely at your lender instructions. Is there language instructing you to collect and pay taxes due within say 60 days of closing?

If the lender assumed you would collect and pay any taxes due within so many days following closing they would NOT setup a scheduled payment in their system. THAT would result in a high aggregate adjustment that effectively refunds the tax to the consumer at closing.

If that's the case, the consumer would still owe the tax but I would offer to pay any penalties or interest owed. Depending on the amount, you may or may not turn it over to the title underwriter as a claim. A claim such as this falls under the closing protection or closing services letter wherein the title agent agrees to follow the lender's written instructions.

In either case, it's a matter of helping the consumer understand how the mistake occurred and that they are responsible for the tax itself. The party who erred should cover the penalties, either the lender or title agent.

Hope that helps. We try to be very careful in our review of the initial escrow statement. Anytime you see a high aggregate adjustment, double-check the scheduled tax payments. Or better yet, check them all the time. It's the only way to be sure.

Thanks for reading and taking the time to comment, especially with such a good example.

blondie said...

I had closed on a retail strip 12/17/07. The title company charged me; 1) - county taxes 12/17/07 - 12/31 07, total of 15 days. 2) - mortgage interest 12/17/07 - 1/1/08, not including the 1st., which totals 15 days as well. When it came to the credit for the rent, I was credited for 14 days, rather than 15 days. The day of closing I was rushed by the title company, signed the form, overlooking this mistake. After emailing the title agent a couple of times, today she finally agreed with me, although she claims; 1) The seller submitted those figures. 2) It would be up to me to go after the seller. I think that she is responsible for all hud calculations, recover the fund's difference, and reimburse me. When a title company undercharged me in another closing, I sent them a check, without any hassel. I like to know what is the legality in this matter?

Diane Cipa, The Closing Specialists® said...

Blondie: I'm not an attorney and can't comment on the legality of the issue. From the perspective of a title agent, prorations of rents are very frustrating. We rely upon the buyers and sellers to negotiate terms and then simply put those figures on the statement. Both buyer and seller have an obligation to review the figures and approve them before signing.

I am always unhappy to hear that a title company rushes a buyer or seller through documents. You have the right to take your time. This is a good sample for others. Please remember ou can ask the closer to stop while you read documents before signing and also request your HUD-1 settlement statement via e-mail or fax prior to closing when possible.

Thank you for commenting.

Anonymous said...

I've read through some of your blog and thought you might have a good opinion/thought on this. We purchased a home in 2007 and, at the time of closing, believed the property was not in an SFHA flood zone. The loan was transferred from one lender to another one year later, at which time we were notified that we required flood insurance. Is the lender legally responsible for anything as we are now required to pay significantly more each month than was identified at closing, and it was their error (as well as the flood certification company) that caused this?

Thanks very much.

Diane Cipa said...

I can't comment on legal responsibility but I'd look at your HUD-1 Settlement Statement to see who you paid for the flood certification. That's the company who made the error. There's a good chance that the company is partially owned by the lender.

You would need to talk with an attorney if you believe the knowledge of being in a flood zone would have caused you to NOT purchase the property.

If you would have purchased it anyway, then just be happy you didn't have a flood before you got the insurance.

I'd also be interested in what the sale agreement said about flood areas. What was it that the seller disclosed? These are issues to discuss with your attorney if you are certain you would not have purchased the property if you had known it was in a flood zone.

Good luck and thanks for reading!

Anonymous said...

Hi Diane,
We purchased home recently and Home Insurance amount was listed on closing statement as "paid by lender", but lender never paid for it blaming title company that they didn't balance amount correctly and title company doesn't want to pay for it since it got instructions from lender that it will be paid by lender. For now I have paid Home Insurance from my pocket, but this issue remains unresolved and now lender lady is not even replying to my emails.
I was wondering what are our options in such scenario?

thanks in advance.

Diane Cipa said...

Well, I do understand that is it frustrating. The title agent followed the lender's written instructions so they are correct.

I have to believe that ultimately the lender would have collected the insurance money from you anyway so though it might be confusing, you would have paid for it one way or another.

Now, if you paid a higher than market interest rate in exchange for the lender covering costs including your insurance, that might be different and you should pursue the matter up the chain of command. For instance you could send a certified letter to the president of the lender.

It would be unusual for the lender to really pay for the insurance so I'm thinking it's jut an unfortunate error that got resolved by your paying for the coverage directly rather than through the lender.

Does that make sense?

Anonymous said...

Hi Diane,

Thanks for ultra quick response, appreciate that :)
It makes more sense after your explanation, I will re-add the #s and hopefully everything should be golden.

thanks once again.

Diane Cipa said...

You are welcome! ;)

Anonymous said...

I have been scouring the Internet for some answers to an issue I had that sounds remotely similar to your example above.

I bought a house on Jan 9, 2009, and since the seller had pre-paid the property tax for the first six months of 2009, I had to reimburse her for that (minus the 9 days she owned it in 2009). The problem is, the lender’s attorney never gave the money to the seller but put it in my escrow account instead. Here we are 11 months later and he is asking me to write a check to her.

I know that you are not dispensing legal advice, but I am curious to know if you have an inkling on whether or not there are any time limits on something like this. The atty already came back once in the weeks after closing to have me sign off on a revision to cover an error (non-financial) that he had made, and now this.

Further complicating things (and angering me) is that the seller received an abatement and subsequent refund for the time period in question. The lawyer wants me to pay her the pre-abatement amount, which means she would be getting more than she actually paid in property taxes. My position is that if I am reimbursing her for the tax payment then I am also entitled to the refund amount.

And by the way – the most frustrating part is that as I reviewed the paperwork and the financial things at closing I sensed that something was wrong (wasn’t sure what at the time) in regard to escrow, taxes, etc. but no one would listen to me. They dismissed my concerns in a rush to get the paperwork filed before the window closed.

Diane Cipa said...

There are two things that seem odd.

First, the adjustments between buyer and seller for pre-paid property taxes are in the 100 and 400 sections of the HUD-1 Settlement Statement. When the money is debited from the buyer, it is automatically credited to the seller.

Using any other section of the HUD-1 for the adjustments/prorations would be odd.

Also, the lender escrows are calculated by the lender and balanced using a federal formula so it would be really odd for the lender to accept an overpayment.

It could be that the attorney just has little experience with a HUD-1 and did not understand how the money moves.

If he sent the money to the lender in error, the lender should be willing to rectify the situation. If he can't explain it to the lender in a way that they understand and agree with, then I would seriously wonder if he isn't in error still.

If the lender has an excess in the escrow account, their annual analysis might result in a refund to you. That analysis usually happens in January. Perhaps everyone should just wait and see, eh? ;)

Anonymous said...


I really appreciate your fast and thoughtful reply.

I will have to check the form to see where he listed the taxes, but as I recall, there was no offset in the seller’s column on the line where I was charged. It seemed to be one sided (the 9 day adjustment for her time in the house was on both sides, but not my payment of the 6 months).

The lender changed my escrow for taxes from 2 months to 6 months the day before closing, so they were aware it was due to the seller and should not have gone into the escrow account. (I am not sure who actually deposits the money but obviously someone did).

The loan was sold off even before my first payment, and the new mortgage company has already done an early escrow analysis at my request and they will send a check. I am just wondering what my legal obligations are to keep covering for this lawyer's mistakes. He dismissed my concerns at closing (which would have uncovered this error had they been discussed), and he continues to do so now (in regard to who is entitled to the abatement refund). His fee of $600 was on my side of the closing form and I definitely did not get my money’s worth. I paid him $600 to fill out the form incorrectly - I could have filled out the form incorrectly myself for free!

Thanks again for your insight.

Diane Cipa said...

You're welcome. It sounds like one of those situations everyone just wishes didn't happen but is on the way to being fixed. Good luck with it and Happy Holidays. ;)

Anonymous said...

Hi Diane, what is the max time limit after escrow close, that title company can fix the mistake? Is it 3 days or 90 days.

Diane Cipa said...

Well, let me answer two questions.

If under the new RESPA 2010 rules the lender needs to cure an intolerance, the cure and corrected HUD-1 must be done within 30 days of closing.

If the error you are referring to in unrelated to the RESPA 2010 rules, I know of no time rule.

Anonymous said...

Thank you Diane.

Diane Cipa said...

You're welcome. ;)

Anonymous said...

Hi Diane, I sure hope you can help with the situation I have. My wife and bought a house a year ago. we have a fixed mortgage with an escrow account. Both our LO and the title compan had our taxes down as aroun $39 a motnth for the account. Well today we received notice that apperently the taxes were 299 a month and now we have a short of 4800 and our monthly payment is now going to go up a bit because the we are now being charged teh taxes of 299 a month. Had the taxes been correct to stat with weprobably would of not gotten the mortgage. So who is the one that screwed up the lender or the title company for setting up a severly low amount for our taxes?

Diane Cipa said...

Morning, Anon: Wow, that's a big jump. There are a few things I would consider in this situation. First, what did the seller tell you? The first figure you should have heard would have come from the seller, either directly or through a real estate agent. As a former lender, I would have used the figures provided by the seller for the original Good Faith Estimate. The title agent then has the job of getting a tax certification. The certification would come directly from the tax collector. This tax figure would then be given to the lender who would compare it to the tax figure the appraiser had on the appraisal report. If everyone is paying attention, it is a good check and balance system.

Sometimes the property is reassessed soon after closing and that causes a jump in the figures. Tax increases are one of the risks of homeownership.

Try to find out exactly what happened. If the taxes didn't change and they always were $299 per month, then I would wonder why you weren't given the correct information when you saw the house in the first place.

If you were given correct tax figures at the showing but the lender or the title agent made a mistake with the escrow calculation, you had personal knowledge of the dollars involved and an obligation to look at what you signed and to tell them it was incorrect.

In all transactions parties should take the time to carefully review numbers and terms before signing. We have to expect that human beings make mistakes and it is better to catch it early and deal with the reality even is it means disappointment.

Thanks for reading and I do wish you well.

Robert T. said...

Hi Diane,

I just came across you blog with a google search and maybe you can help point me in the right direction. My wife and I just settled on our first home last week. For the mortgage we went through a broker. At closing there were a few items that she had a hard time explaining and for the most part, with help from the title company, were able to explain most of the to my satisfaction. However, there was on charge that she could not. On the HUD1 there was an extra origination charge over what we were quoted on our Good Faith Estimate. From what I understood of the GFE, origination charges could not change. After going back and forth for about 45 minutes with this line item, out of frustration we signed the HUD and continued with the closing. Do I still have any options if I believe this change to be incorrect? We are in PA and on our HUD it was line 803, if that helps. Should I pursue this with the title company, the broker or with the bank that purchased the loan from the broker? I appreciate any input you might be able to provide.


Diane Cipa said...

Hi, Rob: You are correct. That section of the GFE cannot change unless the broker or lender redisclose and explain why the circumstances changed and give you three days to decide if your still want to close. I suggest that you go straight to the mortgage lender rather than the broker. They have 30 days after closing to cure a tolerance violation without getting in trouble with RESPA rules. If you are not satisfied, contact HUD directly. You can try a phone call to the lender with an immediate follow with a letter via certified mail. I'd copy the title agent and the mortgage broker. Lenders are operating at the beginning of the learning curve on these new rules. The problem may not have been intentional but you deserve a clear resolution. Let me know how it works out, okay?

rajesh said...

Hi Diane,
I bought a condo in November 2009. The title company cleared the statements and every thing was fine until I received a mail from my HOA company that there we 1.5 months of HOA assessments pending from the past. I spoke with the title company and they said that they missed the dues because the seller didn't register the deed for 1.5 months after buying the property in forclosure. Title company has been trying to contact the seller to get the dues paid. But the seller has not responded so far. What do I do now?

Diane Cipa said...

Hi, Rajesh: You should not be forced to wait for them to collect from the seller. File a claim with the title insurer. Send a copy of your title policy, all documentation related to the loss and a letter demanding that they pay or reimburse you for payment. Send it via certified mail and copy your title insurance agent and your state insurance department. Good luck!

Anonymous said...

First I have to say, thank you for having this website. I am in a situation with a HUD-1 mistake and I was lost on what I should do.

I signed the HUD-1 document on May 26, 2010 and closed on the 28th. I was told by my mortgage broker, who reviewed the HUD, that the amounts for closing listed on the HUD-1 were accurate and to sign the papers at closing. When I signed the papers, both our lender and escrow company had reviewed the paperwork and the paperwork was to be sent one more time to the lender for approval before I received the keys. Since I was receiving a FHA loan, I was required to pay 3.5% at closing. I was purchaing a new home with upgrades and rolled some of the upgrades into my home loan (so the down payment that I was told to pay was suppose to be the 3.5% minus monies I paid prior to closing which included upgrades, the apprasial, and earnest). Everything on the HUD-1 seemed correct since all the costs were listed on in the right areas.

About a month later (month after closing), I received a letter from the lender, that we were $310 from meeting our 3.5% down payment. When I received this letter I was shocked that they wanted us to pay more money after closing. The lender indicated the money was owed because the HUD-1 statement indicated that the seller paid $310 more (which happens to be the cost of my homeowners insurance) than they should have and hence I paid $310 less. The lender has requested that we pay the difference in order to meet the FHA loan requirement.

I have talked with both the lender and the escrow company. Both have indicated that the mistake is not their fault but their counterparts in this arrangement. The lender indicates it is not their fault because they did not type up the HUD-1 (although they reviewed and approved it) and the escrow company indicates they got their numbers from the lender (although they did not add the costs appropriately). I’m stuck in the middle of this mess trying to find out what I need to do and if I really need to pay for the mistakes of both my lender and the escrow company.

Do you know if either the lender or the escrow company is liable for this mistake (meaning they need to pay the additional cost)? Do I have any rights to ask either of them to pay for the discrepancy since they are the ones who made the oversight? Am I required to provide the additional funds to the lender? Do I need to make sure they are going to return the extra funds they took from the seller (which they have seemed to overlook)?

Any help/direction on this matter would be greatly appreciated.

Diane Cipa said...

Hi, Anon. It's likely that both the title agent and the mortgage lender are at fault. There is probably some clause in the closing instructions which requires that you, the buyer, make a minimum investment. The title agent might have miscalculated that figure and the mortgage lender didn't catch the mistake.

Human beings make mistakes and that's why mortgage lenders have you sign a document that says you will cooperate with them to correct any error which impedes their ability to sell the mortgage or get the FHA insurance.

This is one of those situations in which you'll need to comply or they have the ability to call your mortgage in default and start foreclosure proceedings.

If everyone had been on their toes you would have paid this money sooner rather than later so maybe consider it an interest free loan. ;)

Anonymous said...

Hi Diane,

What happens when the Title company makes a mistake. In 2004 a home was purchased at the time there was a 300K mortgage on the home that was paid at the time of the closing. However, years later when trying to sell the home it was discovered that the Title company never signed off on the mortgage being paid and is now on my title from the previous owner. The Title company and bank are both now out of business, what's the next step?

Diane Cipa said...

Morning, Anon: I'm thinking you are saying that the mortgage lender didn't file a satisfaction document at the courthouse. This is a fairly common situation. What happens is that the title agent send the money to the lender for the payoff and the legal obligation to file the satisfaction rests on the mortgage lender. In PA the lender has 60 days to file the document.

Your solution should be easy. Find your owner title insurance policy and present it to the title agent being used by your homebuyer. The title agent will contact your title insurance company and request INDEMNIFICATION which will extend your coverage over your buyer's policy and let you close your transaction. This process should take less than a week.

After you close, your title company - or their successor if they are out of business - will contact the bank's successor and have the satisfaction filed to clear the title.

The important point is that companies like banks and insurance companies - when they go out of business - have procedures for assigning their book of business to another licensed entity.

If you encounter any problem, contact the state regulator for insurance in your state.

Good luck and thanks for reading!

Al said...

Hi Diane,

I recently purchased a condo in florida. The title/closing company sent me the closing statement showing the correct address for the property and the funds were disbursed.

However, since closing the title company sent me the deed and title policy but it shows the wrong address. It shows the address for another condo on the same plot but not the one I bought.

I have since heard from the porperty land records people that they will not be able to update the public records as they details in the deed are incorrect?

I am really worried what should I do? The title company say they are trying to rerecord the deed? Should I get an attorney involved?


Anonymous said...

Hello, I was wondering if I could get your advice on something. We sold a home 5 months ago and the title company made a mistake and did not collect on an invoice from a home repair. The buyer has waited 5 months to decide to make this repair and has found out that the title company did not collect the money for it and now they want us to pay it. Are we responsible to pay because the title company made the mistake of not listing the amount in the HUD and collecting for it at the time of closing?

Diane Cipa said...

Morning, Anon. Here's my take as a non-attorney title agent. If you agreed to pay for the repair and would have done so at closing, is there really any difference now? Five months is kind of a long time but it's not horrendously long.

My real concern, however, is whether or not there was a mortgage lender involved who had told the parties that they are not permitted to have a seller to buyer credit for a repair. If that was the case, then it was not allowed then and that means it is not allowed now.

We have to deal with these types of repair situations all the time. Buyer and seller make an agreement that is outside of lender guidelines. They don't know it's a problem and the lender, real estate agent, and title agent can't think of a way to make it legal so they pretend it doesn't exist or encourage people to handle it "off" HUD-1.

If there is a mortgage lender involved, I would never move money off the HUD-1 unless I had written instructions from everyone - including the lender - telling me it is okay to do so. Otherwise you risk having colluded to defraud someone - usually the lender - and that's called mortgage fraud.

Hope this helps. ;)

Anonymous said...

Hi Diane,
we sold our home on July 28th, 2011, and i just recieved a letter (Feb 7, 2012) from the buyers of our home that i owe them a check for 231.00 for the price difference in the amount that thier property taxes have now gone up due to the home has gone up in assesed/appraised value. At closing, we paid for property taxes from 1/1/2011-7/28/2011 per the HUD based on the previous years taxes (which was 3,800). when they got their tax bill in November it was for 4,031) so they say i should owe them the difference. My question is, why should i have to pay them the difference if taxes went up or the home assessed/appraised for more? They had an appraisal done before they ever closed on the home so they new it was going to be worth more? Can they really ask me for that price difference, and do i have to cut them a check?

Diane Cipa said...

Hi, Anon: I'll include your question and my response in a new post because it's a good topic. ;)

I would ask the buyers to provide a copy of a document in which you agreed to pay for a retroactive tax proration based on a new assessment. If there isn't a document supporting such an agreement, in my non-attorney blogging title agent opinion I see no basis for you having to cover it.

Take a look at this language and see if it wouldn't have been useful in your situation.

"Buyer(s) understands that the calculations used for proration and lender escrow, if applicable, of taxes not yet due and payable are based upon the best information available. The actual tax when due may be different due to reassessment or changes in millages. Buyer(s) agrees to accept the tax proration figures as shown on the HUD-1 Settlement Statement without further claim to the seller(s). Buyer(s) further understands that the lender escrow, if applicable, would change if actual tax figures are different than the estimated figures used to establish the escrow account."

We use this language in our Sales Agreement Satisfaction form. It's not required but we find it helpful.

Good luck and let me know if anything interesting happens. ;)


Anonymous said...

Hi Diane Thanks 4 this site. I have a similar issue with my closing & I must agree with the others that they do rush you through it. I did not realize that I had not been credited for the 7 days of rent as we closed a week before the end of the month. I was properly credited for the tenant's security, the association fees, and taxes. The Title Company did say NO ONE really bothers to check the next year's tax bill to see if the amount prorated is over or under the actual amount & if someone should pay the other one the difference. I will, however. I feel it is only right. If I owe her money, I will send her a check when I get the tax bill and figure it out. When I e-mailed the Title co. the Monday after our Friday closing, the employee just sent my e-mail to the Seller's Agent & he was under the impression that there were no pro-rations for rent - She sent me a copy of his e-mail saying that. How he could think that, I don't know - it is done all the time. I e-mailed back & told her it is due me & she should get the money for me!! Can you give me any advice of how to get my money without small claims court or lawyers? It is not much $, but it is rightfully mine, rent for days the Seller no longer owned the property. Should I send a demand letter to the Seller? It is complicated because the Seller's Agent is also her family member.Thanks for any help you can give me in addition to this shoulder to cry on. Olga

Diane Cipa said...

Hi, Olga. You're welcome and thanks for sharing your story. It's through this type of interchange that everyone learns.

I would go back and look closely at your sales agreement to see if rent prorations were discussed anywhere in the language. In our market, they typically aren't spelled out in the contract and so when we have a rental property we ask the agents for the rent amounts and whether or not the parties want us to do a proration.

Rent proration as with tax proration are negotiable items which are set by the terms of the sales contract.

You are right that so much happens at closing that is is hard to see everything. When possible it is always helpful to try to get a copy of the HUD-1 Settlement Statement before closing so you have time to peruse it.

I am not an attorney and I do not give legal advice. I use a demand letter when I want someone to send me money. I send it via certified mail and I enclose evidence that supports my demand. If you find language in your sales contract that helps to support your position, I would include it. If you don't find that kind of language I'd probably just let the matter drop and be more careful next time. Your post here will help others and that's a good outcome.

I wish you well. ;)


Kyle said...

I agree with many of the comments above about the ludicrous claims that some people make - that they shouldn't have to pay their property taxes because someone else didn't list them on a settlement statement (don't they know that they only things certain are death and taxes?) I was an escrow agent for several years and lived through some situations like this.
However there is another side to this story as I am now discovering. I bought a house 2 years ago and at that time the title company accidentally recorded duplicate copies of my deeds of trust. (now that recording means submitting a PDF file, apparently this isn't so difficult to do.)
Now, 2 years later, we are trying to refinance, which as you can imagine is pretty difficult with duplicate deeds floating around. The old title company has turned a deaf ear to our requests for assistance, claiming they can't do anything and we have to talk to the bank. The new title company is not much better, they didn't even notice the duplicate deeds on their preliminary commitment, and the issue only came to light when I personally went to the recorders office and discovered that our 2nd mortgage had in fact already been released, but the duplicate copy had not, and that's the one listed on our current commitment. Of course now we are almost 30 days into our 45 day interest rate lock.
I find it appalling that the title company takes no responsibility for what was clearly their error. I understand they can't file a release but they could certainly help me contact the banks and try to get it taken care of, or offer to close the loan and insure around the deed that they know is not real. I have my original signed DOT, stamped 'PAID IN FULL' in my hand, yet I cannot refinance because it is still on my title record. Buyers and sellers are not the only ones who act without regard to logic and ethics.

Diane Cipa said...

Hi, Kyle: I agree that it is appalling that the title company who created the error isn't taking responsibility.

If I were you, here's what I would do. I would write a demand letter to the title company who insured the transaction that created the error. By title company I mean the underwriter, not the title agency. Include copies of your owner policy, the duplicate deeds of trust [mortgages for those who aren't familiar with DOT], and a copy of your new title insurance commitment. Send it by certified mail.

Certified mail shows you are serious but to get fast action, I suggest that you also scan and email it to their claims department which you can find on their website.

Be certain to include a specific demand that they do two things. You want them to indemnify the new title insurance company so you can close pronto AND you want them to follow up with the lender to get this resolved for you.

Make certain that your letter shows that you are sending copies to your state insurance regulator, attorney general, the mortgage lender in question, your state department of banking, AND the Consumer Finance Protection Bureau.

You are demonstrating that you are loaded for bear and someone better do something.

Good luck and thanks for sharing your story. ;)


Casandra said...

I agree that good old fashioned ethics should be relied upon in situations like that. However, my hometown banker closed my mortgage loan and 3 weeks later contacted me to pay $600 more for title insurance that they forgot to collect. They said when I changed the mortgage rate terms the week before closing, they had to charge for title insurance even though they were keeping it in their portfolio rather than selling. I paid extra fee without even reviewing my GFE(emailed day before closing) and settlement statement. That fee was never even disclosed so I'm thinking I may have been too easy and the bank didn't follow the rules.

Crissy Hoffmann said...

I am hoping that you can help guide us with advice on our situation...sorry it is long (& can be very confusing!)...
Our situation started last year. We have 25 acres & were going to start our new house ~ went to Wells Fargo & started the process. First, we were told that we had to survey out an acre (as banks would not lend on ag value land) ~ had the acre surveyed out & then within a few weeks, we were told the rule had changed...we had already paid for the survey so we went with having the loan only on the one acre. Appraisal came in & included the 25 acres (we were compared to almost 40-year old homes as there are not many houses on tracts of land around here anymore)...called & said "hey ~ wrong amount!" ~ bank said that it happens a alot...appraisers tend to ignore what the bank has shown & look to county records. Appraiser went back & ONLY changed the amount of land ~ did not now our appraisal value is EXTREMELY LOW. When we were told that we would have to come up with a huge amount of cash to make up the difference, I told the mortgage consultant we would look elsewhere...he said, "wait ~ let me see what I can do" (WF does not do construction loans so he was "farming" it out to another bank for that...) ~ he called me & said if we were willing to pay for another appraisal, that would probably work...OK ~ did it, appraisal came in $50,000 higher than low-balled appraisal...move on, build house, got the HUD-1 settlement, all looks closing, we get PMI sprung on us...when we call bank, mort. cons. says "yes, I told you..." (uh, yes, that is when I said we would look elsewhere...) ~ surprise, the final mortgage was being based on original low-balled appraisal ~ consultant said that the appraisal we paid for was just to get construction loan ~ WF couldn't use that one ("would be like cheating"). Here's my deal ~ on the HUD-1 settlement, PMI was NOT checked off ~ not until the note on the day of closing did we ever see anything about it. I contacted WF headquarters ~ a lady there investigated & she called me today...she said that the HUD-1 is NOT a binding document & that PMI was disclosed on the the truth-in-lending ~ I told her that the only truth-in-lending we received was on the incorrect now is there any recourse that we can take??? First & foremost, I believe that we were deceived ~ secondly, when I clearly stated that we would go elsewhere if we would have to pay PMI & then the mort. cons. said he would "see what he could do" & we were offered the paid appraisal option, I thought the PMI issue was done. I wish that he would have offered a piggyback loan as an alternative. IT HAS BEEN FRUSTRATING!!! We put so much more into the house (out of our own pocket ~ even WITH the higher appraisal) ~ where it shows that we put down only about $17,000 & we really have invested over $70,000 already! Thanks for ANY advice!

Diane Cipa said...

Hi, Crissy: The disclosure document I would look at is the Good Faith Estimate. Go back through your file and find any and all GFEs that were provided to you. The first would have come within 3 days of the initial application. You would likely then have received new disclosures as the terms changed.

The HUD-1 for the construction loan and also the HUD-1 for the permanent loan would have a page 3 comparison of the HUD-1 versus the applicable GFE.

Keep in mind that you really did work with TWO different lenders. The construction lender is responsible for disclosure compliance on the construction loan and the permanent lender for their loan.

Very carefully see if you can match up a GFE with each HUD-1.

These forms are designed to make comparison shopping work. If you did not GET the correct disclosure you may be able to seek a remedy from one of the lenders.

If you did receive the correct disclosure but did not understand it or paid attention to what you were being TOLD versus what the form said, this is an ongoing problem we have in the industry and one that CFPB - the Consumer Finance Protection Agency - is trying to fix.

So, start with the lenders and have them both help you to match up a GFE that you ACTUALLY received with the HUD-1 forms used at closing. VERY important that you can see that you really DID get the GFE they used for the HUD-1 comparison. If not, make sure they know that you NEVER got the disclosure and ask for a remedy.

If it still does not make sense, then I would contact CFPB and ask for assistance. Good luck!

Anonymous said...

Greeting and Salutions Diane,

My wife and myself closed on a house back in Setpember 2012. The HUD 1 documents provided stated that the seller paid the HOA fees for the year, so at closing, we needed to reimburse the seller for the months we would own the home.

Fast forward to May 2013, the HOA management company has issued a court summons for us, stating that they didnt recieve dues from September 2012 to December 2012. We contacted out Title company and they couldnt verify the number in any way shape or form, and basically saying we would need to pay it since title insurance doesnt cover HOA fees.

What are our options here? Are we responsible for the title company's error?

Thanks your blog is a life saver!!

Diane Cipa said...

Hi, Anon: Immediately open a formal claim with the title company - the big one whose name is on your title insurance policy. Include a copy of the summons, the owner policy, the HUD-1 and a letter explaining the situation. Get that out there so you can get a formal reply.

Normally HOA fees that are not yet due and payable are not covered, however it is possible that the HOA fees in question were considered sue at the time of closing and therefore covered. DEMAND a copy of the resale certificate or lien letter that was used as a basis for the prorations.

You may also want to seek legal advice concerning taking action against the seller who has your money. Working both paths at the same time might bear fruit. Have your attorney send a demand letter to the seller to return the monies you gave them at the closing.

In the meantime, you do have a responsibility to mitigate damages and your attorney may advise you to pay the fees and fight for recovery.

Good luck and as always it may help to carbon copy the state insurance department on the claim as they may think the licensed title agent has some obligation to rectify your situation even if the matter isn't covered by the insurance.

Thanks for reading. ;)


Anonymous said...

WOW, thanks for the information, it has really opened up my perspective on the situation. But I have one more question. What if the title company states that the processor who worked on my case, doesn't have any verification of the amount that is on our HUD 1 documents? (crazy, I know) All they are saying is that the processor had a telephone conversation with someone at the HOA management company, but no letter or anything verifying the amount. I feel that due to their negligence I am in this mess now. :-(

Diane Cipa said...

If a title agent decides to rely upon a verbal certification they do so at their own peril. I'm not saying we don't do it. It's the exception and not the rule, however, the risk is mine, not the consumer if we get bad information.

The consumer has hired a professional. Presumably the title agent had professional liability insurance that will come to their aid of you sue.

I suspect a well written threat by a competent attorney should help them understand making you whole is the less expensive route. I'm sure their premiums are already pretty steep.

Richard Flattum said...

Came across this and thought you might be able to help me. I closed on Friday and was looking over the paperwork again that night when I noticed an error where the HUD didn't include the agreed upon credit. I've been trying to work with the real estate agent to address this for the past month and just getting the run around and so not sure how to address this to finally get it resolved. Any ideas or am I SOL?

Diane Cipa said...

Hi, Richard. If this was a cash purchase, I suggest writing a demand letter to the seller with a copy to your real estate agent and the attorney or title insurance agent who handled the closing. Be polite because the seller may not have noticed the error. Be sure to include a copy of the signed document showing that they agreed to the credit and also include a copy of the HUD-1 Settlement Statement to show that they did not give you the agreed amount. If you are lucky, the seller will send you a check. If not, you will have to decide if you want to pursue them in court.

If this was a purchase involving a mortgage lender, the situation is more tricky. You must first make certain that your mortgage lender was aware of the agreed credit and approved of it prior to the closing. Be sure to get evidence of this approval in writing from the lender. If the lender did approve of the credit, follow the steps listed above as if it were a cash transaction. If your lender did NOT approve the credit or had never heard of it, then forget it. You can't take money from the seller without the approval of your mortgage lender.

Hope this helps.

Brent Saba said...

I was the seller of a home that closed July 7th. I was unable to attend to closing in person. Nearly 1 month later, the Realty Co. contacted me and said there was an error on the HUD-1 form and I was only charged 6% to the agents when it was supposed to be 7%. They asked me to simply send a check for $1750 for the difference. The amount on the HUD-1 form and amount deposited into my bank account matched. If I sent the check for $1750, then I am ending up with less money than indicated on the HUD-1 form. They sent me a revised HUD-1 form on August 11th (36 days after the closing) wanting me to sign it and scan back to them, and demanding that I pay $1750. I have not signed it, and it is my opinion that it was their error and I do not believe I should be held liable for their error more than 30 days after the closing.

Diane Cipa said...

Hi, Brent. I do understand your frustration. Remember, I'm not an attorney so I'm not giving you advice but giving you my take as a title agent. People do make mistakes. That's why people buy title insurance.

First, go back to the contract you signed with the real estate broker. Was it for 7% or 6%? If it was 7%, you really do owe them the difference. It's the basic Golden Rule principle. Do under to others are you would have them do unto you.

Pretend for a moment that the mistake was in the opposite direction. What if you had a contract for 6% and the HUD error was a 7% commission that you didn't notice until a month later, would you want your money back? Probably, right?

That said, if the contract says 7% and you still don't want to ante up, then you could take a chance on whether these folks think it's a large enough chunk of change to fight over. They can always sue you and ask for costs on top of the commission.

My way of looking at things like this is to go back to the deal and then honor it. ;)

nicholas hampton said...


I just recently sold my home. At closing I was asked to bring 9K. I borrowed $3K from a friend. The following week the title company called me an told me that they punched a hole in the check by accident and would be sending it back. I told my friend and he doesn't have the cash right now and neither do I. What should I do. What will happen?

Diane Cipa said...

Hi, Nicholas. Well first of all, the title company made a HUGE mistake by accepting a check that wasn't a cashier check! What were they thinking? If it were a certified or cashier check, the money would be there no matter what. It wouldn't matter if your friend had cash because the money would already have been taken from his account and hold for this check. If they took a personal check, then it would have bounced anyway.

For now, the title company will have to put their own money into the escrow account to cover the shortage. They have that obligation. They will desperately seek funds from you and may even sue you. They have that option because you do owe the money.

You might offer to make payments. See if that's a solution that works for them. It may be cheaper than having to sue you.

That's just crazy. Good luck and thanks for reading. ;)


SKB said...

I just found your blog and need a little help. We recently sold our vacant lot in Florida, cash sale through a Realtor. The buyer chose the Title company. We live out of state. Our agent in Florida represented us. We received the closing documents via email and we reviewed them. Speaking with our agent she said everything looked OK, we signed and fed-exed the docs back to their title company. Our agent went to the closing, received our check. Three days later we receive an e-mail from the title company stating the closing statement was incorrect and the listing and selling agents commission was 5% and should have been 10% therefore we need to send a check for $400.00 immediately.
My question is, these documents are reviewed by all parties before sitting in a closing. As a real estate agent, wouldn't you look at your commission? When we got the closing statement we reviewed line items that pertained to us; property taxes, lawn mowing etc.
Having been in banking prior to retirement, and doing mortgage closings, these documents would have been reviewed by two sets of eyes prior to customer closing. If there was ANY mistakes at that point, we the bank absorbed that and if large enough those employees were written up. Again two sets of eyes.
May I please have your input as my husband and I feel this truly isn't our fault.
Thank you for taking the time to review.

Diane Cipa said...

I hear you and I know it's frustrating. I'm always astounded when there is a post closing discovery of an error in the commissions. I would think that is the FIRST thing the real estate agents would check.

That said, you really need to go back to your listing agreement or the sales contract and see what your agreement was with the real estate brokers. Even if there was an error on the HUD-1, you still must honor that agreement.

If the situation was in reverse, you would expect a refund, right?

Preparation of the HUD-1 Settlement Statement is usually done in a high stress compressed timeframe and even with lots of eyes looking at it, errors sneak through. I don't know if the pending CFPB TRID procedures will help but we are all hopeful.

So, bottom line, I would just send the check. I would look at it more like the bank accidentally deposited money in your checking account. Once discovered, they would surely debit your account. Eating fees as you described is a marketing decision. Banks tend to be more sensitive to consumer experience because they have a long term relationship prospect AND banks have big pockets. Real estate agents and title agents might absorb little mistakes but $400 is big money to these folks and I wouldn't expect them to cover it.

SKB said...

Thanks Dianne just like I mentioned 'wanted a second set of eyes' before I made the decision :-)
Also, thank you for being out there for all of us and providing useful information.

Diane Cipa said...

You're welcome! ;)

Frustrated Buyer Agent said...

Hi Diane,
I have a buyer in the last weeks prior to closing. The lender and Seller use different title companies and to hopefully expedite things we decided to use the Seller's title company for our transaction. Closing is supposed to be 8/25/2016 per the Sellers request.
Our lender repeatedly asked for title commitment/policy to provide accurate loan disclosures to the buyer. After a couple of weeks the information was finally received showing that the Sellers paid 2015 Winter ($657) tax but not 2016 Summer Tax ($2,600). The lender made the adjustments on the buyers loan estimate to show escrow to makes sure those taxes are covered.
On 8/24, the Sellers decided to pay the Summer Taxes because, per Seller Agent, they were due August 1st and they didn't want them to be late.
This resulted in confusion on the buyers final loan disclosure of reimbursing Seller via additional closing costs AND still paying for those taxes via escrow. I also want to point out that the taxes in escrow did not represent the title taxes and were actually doubled, with added "county" tax which changed the previous loan estimate mortgage from $1,500 to $1,900.
Closing had to be pushed back and the Seller agent is upset, however, the lender still has not correct the loan (HUD) paperwork showing the correct escrow and closing.
The sellers's title company, at the sellers insistence, has hastily scheduled the closing for 8/29 at 4pm and attached the title paperwork showing that the Sellers STILL had not paid summer taxes. I let them know that the buyer will not be closing until the title work has been corrected and the accurate HUD numbers are finalized/approved by the buyer.
The contract for this purchase has a 8/29 deadline, per our PA. Do the buyers or sellers have the ability to walk if the closing needs to be pushed back further? Right now our lender is saying that closing will not possible 8/29.

Diane Cipa said...

And this is why TRID makes everyone stress.

Diane Cipa said...

It's debatable whether the taxes should've had an impact on timing due to the TRID disclosure however reality is that the lender chose to allow the impact.

Diane Cipa said...

The question of whether parties can walk from a contract is a legal question and you should consult an attorney. As a non-attorney person who is also no longer a title insurance agent BTW, my many decades of experience told me that willing buyers and sellers will hang in there through these kinds of delays unless they have some other reason for canceling the deal.