Sunday, September 30, 2007
The Mortgage Lender Implode-O-Meter site lead me to this linked article in The Washington Post.
We close lots of Federal Housing Administration [FHA] transactions. So, for our FHA lenders out there, please don't fret. This isn't the end of the world as we know it.
I've been originating or closing FHA transactions since 1978 and believe me, most familes who want to buy a house can do so under the regular FHA program without the charity gift program.
The move by the FHA is part of the overall restoration of quality in mortgage lending. It's not a bad idea to call a spade a spade. Why have a middleman taking a piece of the transaction? Let the seller assist the buyer without throwing some of the cash to a third party.
Here's another good angle. Did you know that many transactions had gifts that were higher than actual costs? Yes, it's true. Since we often don't get real figures until the last minute, FHA lenders had to deal with last moment decisions when faced with too much money solidified into the gift deal.
How was this handled? Well, there wasn't enough time to re-craft the gift, so the lender would direct us to either force a principal payment of the excess OR give the extra money back to the charity.
So, if we go back to working direclty with the parties and NOT with a third party gift charity, we can adjust figures. If the buyer is getting a personal gift from the family, the buyer can keep the extra money. If the seller has agreed to assist with costs, the seller can keep the extra money.
The "new" old rules will take some adjustment, but I predict the FHA market will have much vitality and as an alternative to subprime, it's a much safer place for homebuyers.
Thursday, September 27, 2007
The idea of issuing rubber checks to pay taxes is entirely repugnant, wouldn't you agree? There oughta be a law! Somebody should do something! Criminy! What about the children?
I think issuing rubber checks for any reason is entirely repugnant, especially when the party issuing the rubber checks is a fiduciary and a trusted professional in a real estate transaction.
Do you know that less than responsible attorneys and title agents routinely issue rubber checks at closing? Do you think I'm kidding?
If you are a seller, just ask the attorney or title agent for your proceeds in the form of a wire or cashiers check. A wire or cashiers check is considered good funds, that means REAL money, in hand now, not a week from now, and not potentially rubber money. Good funds can only be produced by someone who actually HAS the money to give you.
A request for good funds is the litmus test of responsibility in a real estate transaction. It separates the wheat from the chaff, the strong from the weak, and more succinctly and to the point, the responsible from the irresponsible.
Consider this real life scenario playing out in my office today. There are three closings taking place, each dependent on the others. There are three families whose lives are on hold wondering whether or not they will be able to complete their very important real estate purchase.
These are what we call domino transactions. The seller on the first transaction must sell his house in order to purchase the house in the second transaction. The seller in the second transaction must sell his house to purchase the house in the third transaction.
To add to the drama, the house being purchased in the third transaction is being sold by a lender who foreclosed. The contract has a strict deadline which expires today.
An attorney in Pittsburgh is handling the first transaction, my office is handling the second transaction, and a title agent in Florida is handling the third.
Domino transactions require cool cooperation between professionals and many, many things have to go just right for a successful conclusion, especially on the last day of the month - a high volume day for the entire industry.
All seemed right with the world yesterday until we discovered a weak link, the attorney in Pittsburgh. The attorney planned to issue a rubber check to his seller. Why? Well, he was not attempting to assure deposit of good funds from his buyer's mortgage lender before he intended to disburse. He just had no comprehension that REAL money had to move through all transactions and that rubber money was not sufficient.
Think about that so that you really understand.
He expected the seller to take his check, after all he's an attorney, which would take a week to clear. He didn't give a crap that the seller needed good funds for their home purchase. He suggested that we accept HIS check which would take a week to clear. He didn't give a crap that our seller needed good funds to purchase his home in Florida and that WE were prepared to wire funds to that end.
You read in the papers, don't you, that mortgage lenders DO go out of business. You also know that some attorneys and title agents - the irresponsible ones - sometimes steal the money from escrow.
I don't know this attorney. I don't know if he's a drug addict. I don't know if he's been using his escrow account to pay for a BMW and a big house. I don't know and I don't care because I will not close without good funds.
I DO know that he is irresponsible and disburses real estate transactions without having received good funds into escrow. THAT means that his house of cards might just fall down and any sorry sap who joins his game of irresponsbility or is intimidated into taking his rubber checks is at risk. I'm NOT at risk because I will not close without good funds.
So, we've forced this attorney to face the reality of his responsiblities. He has contacted the mortgage lender. He is "trying" to get good funds deposited into his account so he can wire the money to us today. We had to move the other two closings to a later time in the hopes that his "efforts" would be successful. Everyone is hoping that the REAL money will arrive on time and that these families can complete their very important real estate transactions.
Some people who read post might be thinking that I'm a big pain in the ass. I've got news for you. It's the attorney AND those like him who have no respect for money, responsibility and the clients they serve who are the pains or the asses, you choose.
Think of all the economic and emotional pain being experienced by so many people tied to real estate in this country and think of the repercussions reverberating through the markets of so many countries and remember this. It's source sits squarely on the shoulders of the irresponsible so-called professionals who don't give a crap about what's right and what's REAL.
It's that simple.
I would prefer that the real estate agent, wishing to avoid any potential conflict of interest, would not act as a notary for any reason on their own deal. In reality, we live in a world in which many real estate agents are steeped in conflicts of interest in every transaction and they seem to have little respect for ethical lines drawn in the professional sand.
So, unless and until all the more substantial conflicts of interest, such as dual agency, are resolved, who the hell cares?
Wednesday, September 26, 2007
Why? Foreclosure attorneys sometimes make mistakes. The title insurance provider selected by the seller may be inclined to overlook mistakes and move the transaction to a quick settlement.
What kind of mistake? Well, some foreclosure attorneys don't understand how to deal with federal liens. We had a case in which there was a rural housing 2nd mortgage. The foreclosing attorney did not give proper notice. After the foreclosure had taken place and the purchaser were moving towards closing, the federal government started their own foreclosure on the 2nd. Luckily we were involved and had discovered the deficiency in time to resolve the matter, but what might have happened if the buyer had closed quickly using the seller's title agent?
Well, you could argue that because they were insured, the title company would take care of the matter, but do you really want to have to deal with trying to get someone to help you stop a foreclosure and do you want to deal with the stress of making a claim?
Good title insurance practice is about finding potential claims and eliminating them PRIOR to closing.
I recommend that you hire your own independent title insurance agent to vet the foreclosure transaction and make certain you are truly getting clear title.
Be extremely careful buying property that has gone through a foreclosure.
Monday, September 24, 2007
"I have several title companies where I have a 2nd mortgage against, and they are refinancing people, even now, and somehow not seeing we are recorded and on title. I am trying to avoid litigation and want to know the best way to attack it. Many of them are reluctant to pay, even when a settlement has been offered. Proof is shown of recording and they still play around. Is there a law that governs them, especially now with all of the mortgage fraud going around?
One more but it is one of a kind:
I have a customer who sold her property; she had a 2nd recorded mortgage on it. The 2nd mortgage was assigned to a different lender that did not record the assignment. The realtor sold the home under a short sale, took full commission then claimed she couldn’t locate the 2nd and the customer 1st was in foreclosure and she had no time to search. She then filed a quiet title against the 2nd? Doesn’t that constitute fraud? It is very easy to locate the 2nd by googling the old company.
Sorry for so much, but I have read some of your answers in blogs and have much faith in you."
OK. Here goes.A title insurance claim is made by an insured lender or owner so unless you have a loan policy covering your liens, a title claim wouldn't be an option.
In the first case, if the mortgagors are making their payments, what have you got to lose? You are in first position and that's tough luck for the new mortgagees, right?
If the mortgagors aren't making their payments, you have the option of foreclosure. If your liens are valid, you are in the driving seat. You need to consult an attorney.
The attorney may advise that you contact the new mortgage lenders directly and advise them of your position. You are now in the first position and they won't be too happy and they may force the title companies to fix the problem.
As to the second issue of quiet title, it's complicated. The courts have rules concerning notification of interested parties. The matter should be reviewed by a competent attorney who can determine whether or not the effort to find the mortgagee was adequate.
Sunday, September 23, 2007
query: title on real property includes non-vested spouse, can a creditor put a lien to non-vested spouse
Here in PA, if a person is on title, they ARE vested.
You should be discussing your situation with an attorney.
Saturday, September 22, 2007
In fact, in Pennsylvania the PAR, that's Pennsylvania Association of Realtors, approved sales agreement includes the provisions that the buyer will provide the seller with a cashiers or certified check at closing. It's under TERMS on the first page of the contract. It says "cash or cashier's check at settlement" which implies clearly that the seller has bargained to receive good funds at closing and that the buyer has agreed to the terms, which to go a step further implies that the buyer really should pay any bank related service fee for obtaining a cashiers check. Don't you agree?
I find it interesting that this clause is largely IGNORED by just about everybody. Why? I am not sure but I have a theory. My guess is that settlement attorneys and title agents tell people it's just not possible. Why would they say that? Well, most of them don't do a good job managing their escrow accounts. Why should that matter?
Well, next time a seller asks for a cashiers check, talk with the closing attorney or title agent. See if they willingly agree. If they try to avoid providing the service, dig a little deeper. I'll lay odds it's because they plan to disburse on the transaction before receiving good funds from the mortgage lender.
Yes, that means that they are issuing a check to the seller - and everyone else BTW - that isn't good. The money to back those checks isn't in their account! Can you blame the seller for wanting a cashiers check?
This is why everyone, EVERYONE, should get used to working with good funds.
We are in a period of instability in our real estate world. We can't tell which mortgage companies might go out of business. We can't tell which title companies and attorneys are doing a good job managing escrows. The only way to protect your interest in a transaction is to insist upon good funds and that means wires or cashiers checks.
When checks start bouncing you don't want to be at that party. So, yes, your seller can and should ask for a cashiers check. The ability and willingness of your closing company - attorney or title agent - to produce that check is a TEST. It tells you whether or not you are dealing with a reputable and capable provider.
Thursday, September 20, 2007
Lenders have quality control department who have always been able to pull a loan for a spot audit prior to closing. Sometimes the selection is random, but I find a pre-closing audit is usually triggered by a red flag of some kind.
We had a closing cancelled this week when the lender did a last minute audit and re-verified employment. They found the borrower had just quit her job. That was a good call by a lender who probably sensed something was wrong.
We'll invoice the customer for the title work we performed on her file.
I really can't connect the corrective deed part of the question. I hope this helps. ;)
Wednesday, September 19, 2007
That does not mean that the title company will not pursue every means at their disposal to recoup funds owed by the mortgagor. So, whoever owed the mortgage money that is the subject of the error will eventually have to make restitution and pay up. It's their obligation.
The title company may also pursue a settlement with the mortgagee. If the lender gave a payoff letter that contained the wrong figures and the title company relied on it to close, they may be able to force the lender/mortgagee to accept the lower amount.
The main issue is that the title company goes to bat to protect the integrity of the title and will remove the mortgage lien by whatever means they choose.
Tuesday, September 18, 2007
I'm surprised that your Google search didn't find our Choose & Save program. We created an alias for our web site www.tcsclosing.com so consumers would find the program more easily. The alias is www.chooseandsave.com.
We love this program and our customers love it, too. Doc prep, courier and bank related service charges are waived on both sides of the HUD so it's a really great deal for all parties.
We think it's a real win-win because the consumer fronts the money for title examination and lien letters and then gets a nice reduction in costs in exchange.
It is extremely important to read the short sale agreement carefully. I also recommend that you have the actual closing/escrow company prepare the draft HUD-1 on which the agreement will be negotiated. This way you'll have credible figures in play rather than rough figures that may be used by the real estate broker.
Bear in mind that even in a short sale situation you may be obligated to repay the shortage to the lender as a personal obligation after the closing. Discuss the pros and cons with your attorney.
Saturday, September 15, 2007
No. There is no situation in which you can assume clear title. You should always hire a competent title professional - attorney or expert title insurer/agent - to examine title and issue a commitment to insure. The commitment will outline issues and exceptions.
You want title insurance, not just an opinion. Humans make mistakes and that's why you can't assume clear title, ever.
He may be wrong.
If you are being harmed, take a stand. If you have title insurance, contact your title company. You may also want to hire an attorney.
He was really, REALLY, upset and I don't blame him. We couldn't disburse because the $39,000+ 2nd mortgage funding had not arrived. He was in a jam because the seller wouldn't let him into the house without having received their proceeds.
This was not a question of everything happening at the last minute. The documents arrived the day before closing. The HUDs had been approved the day before closing. The first mortgage funding arrived on time, but for some reason the second mortgage money didn't.
Our closer, David Keiser, started calling the lender first thing in the morning trying to track down the funds. He was assured that the wire was on the way. When it didn't arrive, he tried to reach the lender contact again but getting voice mail, left several messages and tried for the receptionist but couldn't get a response. He called me as the closing was soon to start and I gave him the number of another individual who worked in the same building. She was able to intercede on his behalf by physically going and finding the person who should have been helping him and was so hard to reach.
The parties left the closing table after waiting for a long time and eventually having signed a dry closing disclosure.
The buyer, a business person with a reasonable understanding of financial affairs, was just really unhappy when he called me. He wanted to know why I wouldn't fund since the lender had assured us that the funds were in the Federal Reserve system and had a tracking number. I explained that we were not permitted to release funds until the money was in our account. He asked whose rules those were and I explained that we are under contract with the title underwriter and that we are obligated to adhere to a good funds policy.
I defended David who I know was doing everything he could all day to resolve the problem. I explained to our unhappy buyer that it's the lender's responsibility to make certain that funds arrive on time and that we can't change reality.
After we hung up, I called the lender contact directly to get a specific status. I knew she would be honest, she's truly someone I can count on in that way. She honestly told me that the funds had just left their office 10 or 20 minutes ago.
Well, they arrived in our account by about 4:17pm and the buyers were permitted into the house.
The explanation was simple human error. She had ordered the funds the day before and someone else in the second mortgage department dropped the ball. It was unfortunate that they assumed for the greater part of the day that the funds were simply en route in the Fed despite numerous urgent inquiries from David.
I do understand that our buyer was very unhappy when I said I couldn't change reality, but I couldn't and I find bending that truth doesn't really help anyone.
Thursday, September 13, 2007
We used to live in a big Victorian. We had a music room. We had an exercise room. We had a guest room. We had a crazy party room. We had lots of extra rooms we didn't need and guess what we did with all those rooms? We filled them with stuff. We needed two cleaning ladies to come regularly to keep all that stuff in all those rooms looking good.
Now we live in a small home. We have no extra rooms, we have just enough. We have no room for lots of stuff. I'm not counting the giant attic because I refuse to fill it up with stuff. I can clean this place by myself lickety split. What's to clean?
Why am I talking about this? Well, read this article.
We don't have children but the previous owner of our house had two. They would have stayed there, too, had work not moved them from the area.
My point is that downsizing is good. It's good for your pocketbook, makes for a cozy home life, and it's good for your soul.
Are you wondering what we did with all that stuff? We had a big auction. It was a hoot - like taking a life style shower - very cleansing.
Just look through some of these house plans and tell me you couldn't live there.
While we're at it, we might want to take another look at smaller TVs and cars, too. ;)
PS - We drive a minicooper AND got rid of cable TV. Life is rich.
Wednesday, September 12, 2007
Had a FHA transaction. The buyer had sold a house in another state and wired the proceeds to our escrow to hold for their purchase.
We correctly showed the deposit into our escrow account on the HUD-1 and since the buyer didn't need all of that to close, the bottom line showed them getting cash back.
The lender's closer insisted that we remove the proceeds deposit and show the buyer needing cash to close. I calmly but firmly explained that the FHA would have no issue with the deposit as it was fully documented. I further said that I would not ignore the funds in my escrow account and that the HUD disbursement must match up with checks issued from escrow. We reached a stalemate.
[Heck, wouldn't you think with all the publicity about truthful HUDs folks would know this stuff by now?]
The lender's closer threatened to change the loan amount or do all sorts of terrible things like take the extra cash due the borrower and force them to make a principal payment. I stood my ground and politely but firmly asked that he take the file back to the FHA underwriter who I assured him would understand.
We were about 90 minutes from the time our closer had to sit at the table and still had no documents. While we waited we had the processing office fax an additional copy of the HUD from the sale of the previous home to the closer just to be sure the he had it for the underwriter.
BTW - the processing office also argued with me that it would just be oh so much easier if I would remove the item from their HUD since it had nothing to do with their transaction. I argued that the funds came into my escrow account for no other purpose than for this transaction and so the funds would be accounted for on the HUD. I also argued that it would be a criminal offense and a violation of FHA guidelines for me to take the deposit and money due back to the borrower off the HUD.
Well, what do ya know? The FHA underwriter said no problem and approved our HUD. We got our docs, closed just a few minutes late and everybody was happy.
Sunday, September 09, 2007
query: I have two HUDs from title company
I fully intended to answer as it's an important situation but got sidetracked. So, let's deal with that one first.
You should never have two HUDs for the same transaction unless there is some very clear purpose laid out in writing that makes complete sense to you AND both versions of the HUD have been delivered to all parties including the lender AND both versions really say the same thing. What I mean is that the disbursements are really the same on both. That means that the money being paid to each payee is the same and the name of the payee is the same.
Frankly, the only time I allow two HUDs on one transaction is when a mortgage lender refuses to acknowledge the regulations of TIRBOP and changes the way title fees are disclosed on the HUD. This is extremely rare. It's happened only two times. In both cases, we had the parties sign two HUDs - one fulfilling the lender's desire for lumped fees and one meeting our regulatory guideline for itemized fees. We also had parties sign a disclosure explaining WHY we were forced to do two HUDs. Everybody including the lender received both versions and the disclosure.
NOW to respond to your second query, if you believe someone has forged your signature on a HUD-1, you've got a serious situation on your hands.
What you don't want is to be pulled into a fraudulent transaction.
I would send a copy of both HUDs and the allegation of forgery to the FBI or perhaps the state Attorney General's office. Forging a signature is a crime.
Oh, and I'd copy your title insurer. You have an obligation to inform them of potential fraud in the insured transaction. Send it directly to their main office. You should be able to find the address on the internet or through the state insurance department. I would include a copy of your title commitment or title policy if you have one.
Saturday, September 08, 2007
So, what's a reversionary clause? It's a restriction of some kind that if violated causes you to lose your ownership of the property. The title reverts back to whomever owned the land when the clause was first inserted into the deed.
What the hey? Yes, it's true.
Reversionary clauses should be rare but we find lots of them in Cambria County here in good ole Pennsylvania. I think the local bar association must have had a meeting and decided these things were great. Instead of creating normal restrictive covenants when they helped a developer create a new plan of homes, they created reversionary clauses instead. Go figure.
So, while normal title insurance underwriting would cause us to go bananas when we find reversionary clauses, we can't do that in Cambria County or no one would be able to insure title in the City of Johnstown. Yes, it's the city of floods and the reversionary clause capital of the world.
Here's an example. Part of the City of Johnstown is called Moxham. The developer of Moxham must have been a teetotaler. Moxham is a dry community. There are no bars or beer distributors or liquor stores - none. As far as I know, there is no ordinance prohibiting the sale of alchohol, but the entire community is subject to a reversionary clause which prohibits the manufacture or sale of spiritous liquors. You open a bar - BING - lose your land.
Now, I'm not a Johnstown native and so maybe we have a reader out there who can shed light on this unusal use of reversionary clauses, some of which include simple things like building setback lines. Are the heirs of these original grantors actually still around and waiting to see if someone violates their clause?
Yes, it is interesting and unless Johnstown turns into something like Atlantic City where cheap properties suddenly become very valuable, my guess is that those reversionary clauses will remain dormant, like bad seeds, waiting for their day in the sun.
Friday, September 07, 2007
The fiduciary for the estate or the heirs of the deceased can sign a satisfaction document. Have an attorney review the matter and prepare the document. If you can't locate the parties, have your attorney start an action to quiet title. Don't dilly dally because it may take time.
Depending on the circumstances and the age of the mortgage, the title insurer may consider an escrow pending resolution so you can proceed with your closing.
I know you aren't used to reading over insurance documents because most are boilerplate. Title insurance commitments and policies most often contain exceptions unique to your property and so it behooves you to pay attention.
Good question, thanks.
Thursday, September 06, 2007
Dear Mr. Much Ado About Nothing:
I am in receipt of your letter dated September 5th directed to redacted implying that you and she had discussed this issue. No such discussion took place.
I received a call from your secretary last week in which she made inquiries about the unsatisfied mortgage. I told her we were aware of the mortgage and had insured over it due to the age. [Note that our owner policy does not state that were are no mortgages of record. It simply does not except any from coverage.] She placed me on hold and conferred with someone, perhaps you, who said they were unsure that you could get title insurance with the outstanding lien.
I assured her that you could and offered to process such coverage in the form of an indemnification letter from redacted to the title underwriter you propose to use. I asked your secretary to fax the title commitment and a letter requesting indemnification so we could proceed. I have received no response to that request.
It is customary and usual in the business of title insurance to use indemnification as an interim measure in the case of issues like unsatisfied mortgages. The letter is issued for the benefit of your office and the title underwriter so that you may proceed without liability to close and insure your proposed buyer and/or lender. It takes a mere 24 or 48 hours to acquire such a letter.
I agree that time is of essence in any real estate transaction and while you may feel that a 72 year old $2000 mortgage obligation imposes great risk to the title, I fail to understand why your title underwriter would refuse indemnification from redacted.
Mr. redacted called yesterday to discuss the matter and I extended an offer to issue title insurance to his buyer and/or lender should the need arise.
This is not a question of marketability of title, Mr. Much Ado About Nothing, because title insurance is available without exception on this matter from every reputable title underwriter with which I have worked. The homebuyer has many an option, which would fulfill the bargain made with Mr. redacted.
Should you wish to process an indemnification request directly with redacted rather than release the title commitment to my office, you may do so by contacting Atty. redacted of their Pittsburgh office at redacted. He has a copy of the owner policy, is aware of the issue, and has offered his assistance to you.I have to officially retract any previous credit given. Yoi!
He thought we knew.
After long silence of disbelief, we pause and say how exactly do you suppose we would know that? Isn't that why we pay an abstractor?
I still don't have a satisfactory answer to THAT question and am reconsidering my abstracting options for the county in question.
Tuesday, September 04, 2007
Monday, September 03, 2007
It's an important question because title underwriters have demonstrated that they have no good system in place to find issued policies. A consumer trying to make a claim pretty much has to provide evidence that they are insured in order receive service. I know we're trying to change that scenario but the reality is that we are still operating in a buyer beware state.
[As an aside, it always cracks me up that title underwriters tout their ability to perform instant automated title searches but can't locate a consumer's policy. What a crock.]
Think about it. Title underwriters never really push attorneys or title agents to submit their policies in a timely manner. What if the agency goes out of business before the policy is even filed with the underwriter? What happens to those files?
When I closed my Statewide Settlement operations I moved the files into The Closing Specialists. I'm aware of no requirement to do so but it seemed logical and fair. We do still have to work those files. As the properties are sold or refinanced, we use the files as resources and we also field questions from attorneys or title agents who may raise issues or questions on our insured transaction.
If we weren't working these files for the insured consumer, who would?
So, yes, it's a good question and one I can't answer.
Saturday, September 01, 2007
Wouldn't it be more appropriate for the consumer to order their own title insurance? Certainly the Realtor can assist by providing seller data, but the title work is being performed on behalf of the consumer and I believe they should shop, select and order for themselves.
BUT to answer YOUR question of WHEN, I say order title insurance whenever someone is willing to foot the bill for the examination work.
On our office we have the Choose & Save Program. The consumer puts up a $300 deposit which they'll get back if they close within 90 days.
Most consumers prefer to wait until the home inspection is clear before they start the order. Some are willing to front the examination deposit earlier because they really want to close quickly.
It takes 7 to 10 days to complete title examination and issue a title commitment in our area. So, the WHEN of ordering title is transaction specific based upon the needs of the consumer.
We prefer a 60 year search for purchases and minimally a 40 year search for refinances.
Well, think about the life expectancy of a person who might raise a claim. If you've examined the title back 60 years and resolved any clouds that might reasonably affect title, the likelihood of a party with a claim coming forward is remote.
There are circumstances in which it is prudent to search back even further. If you have a substantial commercial transaction with concerns about rights of way, you may wish to go further back. In cases where the proposed insured are concerned with mineral rights, a special mineral search is necessary and that typically goes back as far as deemed necessary to cover likely conveyances.
Trust me. Experienced professional title examiners have no respect for title insurers who cut corners and do short searches. They are sacrificing quality for search cost and believe me, the reduced cost of the search is not likely to be enjoyed by the consumer.