Monday, September 03, 2007

query: what happens to documents when title company out of business

That's a good question and one I'd like to extend to our readers out there. Are you aware of any rules governing the custody of title files when a title company goes out of business?

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.


Todd said...

Wouldn't those files go to the original licensing authority?

Diane Cipa, The Closing Specialists® said...

Hi, Todd. Not in PA. I'm not sure about other states. The title underwriters will account for and take their policy jackets but as for the transaction files? I know of no rules here. Certainly when I closed Statewide no one even asked about those files OR the money left in escrow accounts. On my own I took over custody of the files in the new company and moved the money for outstanding escrows into the escrow account for The Closing Specialists. We continued to administer the funds until the remaining balances were finally turned over to the state in the escheat process.

Todd said...

I really never thought about it - I was guessing.

Anonymous said...

I've been told you give the underwriter call, and set aside 6 months of operating expenses if you want to do this the right way. I wonder how often this happens.

My partner and I folded our old operations into a new venture. We still service those files, but I don't think we have to. We just do.

Diane Cipa, The Closing Specialists® said...

It's a very interesting topic. Add to that the escheat issue and it gets REALLY interesting. I am in the middle of a Dept. of Treasury escheat audit that has been going on now for a few weeks. I hope I've made the right decisions all along but since there really isn't title underwriter guidance I've made my own calls on what to do and when.

Unknown said...

I have a mortgage from 2000 that showed active on the title search. The title company is no longer in business. I contacted the underwriting company but they have no records for the 2001 mortgage that would have paid this off. What options are there to clear our title so we can close our va loan.

Diane Cipa said...

I'm guessing the 2000 mortgage was paid off in a refinance in 2001? That means you probably paid for lender title insurance in the refinance, right?

[If I have misunderstood, let me know.]

If you have a copy of the HUD-1 Settlement Statement from the refinance in 2001, ask the title underwriter to use that for a basis to issue indemnification to the new title insurer for your buyer. That will often clear the way for closing.

If you lost the HUD-1 you could ask your mortgage lender from 2001 if they will give you a copy.

Hopefully someone is contacting the 2000 mortgage lender and asking them to verify that the mortgage is paid in full. Lenders often neglect to file satisfaction documents at the courthouse OR sometimes the courthouse indexes them improperly so they can't be found. The lender can file a sat. piece now.

If no one will help you, you could contact the state insurance department to see if they will assist in getting the title underwriter to be more interested in a resolution. The agent who went out of business was supposed to verify that the satisfaction was filed and they didn't do their job, hence the title underwriter didn't do their job.

I am sorry that you are experiencing this problem. Thank you for posting the comment as it DOES help consumers to understand the value of keeping important papers, just in case.