Friday, November 30, 2007

query: what happens when a title company closes

I am interested to hear from readers on this one. Are there specific procedures in your state? As far as I can tell, it's pretty haphazard or perhaps I should say each situation is unique?

The title underwriters will perform an audit to make certain they have accounted for all policy jackets and that the premiums for issued policies have been remitted.

If the title company is closing without a successor taking over, I'm not certain who takes custody of the remaining escrows. A responsible title agent would make arrangements for someone to take their files and accounts. It's sort of like a law office closing. Someone at least takes the records.

If a title company closes without warning, perhaps due to defalcation, the title underwriters and bond companies and perhaps the state would step in to resolve accounts and protect the public.

What do you think, readers. Do we have anyone who's been through this that might want to comment anonymously?

Tuesday, November 27, 2007

query: life insurance agent made a mistake on irrevocable trust

I just need to ask this question because I'm a humble title insurance agent and not a life insurance agent - why is a life insurance agent preparing a trust? Is that usual?

Anyway, the trustee will have to amend the trust to fix it. Perhaps you'd want to have an attorney handle it this time around.

We do run into errors in trusts when reviewing them for title insurance. We only notice or comment on errors that relate to title, BTW.

We had a transaction last month in which it was discovered that the wrong property had been deeded into the trust. In that case, their attorney considered doing a corrective deed but it made more sense to simply have the estate deed the property directly to the buyer.

We had another transaction in the office today in which the trust set up a life estate for a sibling of the settlor. We asked that the sibling join in the deed to extinguish her interest, even though it wasn't cited in a deed. The attorney for the trustee opted instead to simply amend the trust and remove the life estate provision. This was not an error in the trust but I raise it as an example of a last minute correction used to quickly resolve in issue.

Saturday, November 24, 2007

query: what happens to a mortgage after it closes

That's a really good query. Thanks. Good post-closing functions are key to running an efficient title agency and loan servicing operation. Let's take a look at post-closing from the perspective of both the title agent and the mortgage lender.

Let's start at the point where the "closer" takes the documents back to their office following closing. The "closer" will perform a final review to make sure they haven't missed any signatures or conditions. The "closer" makes notes for post-closing clarifying any issues that may have arisen at the closing table. [For instance, let's say the sellers paid a water bill which was listed as owing on the HUD. The note would direct post-closing to verify that payment so they can void the check to the water company and refund the money to the seller.] The "closer" turns the entire file over to post-closing.

Post-closing once again audits the entire document package trying to find any errors. They check notary seals, dates, addresses and names; they also check money. Post-closing is the final balancing point to be certain that proper amounts were received from the mortgage lender and the buyer. The checks are verified against the final signed HUD-1 to be certain no changes made were missed.

Once satisfied that the transaction has been properly closed, the original Deed (conveyance) and Mortgage/Deed of Trust are sent for final bringdown and recording at the courthouse. Certified copies of these documents will be combined with the other original documents and organized in whatever format the lender has requested. Each lender has its own set of instructions for final delivery of documents. Post-closing must be very detail oriented and able to read and follow intricate instructions.

Mortgage loan payoffs and payments from the HUD-1, anything that has not already been disbursed, will be processed by post-closing along with any related letters such as tax collector notifications and mortgage satisfaction requests.

Short form loan policies are created for delivery with the loan package. The file information is logged for the title underwriter.

While all of this is taking place, the post-closer is making copies all the documents for record retention.

At this stage, the loan package, the recording package and all other payments and notfications are sent out via courier or US mail. The file then awaits the return of recorded documents and upon receipt, the final delivery of the original mortgage goes to the lender and the owner policy is issued to the buyer along with their original deed. Copies of both title policies along with a check for the insurance premium are mailed to the title underwriter.

Finally, the entire file is scanned for storage and the paper contents are shredded.

That's the perspective of the title agent, now let's look at the mortgage lender.

The document delivery receipt area of a mortgage lender will usually be in the secondary marketing center. At this location the file will be audited for adherence to the closing instructions. The original note will be routed to custodial care and placement in a pool destined for sale in the secondary mortgage market.

A copy of the note and the remainder of the document package will move through the various lender procedures with applicable data on taxes and insurance and the repayment program being entered into the servicing computer. The file will be scanned and the original documents will be placed in storage. Quality control will pull certain percentages - at least 10% - of the transactions for yet another review.

You should expect to wait at least 30 days before your file is completely accessible by your mortgage servicer's customer service center. In the interim, your title agent or mortgage origination center will be your contacts for issues that need immediate attention.

Friday, November 23, 2007

query: the future of title insurance

Boy, you and me both, we could sure use a crystal ball now couldn't we?

We "traditional" title examiners and agents are operating in a strange industry quagmire in which our supposed leaders and purveyors of what we have to sell - the big title insurance companies - seem to be hell bent on destroying our product - title insurance.

This product which found its roots in the hands of carefully trained attorneys and conveyancers and examiners who had a love for the land and a respect for the quality and integrity of the conveyance process may not survive.

Title insurance has been bastardized by the so-called leaders of our industry and has been reduced to a vehicle for the payment and collection of referral cashola and laid out as the base for the creation of gold plated data silos.

Now, instead of spending energy and creative thought on the education and ethical conduct of title professionals, these "leaders", who are scofflaws themselves, expend all effort in the creation of more referral affiliations and teach how to skirt laws in the quest for cash and data for the silos.

It's a crime against the industry, it's a crime against consumers who deserve and need a quality product provided by ethical, well trained professionals, and it's a crime against those of us who chose what was once an honorable profession. We who made careers, loving and learning the laws governing real estate, have been sacrificed upon the rock of prostituted standards which sits in the church of greed.

I have hope that the future of title insurance will be saved by state and federal regulators who have the ability and motive to rein in the outlaws of title. We're not too far gone to restore a quality product of use to the consumer and we haven't yet lost the professionals who can train and mentor those who come behind us.

query: what does spouse mean

A spouse is a partner in marriage, husband or wife.

Monday, November 19, 2007

Thursday, November 15, 2007

query: FHA loan, husband not on loan, can I add him to title

I paraphrased that one. ;) This is FHA's rule, not a state issue. Unless the guidelines have changed, FHA lenders want the vesting on title to match the loan. So, it's likely that the mortgage lender will not allow your husband to go on title.

query: title insurance agent model act pa escrow

This is probably what you are looking for.

Wednesday, November 14, 2007

Where do people find these idiots? Here's a story about a bunny, a treestand, a frog and Mr. Wacko.....

Does that sound too harsh? Maybe it's got to sound harsh because we've got this crazy deal that looks like a scam on the one hand and on the other, absolute incompetency. I can't figure out if they are all just plain dumb or if somebody is really trying to get one over on the other. It's bizarre. Here's the story:

A young lady contracts to purchase a house. She is probably a subprime candidate and might have gotten approval a few months ago, but now she can't. Her mortgage loan was rejected and the Realtor can't find a lender to take her.

Enter Mr. Wacko, the licensed mortgage broker (Yes, we checked.) who offers special private financing. Mr. Wacko finds investors who purchase the real estate then sell it to the "buyer" in a rent to own program. So, it's really not financing but that's what he calls it.

I forgot to mention that the property in question is REO. The giant lender who owns this property insists that the contract with our young lady be released and a new contract be drawn with the new buyers. The Realtor complies.

The buyers in the new contract read as follows: [Don't worry, these aren't their real names.]

ACME Partners, Bugs Bunny, partner
Harold and Maude Treestand
Barney and Molly Frog

There is a letter attached to the sales agreement which was included in the submission to the REO attorney. The letter indicates that the parties wish to take title as tenants in common and that they wish to have an equal three way split of ownership.

The big REO attorneys don't believe in faxing proposed deeds. They deliver the original signed deed via courier on the day of closing. Our buyers wanted a mid-morning closing and they wanted us to travel to them which was one whole county beyond the property location and the offices of both Realtors. We agreed but noted that we wouldn't have the deed in hand. We'd fax a copy for their review to the table. That was the plan.

We received the deed and I noted the grantee section read as follows:

ACME Partners, Bugs Bunny, Harold and Maude Treestand (husband and wife), Barney and Molly Frog (husband and wife) as tenants in common

This bothered me. The buyers were not represented by legal counsel. They were relying heavily on Mr. Wacko, the licensed mortgage broker, who brought them into the deal. BTW - It's a cash deal.

I am not an attorney. I am a licensed title agent. When I read that grantee section, I see FOUR entities in title - one partnership, one individual, and two married couples. I am fairly confident that it is the intention of the parties that Bugs Bunny is not taking title as an individual but in some relationship to the partnership. I can't give legal advice. My title policy will match the deed and therefore these folks have to decide how they want to take title. I can't advise them, but when I see a situation in which I think they are off course, I try to make it PRETTY obvious that there is an issue they should look very carefully at and perhaps seek legal advice.

So, we made an extra first page of the deed and typed "Manner of ownership is acceptable" next to the grantee section and asked the closer to have them initial it. We asked the closer to make certain they took time to read it and decide if it was correct.

They didn't like it. They wanted us to add language delineating the three way ownership. I said I'd be happy to but before deciding on that language I wanted them to look again at the partnership and I asked if they had an attorney. Mr. Bunny said yes and he said that he was happy with the way his name and the partnership were typed on the deed and so I said fine.

I still felt uncomfortable because it's a crappy grantee section and I do not under any circumstances want to leave this work in a file without some evidence that I had not created the deed in this manner. I wanted a paper trail so that it was clear that these folks had approved and chosen their language themselves.

So, I asked them to simply write down the words they would like us to add to the deed to delineate their ownership shares. At this point Mr. Bunny put Mr. Wacko on the phone and Mr. Wacko insisted that we use the language of his letter. I said that though I could type the contents of the letter in that section, we really only need them to describe in a few words the ownership split. Mr. Wacko got all bent out of shape and refused. He insisted that we draft language and he would review and approve it and I refused.

We didn't close.

This case got even more complex when I spoke with the Realtor who informed me that this partnership was set up between Mr. Bunny and his child and spouse, Harold and Maude Treestand, so that when Mr. Bunny dies there won't be any inheritance tax. I told the Realtor these folks really need legal advice. I get the distinct impression that Mr. Wacko is out there putting these deals together and I don't think he has a clue how far out of his league he really is.

This will sound cruel, but I really think Mr. Wacko is ignorant and perhaps just plain dumb and he thinks he's really smart and he is leading all of these people into transactions involving large sums of money and giving all kinds of advise outside of the license of a mortgage broker. Frankly, I think he's practising law without a license. That's not my business and I don't see any fraud. I see stupidity but no fraud so as long as I document that we aren't causing the stupidity, I'm fine.

The REO attorney has asked them to suggest language and they have thus far refused to provide it and so we wait. In the meantime, these folks are under contract with no contingencies and a $100 per day penalty if they don't meet the closing deadline which is coming up fast.

YOI. Double YOI.

PS I love bunnies. I have nothing against treestands though I prefer treehouses. I love frogs, especially those little green tree frogs. I love licensed mortgage brokers - it's the lulus like Mr. Wacko that drive me nuts.

PPS Yes, I agree that the title of this post is only loosely related to the story because I made up a bunch of names but it's late and I'm only half of a creative brain tonight and we have to settle for almost interesting. Sorry!!!

query: title insurance failed to find lien

and hence, the word insurance is oh so important!

You've hit the nail on the head. Human error is one of the two huge reasons for buying title insurance. The other huge reason is theft by fraud.

So, you order title insurance. What happens next? The title insurer has an abstract of title performed either by machine or by an experienced human. The abstract will likely be reviewed by an experienced human examiner who reviews the abstract for accuracy and makes decisions about insurability. The examiner will prepare your title insurance commitment.

If your title company uses fully automated title, they will skip this step and just spit out the poop from the garbage in garbage out machine and plop it electronically into a title insurance commitment form. The poop just plops out and populates all the fields of that form. [Can you tell I don't like fully automated title?]

BTW - Which form of title examination would you prefer? Experienced human professional examiner or plopped out poop from a machine? Human? Good answer - now remember that when you are shopping for title insurance. Ask your title agent if THEY prepare the title commitment or does it come electronically and just plop into their system. If your title agent does not have the expertise to prepare a title commitment, you don't want them messing around with your transaction. They are likely profiteers in the business for a buck and have no professional interest in the honorable profession of land conveyance. Trust me, you want someone who really cares about good title.

So, if the abstractor makes an error and does not find a lien, the title INSURANCE will cover you. If there was no chance of an error, you wouldn't pay for insurance, you'd just pay for a search.

Tuesday, November 13, 2007

query: what happens to a mortgage after property has been subdivided


The preferred query would be - what happens to a mortgage BEFORE property has been subdivided. Well, maybe all is not lost is the sub-divided property hasn't yet been sold. The big issue is to deal with the mortgage BEFORE portions of the property is sold.

First, realize that the mortgage has priority over the subdivision. That's not a big deal because it's unlikely that the mortgage lender will care that you have divided up their collateral into smaller pieces on paper. They WILL care if you start selling those pieces. So what do you do?

Before you transfer or sell a portion of the collateral securing a mortgage, contact the mortgage lender and request a RELEASE. The mortgage lender will likely re-appraise the property. They may or may not require that you pay a portion of the mortgage balance in exchange for the RELEASE. In any case, your attorney or the title agent handling the sale of the property will take care of having the release recorded.

If you have already subdivided and sold a portion of the property, contact the lender now and you can still have that release processed.

query: title company tax mistake

As with any mistake, the title company must rectify it first by protecting the insured, then by recovering losses from the person who should have paid the tax.

Remember that the owner of the real estate has personal knowledge of the taxes and has an obligation to speak up if the title company makes a mistake on the settlement statement. It's not a case of finders keepers. The owner/seller affidavit creates a legally binding acknowledgement that all taxes have been paid at or before closing.

query: what happens after the preliminary title search

The search is examined by the title insurer who then issues a title insurance commitment. Once the transaction closes, the title insurance policies can be issued.

query: what does non-vested spouse mean

It means that the spouse is not a deeded owner of the property. For instance, John Smith buys property as a single man, then later marries. His spouse may have marital rights, depending on state law, but she is not vested in title - her name is not on the deed.

Sunday, November 11, 2007

query: referral fee from a notary public

Setting aside state statutes that may prohibit referral fees, if the underlying transaction falls under RESPA, a referral fee is unlawful.

RESPA rules apply in most transactions involving a mortgage.

query: an insurance agent explains policy I tell him I am not interested am I required to sign a waiver

In Pennsylvania, yes, you are required to sign a waiver. I'm not sure about other states.

Even if the state has no waiver requirement, in a purchase transaction, I would probably refuse to close without a signature on a waiver of some kind. A purchaser who forgoes an owner policy and only pays for a loan policy may be confused and think they have some kind of protection when they have none. The waiver makes the lack of protection abundantly clear and gives the title agent a record of disclosure.

Another angle on that topic is the practice of some title agents and attorneys who don't really explain an owner policy and simply toss a waiver on the nose of the buyer for signature at the closing table. You can't believe how many people I have met who thought they bought title insurance and later found that they had only purchase a loan policy.

When Realtors and lenders are too chicken to quote pricing for an owner policy and low ball an estimate using just a premium for loan policy they are NOT serving the best interests of the homebuyer.

Just for fun, go to our title premium calculator. Plug in your sale price and calculate the premium. Now plug in your loan amount. What's the difference between the premiums? Not much, is it? Pennsylvania is a simultaneous issue state. That means that we issue both the owner policy AND the loan policy at the same time and for the same premium which is based on the higher of the two - loan amount or sale price.

Let's say the sale price is $150,000 and the loan amount is $125,000.

The basic rate to issue both policies would be $1108.75. If the homebuyer did NOT want an owner policy, we would issue a loan policy at the premium for $125,000 which is $983.75. At that level the homebuyer gets NO protection at all. Their entire $150,000 is at risk.

Why would you skimp on the extra $125 and go completely naked on title protection? No informed person would and so we have to assume they have been misinformed and try our best to help them understand. That's why the waiver is so important if used properly and given with a strong explanation.

Saturday, November 10, 2007

query: if I buy land does it have to be surveyed

First, I recommend that anyone buying real estate have an up to date survey whether or not there is a building on the land, but that's not your question.

If the land is part of a larger piece and has not yet been subdivided, then yes you must have it surveyed. A professional surveyor will also guide you through the subdivision process.

If the land has already been adequately described in the public record and there is no mortgage lender or title company setting forth a requirement for a survey, then it's your choice, get one or not.

I recommend viewing a current or at least reasonable current survey to make certain you know exactly where the lot lines sit. Every piece of real estate I have purchased had physical lot line characteristics at the site that did not match the survey and so in each case I was surprised to find where the real boundaries were. Having an accurate survey in hand is the only way to know exactly what you are purchasing.

Friday, November 09, 2007

query: will most mortgage lenders accept properties that are in a revocable or irrevocable trust

I would say many lenders will deal with the revocable trust because they'll see it as a tax vehicle and not really as a form of ownership. You should expect to provide a full copy of the trust. You should be prepared to sign the promissory note both as an individual and as trustee.

Realize that many lenders may not be familiar with trusts and therefore won't want to deal with it so you may have reduced availability of mortgage products.

I've never been involved in a mortgage for property in an irrevocable trust. I would presume that you could mortgage the property so long as the trust document allows, but there may be mortgage underwriting restrictions I am not aware of.

Shop around. I guess, is really the best advice.

Thursday, November 08, 2007

query: what does a seller pay for on a settlement statement and what does a buyer pay for on a settlement statement

The distribution of costs on a settlement statement will be determined by local custom or the negotiated terms of the sales agreement. I'll give you an idea based on Pennsylvania.

Seller pays for:
  • deed prep in most counties [buyer pays in some]
  • taxes and lienable municipal charges that are currently due and payable
  • outstanding liens and mortgages
  • courier and/or banking fees related to mortgage payoffs
  • one-half of the transfer taxes
Buyer pays for:
  • mortgage lender charges, if any
  • title insurance & closing services letter
  • courier for document return to lender, if any
  • document preparation or settlement fee
  • one-half of the transfer taxes
  • reimbursement for lien letters in most counties [seller pays in some]
There is usually a proration of taxes so that each party has paid their fair share as of the date of closing.

All of these items are negotiable except where prohibited by law. We do have transactions in which either party has agreed to cover all of the costs. So, talk with folks in your locality to get a better handle on what goes on in your county and state.

Wednesday, November 07, 2007

query: what happens to mechanics lien on a foreclosure

Check your state rules and consult a competent real estate attorney, but I believe that a mechanics lien would be divested with good notice.

Tuesday, November 06, 2007

query: when to cancel title insurance

There is no need to cancel your title insurance. It's a one time premium.

The loan policy will automatically cease when the mortgage is paid off.

The owner policy will stay in effect and protect you for as long as you have an interest to defend. It even survives the sale of the property. If you sell the property and at some point you are contacted by someone with a claim related to issues that would have been covered under your policy, the title insurer will STILL defend you even though you no longer own the property. This is because title insurance insures backwards. So if the issue in question occurred before the policy was issued and you are at risk, contact your title insurer to see if it's covered

query: does the buyer get a temporary title policy from ALTA

Title insurance comes in two stages.

First, you will receive a title insurance commitment. The commitment is NOT insurance. It's sort of like a mortgage approval letter. It tells you the title has been approved for insurance subject to certain conditions which must be cleared before the policy is issued. These conditions are listed on Schedule B1. The commitment will also list items which will remain as exceptions to your insurance coverage. You'll find these exceptions listed on Schedule B2. BE SURE YOU GET A COPY OF YOUR TITLE INSURANCE COMMITMENT BEFORE YOU CLOSE AND BE CERTAIN THAT YOU UNDERSTAND IT.

Okay, once you close and the deed has been recorded, the insurer will issue your owner policy. You typically receive the policy with the original deed in the mail 30 to 60 days following closing depending on local custom.

If you don't receive it within 60 days, contact the insurer. It's possible that the documents are taking longer to come back from the courthouse. If this is the case and you want to confirm that your deed was recorded and that a policy is forthcoming, you can ask for a copy of the recorder's receipt and a "marked up" commitment.

Monday, November 05, 2007

query: is there anything funny about title insurance

You must be kidding me! That's a riot. LOL

No. Sorry, can't think of one single funny thing about title insurance.

I can think of a million gazillion laughs we have had over the years but none truly related to title insurance.

Closings? Yes, plenty of hilarity there, but title insurance is pretty ho ho hum..........

safety net in play today to protect an elderly customer

I received an odd phone call at the end of the day today. The Derry Township municipal authority called me because they had in hand a request for a lien letter for a customer they knew to be an elderly lady. They called because a young woman had come into their office today with the elderly lady's credit card. The young woman wanted to use the card to pay for her own utility bill, NOT the elderly lady's bill.

To the credit of the municipal authority's manager, they refused to take it for payment and called our office. I explained that I couldn't release any information from our files but they asked if we could make a call to family or to the lady's attorney - anyone who is looking out for her interest.

We reviewed the file and noted that the transaction we have in process is a FHA reverse mortgage. We know the loan officer and have great respect for him so we called to ask about the persons who have power of attorney. He shared that the persons who have power of attorney appear to be trustworthy relatives and noted that the elderly lady has in home nursing care. He suggested we call the family which we did.

The lady's relative was very thankful as she suspected something was amiss. She looked into it and confirmed that the young lady who was watching over the elderly lady today had convinced her to "help" and had actually taken the credit card for her own use.

I am amazed and thankful to the Derry Township municipal authority for NOT ignoring the matter and I am happy that we were able to assist in protecting this nice lady.

How about that????

query: what is a title company prepared lien certificate in lieu of title insurance

Bullshit. Truly, why would any title insurer offer to sell you a lien certificate when they are in the business of selling title insurance? It just doesn't make any sense and I wouldn't place any trust in that piece of paper. Someone is blowing smoke in your eyes.

query: buying a title underwriter

Well, you've got me stumped there.

query: insure over a lis pendens

Don't bother to try. You won't find an underwriter that stupid. Even I tried to suggest insuring with an escrow of all proceeds which was far beyond the equity in question. The bottom line is that the insured transaction may be rescinded by the court and nobody wants to jump in that pea soup.

Friday, November 02, 2007

query: is title insurance refundable

I'm going to just say no because I can't think of a single reason why it would ever be refunded - other than by an order of court in a settlement of some kind. So, in the general realm of title insurance, I would say no, it's not refundable.

query: undisclosed seller concessions

The "undisclosed" part of your query implies there is a third party to whom the concession would have meaning. If that third party is a mortgage lender, the lack of disclosure is mortgage fraud.

Mortgage fraud is a crime. Do you look good in stripes?

Thursday, November 01, 2007

query: if you pay your loan off early you will not be entitled to a refund of part of the finance charge

Tonight we have two mighty long queries, oh but this one I could type with my eyes closed. It's been a long time since I uttered these words but I did so in every closing I ever performed.

This phrase comes verbatim from the Reg Z. Let's look at it again - just so I can say it for old times sake. ;)

If you pay your loan off early you will not be entitled to a refund of part of the finance charge.

Contrast this with the alternative.....

If you pay your loan off early you may be entitled to a refund of part of the finance charge.

Oh, this is so exciting! Well, you know what I mean....

Most people when they read this phrase look at the total of payments at the top of the form and get real nervous. Don't worry about it. The disclosure is not saying you'll have to pay all of that interest. Your mortgage interest is paid in arrears, not in advance.

For instance, let's say you are closing in August and your first mortgage payment is due in October. When you make October's payment, you are actually paying the interest for September. When you make the payment in November, you are actually paying the interest for October and so on. Because you are not paying your interest in advance, there is nothing to refund. Get it?

In fact, when you payoff the mortgage, you'll be playing catch up with the interest. This is always a surprise to most folks as they expect their payoff to match the principal balance. It doesn't.

Let's say you are selling your property in December and so the payoff is taking place in December. The last mortgage payment you made was November. Well, the November payment actually paid the interest for ????? - that's right, October. Sooooo, your mortgage lender will add interest for November and the odd days of December into the payoff figures. Make sense?

OK, now let's consider the alternative version of your query. Under what circumstances might you be entitled to a refund of part of the finance charge? You'd have to be paying the sort of finance charge that is paid in advance and that is usually mortgage insurance - either FHA or conventional private mortgage insurance. The mortgage insurance may be paid ahead and a portion of that insurance may be refundable should you payoff your mortgage loan early.

Thank you for a good query.

query: forced by mortgage broker in a refinance loan to sign all the closing documents that had all the documents had the dates forged

Yoi! Well, first let me say that this is not a title insurance matter unless the title agent or their representative assisted in the forged signing. If that's the case, you may wish to contact the title company.

I personally think your best bet is to pursue the matter under truth in lending rules and you should seek the assistance of an attorney. Your attorney can look into your right to cancel the transaction or other options.

If you don't want to hire an attorney you might want to raise the case with your state attorney general.