proposed RESPA reform and the closing script comparison of the Good Faith Estimate and final HUD-1

Consumers should know that HUD is trying to set up a procedure that safeguards consumers in the mortgage shopping experience and also at the closing table.

I support what HUD is attempting to do because an empowered consumer is a safe consumer.

You should know that trade groups are waging a war against HUD and this reform. If you have been burned in a real estate transaction or are simply a concerned consumer, please write to your congressman or senator and ask them to support HUD in the new RESPA reform.

What will RESPA reform do for you?

It will create a uniform Good Faith Estimate which clearly discloses terms and also creates burdens on the loan originator for correct quotes.

At closing HUD wants the closer to read from a prepared script which compares the Good Faith Estimate to the final HUD-1 in a way that is easy to understand and that would point out errors or misquotes. The great thing about this script is that the language is mandatory which means that someone can't change it to imply that the terms are anything but what they are. In other words, the closer cannot misinform you about the documents you are signing.

HUD will not tolerate misquotes on loan fees unless there are unforeseen circumstances so in this way YOU would be protected because the entire lending process will focus on getting things right before you go to the closing table.

Please help us help you. Speak up now and help HUD create a marketplace that serves the consumer. Pass the word.

You will find more information on these proposals on the HUD web-site which is linked on the right side of this blog.

a notary public ought to know better

I've got a case on my desk with a seller who has Alzheimers and a Power of Attorney that doesn't have a full acknowledgment and doesn't meet our state statute requirements for notice.

I asked the seller's daughter who prepared the Power of Attorney and she said the notary public prepared it.

I hear you. I hear everyone shouting THAT'S THE UNAUTHORIZED PRACTICE OF LAW to which I reply, yes and we see it a few times every year. Crappy deeds and other documents that have been prepared by those who shouldn't.

This family who trusted the notary and wanted to save a buck are in a bind. I'm attempting to work out solutions but there isn't much money in the pot and going to court for guardianship is an unlikely alternative.

The seller no longer has periods of lucidity and so a new document is out of the question.

The Power of Attorney does meet pre-2000 requirements except for the missing acknowledgment language.

It's a cash deal and I have discussed an exception to coverage for matters related to the statutory failings of the Power of Attorney with the buyer. I am contacting our underwriter for permission to insure with that exception provided the Recorder takes the document with the notary clause as is.

Fingers crossed.

query: does title policy follow the mortgage on a sale

I presume you mean the sale of the mortgage. Yes, when a mortgage loan is sold, the loan policy follows it based on the phrase "its successors and/or assigns" which is typically found on Schedule A following the name of the insured mortgage lender.

If for some reason this language is missing, I don't know if the title company would cover a claim.

query: who selects the title company in PA

Frankly, the consumer - the one buying the title insurance - selects the title company ALL over the country and not just in PA.

They may permit others to make the selection for them, but the choice remains in the hands of the consumer.

query: does a HUD-1 statement have to be signed

If the transaction falls under the Real Estate Settlement Procedures Act [RESPA], I say yes, it must be signed. The HUD-1 is a core disclosure under RESPA.

query: mortgage in husband's name, title in both in PA

The validity of the lien is questionable.

query: how long does it take for a mortgage payoff to post after closing

This is a very important query.

First, as a consumer, you should verify at closing which method will be used to payoff the mortgage. Is the settlement agent wiring funds? If they are sending a check, is it going out via courier or US mail?

I don't trust payoffs to the regular mail. Interest is accruing and do YOU really want to wait and how long would it take to find that something was lost?

The funds should go out from the settlement agent's office the day of closing or the next business day. The mortgage lender receiving the payoff may have a mid-day cut off time. Many do not post after 2pm.

So, with all that in mind, you should expect a mortgage payoff to post within 2 or 3 days after closing. Beyond that, consider it a problem and make a phone call.

just a note...

We got really really busy and I have a key person on vacation so I'm not as quick on the draw this week. I have all of your questions and will get them up here or respond by e-mail as soon as I can. Thank you for reading and thank you for participating. Don't you love blogging?

query: the condo I bought has no insurance, would the title company be involved

This isn't cut and dry, but in my opinion, the title underwriter company wouldn't be involved. That's because matters related to the condominium would be an exception to title insurance coverage.

On the other hand, the title agency might be involved IF as part of their due diligence and examination, they were to obtain a condominium resale certificate. I am only familiar with PA condo requirements so you'll need to check your state's rules. In PA, the seller is responsible fo obtaining a resale certificate for the buyer. The certificate will disclose the amount of insurance and the insurance carrier. The buyer has an obligation to review the certificate prior to closing. A title agent should be reviewing the certificate also because they'll need to look for lienable items.

Whether or not the title agent has liability that would overcome any liability of the seller or the buyer, I doubt it, but I think you should look into the matter.

We had two interesting potential title claims this week involving errors in tax certifications.

Before anyone has a heart attack, we were able to resolve both. Here's the short version:

One transaction closed in 2005. Our insured homeowner just received a statement for delinquent street light fees for the years 2000 through 2003. He thankfully contacted our office rather than paying the bill. We looked at the file and found that the tax collector had verified 2004 as paid and told us to check with the tax claim bureau for prior years. We did and received a certification free of liens. We also got a municipal lien letter from the township which was clear - no unfiled lienable items outstanding.

So what happened? It turns out that the township sends street light delinquencies to a separate collection agency and these folks just got around to making a try for collection now, in 2008. I resolved the matter by pointing out that the township could have filed a lien within 3 years but that time had expired and also that they had an obligation to disclose the delinquencies in their lien letter. They agreed and are dropping the matter.

The other transaction was a foreclosed property that had just closed. We obtained a current year tax certification and a certification from the company who handles delinquent taxes. We collected taxes owing for the current year and also for a few prior years and closed. Upon receipt of our check, the tax collector called to say she had just turned last year's tax over to the collection service and that we owed that as well. We are pretty peeved because she had that knowledge and failed to disclose it. She had the gall to say "You didn't ask." - yoi.

Anyway, I can't fault the collection folks because they didn't have the information at the time we made the inquiry. Everything moved very quickly in preparation for this closing.

Resolution was made by the seller, the REO lender, making good. They stepped up to the plate and are paying the tax.

Our consumers in both instances were entirely covered and not at risk because they had purchased owner title insurance.

for the benefit of our friends in the UK

The word spouse means your marital partner, wife or husband. ;)

don't walk away.........

Here's a bit of sanity......

On March 31, Fannie Mae sent out new guidelines to lenders intended for walkaways and other foreclosure situations. Fannie will now prohibit foreclosed borrowers from getting another mortgage through the giant investor for five years, unless there are "documented extenuating circumstances." In those cases, the mortgage prohibition is for three years.

Even after five years, borrowers with foreclosures in their files will be required to make at least a 10 percent down payment, and will need minimum FICO credit scores of 680.

thought you might also find this interesting.....on the subjects of REO and bank owned title agencies

Yesterday, I received an e-mail from a real estate agent containing a heads up that this language was in a MLS data sheet:

"No Closing Specialists on title work or closing."

That was pretty shocking. I looked at the name of the listing agent and saw that it was someone for whom we do work all of the time so that was odd. I looked at the name of the seller and saw that the seller was a bank selling REO. We do lots of business for this bank and so that was odd. Then it came to me. The REO department manager always refuses to sign the Owner/Seller Affidavit and I figured that might be at the heart of the matter, so I called both gentlemen.

The listing agent said he was following the bank orders and had no problem with our office. The REO manager acknowledged that it was his decision to avoid our office and YES it was because of the affidavit.

We have a good relationship with this bank and also with their legal counsel and so I faxed this letter to their attorney today.

Thought I’d fax this over for your review so we could talk about it. Please call me at 888-680-5177 x104 when you have a chance.

I spoke with redacted, the listing agent, and he said he was following bank orders per redacted. I spoke with redacted who said he doesn’t want to deal with us in a transaction because of our position on the Owner/Seller Affidavit.

I have a few concerns here. First, let me address the core issue. We are agents for title insurers and are obligated to follow their underwriting guidelines. I am aware that many title agents do not take their obligations seriously and perhaps accept the bank’s cross-outs on the affidavits or refusal to sign without regard to their fiduciary duty to their underwriter. We take our contractual and fiduciary duty seriously. In that spirit we carefully review the concerns of a seller and amend the affidavits as necessary to retain a balance of clear disclosure from the seller without gutting the purpose of the affidavit.

I know I don’t have to explain the purpose of the affidavit to you but I’ll just give you my gist so you get my perspective. The bank is giving a special warranty deed. The title insurance uses the affidavit to create a legally binding warranty from the seller as an inducement to insure. The warranty covers those items, which the seller may have caused, contributed to, or had knowledge of and failed to disclose as part of the transaction.

Since the bank has acquired the property in foreclosure, it is reasonable to presume that the bank would have no personal knowledge of material facts that occurred prior to the acquisition of title by the bank. Adding language speaking to that issue is absolutely okay with us. Removing ALL of the warranties is not acceptable because there are or may be circumstances, which occurred in the foreclosure process, or since the bank acquired title for which the warranties would provide material relief to the title insurer. The Owner/Seller Affidavit is a core document in a title insurance transaction.

We’ve discussed before that redacted owns a title insurance agency. This agency monitors and uses the Owner/Seller Affidavit in the normal course of their business.

Rather than shut our office out of future transactions, I would hope that we could work out language in this affidavit that works for both the bank and title insurers.

On the issue of the prohibition naming our company in the MLS data sheet. I objected strongly and redacted did offer to have redacted remove it.

I raised the subject of RESPA with redacted in that RESPA does prohibit the seller of real property from directing the buyer’s choice for title insurance and settlement services unless the seller is paying for these items on the buyer’s behalf.

I certainly do not think that redacted means to harm The Closing Specialists and I chalk this up to a misunderstanding. I welcome an opportunity to discuss it and hope we can reach an amicable resolution.

You might enjoy this article

written by yours truly.

query: does the seller get overcharged on settlement costs

Yes, indeed they do. Sellers, like buyers, should shop for settlement service providers or at the very least make certain that the settlement agent being hired by the buyer isn't overcharging on the seller side.

We see this in the Pittsburgh metro market all the time. A buyer hires a settlement agent. The settlement agent charges the seller a settlement fee. Why? Does the seller have to pay? No, not unless they bargained for the service.

Seller should ask around and find out what is customary in their market and also whether there are options to reduce their settlement costs.

query: sellers title insurance bulls*it

Could you be more specific? ;)

query: if I'm on the deed but not on the note, can I get info on the loan

Hmmmm...probably not because of privacy laws. Did you sign the mortgage? In many states co-owners must sign the mortgage in order to validate the lien. If you signed the mortgage, the lender might consider you a party to the transaction and release information.

query: how long should it take to take care of a claim

Hi Diane,

Have a question, how long should it take to take care of a claim? I have filed a claim with my title insurance co. They have hired an attorney. I have been told it could take a while. I was under the impression that the title company should pay the lien and then subrogate for the money. Just like in auto insurance. So it free's up my title. Am I mistaken? Please let me know your thoughts in the matter.
Thank you,

Coleen

Hi, Coleen: The title company has the right to litigate and so some claims do take a long time. Your question goes right to the heart of a major dispute in the title insurance industry, casualty style underwriting versus traditional title examination underwriting. I'm a traditionalist. Most of the premium you pay for title insurance TRADITIONALLY went for a professional examination of title which took a little time but it was thorough. The purpose of the examination was to find and eliminate clouds and potential risks BEFORE the issuance of the title policy. In this way, title insurance had very few cases to litigate because the real work was in risk avoidance. This traditional method worked well for consumers because they rarely had to face a claim. The policy itself was more of a safety net meant to catch errors and fraud.

The problem is that the mortgage lending industry and real estate sales community started demanding profit centers under the RESPA affiliated business guidelines. This lead major title underwriters into the creation and support of many small title agencies. Each agency had to be run by a licensed agent and since there were not enough experienced professional agents to man all of these agencies, standards were lowered. There followed a demand for cheaper and faster title commitments which resulted in title underwriters creating automated searches or semi-automated searches or simply ignoring search standards.

Frankly, the title underwriters decided to bet that they would make so much money that they would be able to cover all the extra claims. They essentially embraced a casualty style of underwriting for an insurance product which is NOT a casualty product. This casualty philosophy decimated traditional infrastructure and hung the consumer out to dry.

Claims which were once rare, are now flooding into underwriter offices and the old style procedures which were never changed to handle volume may seem tortuous to consumers.

The best defense a consumer has is to select a traditional professional title agent when the insurance is purchased and reduce the possibility of going into a claim. Once you are facing a claim, you've just got to be the squeaky wheel. Keep good records, document everything and don't let them put you on the back shelf. ;)

query: title insurance fee new construction rate in PA

See TIRBOP Section 5.4 SUBDIVISION OR CONDOMINIUM REGIMES

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

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

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

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

If this section does not apply to your circumstances, then normal title insurance rates cover the policy issued for the construction loan, then see......

TIRBOP Section 5.7 PERMANENT LOAN FOLLOWING A CONSTRUCTION LOAN

When a policy has been issued on a construction loan mortgage, and within 6 months from completion of the building, the same mortgagor executes a new mortgage, the Charge shall be 50% of the reissue rate provided that the new policy is being issued by the same Insurer which issued the previous construction loan policy.

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

query: filing a claim for title insurance

Hi Diane,

I read your blog about filing a claim with the title insurance company. I've never done it before, but it looks like filing a claim like any other kind of insurance.

Do you think its necessary to hire an attorney to do this? The reason I ask, is there are other people in this deal ready to hire an attorney and pay a $15,000 retainer to do this. Would the title company pay legal costs too?

Richard

You can hire an attorney but you'll likely pay THAT attorney's bill yourself. Make the claim with the title company in writing and send it by certified mail. You'll need evidence of the time of receipt. Make this initial claim immediately. An attorney can help you draft it, if you like, but time is of the essence and you have a duty to mitigate damages.

The title company has to option of paying a claim or defending you, so that means they MAY hire legal counsel and take the matter to court.

So, it's possible that you will be working with two attorneys, the one you are paying and the one hired by the title company.

It's your call which I believe really depends on whether you are comfortable drafting a claim yourself and/or whether you believe the title company is treating you fairly.

Remember that you are dealing with the title company listed on the jacket of your owner policy, not the title agent or attorney who might have issued the policy.

Thank you for the question and I'll be posting it today. Good luck!

If you are wondering whether or not to buy OWNER title insurance coverage,

here's yet another example of homeownership at risk. Only those individuals who have purchased their own title insurance will have protection in this case. Here's a blurb:

"The unit owners, in the normal course, would have purchased title insurance at the time at which they bought their units," said Riley, who is not involved in the case. "This would insure against a situation where their rights might be jeopardized by prior interests."

Riley said that National City and Richland Properties have a right to collect on Link Development's unpaid bills, even through measures like this -- that could force the condo owners out of their homes. "Those companies are exercising remedies that are provided for in the law," he said. Lower Burrell attorney Gino Peluso said the situation facing the condo owners boggles his mind.

"I couldn't understand how this was happening," he said, "unless (the owners) didn't go through a standard closing. It seems grossly unfair. How can you do that to somebody who's paying the mortgage on their property?"