Thursday, April 10, 2008

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.


Diane Cipa said...


Within two hours I received a gracious call from the attorney for the bank. It was all a miscommunication and all will be made right. Isn't that great and I am so thankful for a friend who alerted us to the issue.

ellopez said...

Nice work. And so well put, how could the bank not only agree with you, but are probably humbled by your integrity.