Tuesday, September 30, 2008
Correct me if I'm wrong, but memory tells me strict accounting mark to market rules came out of the S & L crisis as a solution to prevent failure due to the overstated value of assets.
I don't think we should take lightly any vacation of mark to market rules.
The core and substance of the Paulson Plan - namely the creation of a reverse auction system in which the Treasury acts as the buyer of last resort for mortgage backed securities to help troubled institutions get this hard to value paper off their books - is a sound plan. I think the public and congress over-reacted and so I'd have to say the administration didn't do such a great job selling it.
What we have here is a pricing mechanism failure. Rather than masking the problem with a mark to market vacation - which BTW might not be so easy to undo - the auction system could jump start a real market and other buyers might follow. That's a real fix in which taxpayers are NOT bailing out but buying mortgage backed paper that likely has value far above the purchase price.
I would hope that policiticians could demonstrate leadership and good statesmanlike qualities and help their constituents understand simple business concepts rather than the easy role of demagogue.
Friday, September 26, 2008
I don't claim to be a brainiac, rocket scientist or economist. I'm a street level, street trained mortgage lender and title agent. I lived through what happened at street level and had sufficient exposure to the inner workings of wholesale lending and secondary market operations to get a feel for how it should work and where it went wrong.
I just don't buy into blaming one political party over another because each administration we lived through added their own twang to the song and frankly any sanity in the mortgage industry or securities industry could have ignored politics and held firm to quality in due diligence. That's the job of underwriters and management, not politicians.
As for the Paulson Plan, I can only say this. How we got here isn't as important to me as not dying while we fight out who to blame and stupid politics. We can worry about that stuff once our damaged ship at sea in a hurricane makes land. For now, I'm listening to three people - Paulson, Bernanke and Bair. Why? Because over the last year I have watched them and they have not disappointed me with their critical decision making as they have attempted to bring us home and out of harms way.
I trust that they know the monetary system and have a gut instinct for how all this is moving without perhaps being able to verbalize it. I trust that their intuition senses danger and that they have a very hard time dealing with politicians who don't understand and have to act like they do.
This is not a time for pure democracy. This is not a time for populist decision making. This is a time for leadership and hard resolve and fast action to save our economy from severe damage.
I trust the warnings. I'm willing to trust the plan. Call me an idiot if you want to, that's okay but my guts are talking and I do like to listen to those guts even if I can't articulate their message in any way you can understand.
“The National Compliance Summit promises to deliver useful legal knowledge applicable to title companies’ business immediately,” said
Thursday, September 25, 2008
from The Wall Street Journal
Sept. 25, 2008
Congress reached an agreement in principle on a $700 billion package to bail out the financial industry, leaders from both parties said Thursday. They plan to present the deal to the White House later Thursday, hoping for a vote within days. Lawmakers said there were few hurdles remaining. "There really isn't much of a deadlock to break," said Democratic Rep. Barney Frank, chairman of the House Financial Services Committee. Republican Sen. Bob Bennett said the plan is one that can "pass the House, pass the Senate (and) be signed by the president."
I am now advised that the lot number in my deed and the prior deed is purportedly incorrect. FATIC only provides a current deed with the search and so I called their Quakertown office to get the chain data and perhaps copies of prior documents. They were kind enough to take the call right away and were able to look at the archive immediately. That was impressive, BUT their file as a naked as my file is. They have no chain back beyond the last deed.
They charged me $135 for a full search and they did a stupid-ass current owner which probably cost them $10.
So, I have two choices. I can pass off my customer to FATIC's claim office and say FATIC - YOU figure it out; OR
I can pay an abstractor to research the title -at my own expense - and try to figure out what reality is and how to fix it.
You know me by now. What do YOU think I'm gonna do?
That's right. I'm gonna pay - out of my pocket - to have the title searched back to find the problem and fix it IF it is a reasonably easy fix. If it's a fix that involves a quiet title action, I'll pass it on to FATIC to pay that bill and handle it. I'm hoping - for the sake of my customer - that it's something I can work out.
NOW HEAR THIS ALL YOU FOLKS WHO SAY TITLE INSURANCE ISN'T WORTH IT. Any fix that I do myself is done because the consumer bought owner coverage. If I fix this without turning it into FATIC it will NEVER show up as a claim. GOT THAT?
The work done by traditional title insurance agents in claim avoidance is what you pay for when you buy title insurance.
In the following press release Acting United States Attorney Terrence Berg announced that a 45 year-old Macomb man who embezzled over $2.2 million while working as a bookkeeper for a now-defunct Michigan title company was sentenced to 37 months in federal prison on 9/18/2008. Joined in the announcement was FBI Special Agent in Charge Andrew G. Arena.
Eric McAlpine was an independent contractor performing bookkeeping functions for American Title Works, a title agency with offices in Clinton Township, Livonia and Southfield. Over the course of five years, McAlpine stole checks totaling over $800,000 that were made payable to American Title Works and funded by buyers and sellers of real estate, and/or from lending institutions that granted loans to buyers. McAlpine also stole checks totaling almost $1.5 million that were drafted from American Title Works escrow accounts. As a result of McAlpine’s embezzlement from its escrow accounts, American Title Works went out of business resulting in the loss of employment for its almost 30 employees.
Wednesday, September 24, 2008
from The Wall Street Journal
Sept. 24, 2008
Republican presidential candidate John McCain said he will "suspend" his campaign on Thursday, and asked to delay Friday night's debate against Democratic candidate Barack Obama, so he can return to Washington to deal with the financial crisis. Congress is currently considering a $700 billion bailout plan that is drawing increased scrutiny from lawmakers.
Why have lenders been slow to adopt this technology when so many consumers use online banking and more will in the future? According to a whitepaper by First American Equity Loan Services, many lenders have said there are a number of issues that are preventing them from utilizing electronic signing of mortgage documents.
I was just thinking about it over lunch. All those gazillion white papers Fannie and Freddie and everyone else did on the paperless mortgage transaction...are they all for naught? I doubt that anyone really cares right now. Who survives and how they do business will take place in a clean slate environment.
Guess we'll find out then, whenever then is.
I care about this big bail out. It’s a socialist solution to a capitalist problem. It won’t work. The solution is simple. Banks will figure it out. Re-write the loans or go under. It’s simple shit. We don’t need to be bailing out these guys and their bad decisions. We’re not bailing out the individuals who made bad decisions. Why are we bailing out businessmen who made bad decisions? Screw them. No golden parachutes, you’re an asshole, you made bad decisions have fun living on $1800 a month.
Tuesday, September 23, 2008
Monday, September 22, 2008
Sunday, September 21, 2008
Saturday, September 20, 2008
How do you know your home and the land it sits on belongs to you? One Oklahoma couple was shocked when they tried to sell their home and found they didn't own the land it's built on.
Dennis and Teresa Fine raised three children in their home near Peggs. After 27 years, when they tried to sell their one and only home, they found out the land it's on belongs to the state.
"It was definitely a shock," Dennis says. "We've lived here for nearly 27 years and bought it from the U.S. government. So, I didn't think there would be a problem with the title."
Their modest home has three bedrooms and two baths and sits on just over an acre of land. They have re-financed the home several times and are the third family to own it. They can't understand how the land ownership problem wasn't discovered before.
"Not until this time, not until we tried to sell it."Read more...
Thursday, September 18, 2008
Both the FHA and VA have trouble with the "door to nowhere" situation. You know what I mean. You planned to put up a deck but never did or maybe you HAD a deck, took it down and never replaced it. Basically, you have a door in a wall and nothing on the other side.
Prior to closing, you'll need to fix it. Some will tell you that you've got to put that deck up. Well, not necessarily. If you'd prefer a cheaper option, ask if your can install a bar across the door, or perhaps one of those fake balconies on the outside - a railing close to the house. In the old days we were allowed to nail or bolt the door shut but I don't know if that would fly anymore.
Anyway, that's the deal. Hope it helps.
The Dow Jones Industrial Average soared 400 points amid reports that regulators are considering a Resolution Trust-like mechanism to help banks unwind soured credit holdings and stepping up action against short sellers. New York Attorney General Andrew Cuomo said that he has starting a "wide-ranging investigation" into short selling and British regulators barred short sales of financial stocks. Calpers and other large holders said they are no longer lending out shares of Morgan Stanley and Goldman Sachs.
Wednesday, September 17, 2008
Tuesday, September 16, 2008
Tuesday, September 09, 2008
Monday, September 08, 2008
query via e-mail - Would the "marked up" policy have been as good as a policy without the exceptions?
Sunday, September 07, 2008
Saturday, September 06, 2008
It only happens when the title order comes from a real estate agent or mortgage lender on behalf of a consumer. You see, consumers are pretty darn smart. They select our company for quality of service, expertise and fair price. Consumers understand that the ordering of those services is a hiring decision. I explain Choose and Save and the value of placing a deposit up front versus being billed for cancellation should the transaction not close. Consumers make their choice - deposit up front or not - but either way they get it and if the deal falls thru, they understand they owe us for services rendered and always pay.
In the case of real estate agents and mortgage lenders, they don't always get it - many do, but many don't.
Here's the case on my mind today. I received a call from a loan officer on August 20th - we had done business with him before but not for some time as he switched to working for a mortgage lender that is owned by a real estate company who also owns a title agency and he normally routes his business to the affiliated companies. In this case, he needed a speedy and efficient title agent, this client was a family friend, and so he chose our office. That's very nice and we are happy to help. So.....
I ordered the abstract - a full 60 year search from a qualified expert abstractor with whom we have worked for years. [cost $130] I assigned the file to one of our closing coordinators, MC.
On 8/21, MC called the buyer and left a voice mail explaining who she was and giving him a courtesy heads up and a 48 hour window to opt into the Choose and Save Program. MC also created letters to the seller and buyer and to all municipal agencies. She created a file and faxed title confirmation sheets to the loan officer and real estate agents asking if they had preference for closing time, location or closer. MC cut checks payable to the various municipal agencies and sent them out with the lien letter requests. [cost for lien letters $165]
BTW - The "hello letter" MC created and mailed to the buyer on 8/21 contains - in bold - a heads up that we are processing a title order on their behalf and that if we are NOT to be doing so that they need to contact our office immediately as we have advanced money for abstract and lien letters and there will be a title cancellation fee for services rendered. There is an extremely small window in which we can cancel these things if there has been some kind of mistake.
After completing a full traditional title examination, we produced a title insurance commitment and mailed it to the buyer on 8/29 including copies of maps found at the courthouse and our plotting and a letter which reiterated that there would be a title cancellation fee should the transaction not close.
Yesterday we received a call that the transaction was being cancelled due to property inspection issues. MC informed the buyer that we would be sending an invoice for $300 for title cancellation and he went crazy. Why had we done all of this work when he hadn't decided fully to buy the property. I suggested he should have that conversation with the professionals who handled his transaction as they ordered the title work on his behalf with full authority pursuant to the terms of the sales agreement he had signed.
The loan officer called and wanted to know why we were charging a fee, and I gave him all of the info I have just given to you. We had the pleasure of dolling out $295 to process the file, did a heck of a lot of work in the 7 to 10 day period following receipt of the order so that they would have their title commitment in time to meet their needs. We were only asking for $300.
The loan officer said he would be paying the invoice and I said that's fine.
There are a few difficult issues here but the big one really is setting expectations. The buyer had conflicting expectations. On the one hand the buyer had a fast timeline expectation and that's why the loan officer called upon us because he knew we could perform. On the other hand, the buyer had reservations about the structure and had a property inspection contingency. What the professionals in his transaction failed to do was to explain that in order to stay on target with his fast timeline expectation, it would be necessary to more forward and order services from a title agent while awaiting results of a home inspection. I feel certain that the buyer understood completely that he needed to pay the home inspector. He simply did not understand that he would also have to pay for title work - even though he had signed an agreement to do so.
If the consumer had placed the title order himself directly with our office, I would have had the chance to set the expectations in reality. I do it all the time and it works. We get loads of calls from consumers whose lender or real estate agent suggested they call us to place the order. That's the smart way to do it. It recognizes the relationship between the buyer of services and the provider of services.
So, I'm tossing this post up here for the benefit of real estate agents and loan officers and consumers. Please understand that the ordering of title is the purchase of services. You wouldn't go to a restaurant and order a meal, then cancel it after it was already prepared and placed on the table before you, would you?
Thursday, September 04, 2008
UPDATE: found it...glad to help.
Tuesday, September 02, 2008
Why don't I follow my own advice? Last summer, I said, in this post:
I often advise new borrowers to get a signed mortgage loan commitment, showing the expiration date of the lock. That "commitment" now has to be analyzed for the financial solvency of the funding/purchasing lender. I'll be practicing a strategy of dual submissions until this liquidity crunch clears.
Diane Cipa, a title agent, said, in a comment:
Please don't. It's going to be hard enough for responsible secondary market managers to feel their way through these rough waters without mortgage brokers double or triple locking product.
A more prudent position might be to educate borrowers so that they take some of the risk and understand that the lock is tied to a particular mortgage banker and not you as mortgage broker.
Frankly the lack of liquidity will encourage mortgage bankers to consider shutting off wholesale/correspondent divisions in favor of supporting their retail operations. If mortgage brokers en masses decide to start doing multiple submissions and locks, the shut off may come sooner rather than later. Retail originators can't do multiple locks or submissions and so are a more predictable or reliable source of pipeline data.
Monday, September 01, 2008
Mercury was a title agent, not a title underwriter. That means that they did not underwrite the insurance, they just sold it. The title underwriters - mostly First American - will honor the title policies and are stepping in to clean up a huge HUGE mess.
I am unaware of any comparable situation and so we're all learning here. It will be interesting to see if the corporate veil protects the owners of the company because they apparently have wealth.
It will also be interesting to see how the escrow accounts were maintained and whether in the end the books were reasonably in order.
That said, most consumers caught up in the issue will suffer inconvenience and hopefully not actual loss. We know that checks have bounced in operating accounts of at least one subsidiary. I know of one escrow check that bounced but due to the help of the notary signing agent who pleaded with the insurance department for assistance - the consumer's check was covered.
If you hear of anything you think might be of interest to our readership, please post a comment.
For instance, a title agent became suspicious that the ID presented in the closing was fraudulent. It's normal for a title agent to carefully review ID - we're trained to look for fraud. It's also normal for the title agent to excuse themselves from the room to make a photocopy of the ID. In this case, the agent took the ID to another member of their staff who continued to make inquiries into the situation while the closing continued. They discovered that the parties in the closing room were indeed up to no good and the police were called and yes, they were arrested.
I have been in closings in which we took precautions against potential physical violence. This doesn't happen often but sometimes there is one person who appears explosive. Once I sat before a closed door in a real estate office behind which sat the husband and son of the real estate broker. The sellers were in a nasty divorce and the husband had a history of violence. He did nothing more than call the the wife's attorney a nasty name and sat there growling. Thankfully we didn't need to call the police.
On another note, I put in place a policy this year that if I find criminality in the public record I take extra steps to protect my closers. If we have someone with a criminal history, we close only in public places - never in a private home.