Monday, February 22, 2010

selected title insurance agent data call from PA Insurance Department

We received a data call from the Department today.  Among other things it says:

"The Pennsylvania Insurance Department(the "Department") is conducting a study of title insurance in Pennsylvania.  The study is under the direct supervision and control of the Department; it is being funded by the Title Insurance Rating Bureau of Pennsylvania as the Department's statistical agent for collection of data on title insurance, and it is being conducted jointly by Regulatory Research Corporation (Dr. Nelson R. Lipshultz) and Birny Birnbaum Consulting Inc. (Birny Birnbaum) (the "consultants")."

This should be interesting for the industry - a good exercise.

Link to data call info.

Friday, February 19, 2010

lien letters and transfer taxes....what the heck to do on the new GFE and HUD-1

Here's my take....

First things first, determine whether the charge is TYPICALLY a buyer/borrower fee.  If yes, then you MUST show it on the GFE and HUD as a buyer/borrower fee, even if the seller has agreed to pay for it.

In my neck of the woods, typical is determined by state and county custom.

Transfer taxes are TYPICALLY split between buyer and seller in Pennsylvania, SO one half of the transfer tax would TYPICALLY be a buyer/borrower fee even if the seller had agreed to pay for both transfer taxes.

Be careful and make certain there isn't an agreement for the buyer to pay both.  In that case, you would need to put both transfer taxes in as buyer/borrower fees.

Lien letters customs vary by county.  In Allegheny County, the seller typically pays for the lien letters.  In Cambria County, the buyer typically pays for lien letters.  If you are disclosing for a refinance, the borrower pays for lien letters in all counties.

Where on the GFE and HUD-1 do you disclose lien letter charges?  You include these out of pocket costs in with the title services.

Does this make sense to you?  If you have received any other guidance from a reliable source, I'd sure like to hear about it.  Thanks!!!

if you enjoy forums, there's a new title insurance forum start up

Here's a blurb from its creator, Jonathan Yasko:

There is a new web forum dedicated to title insurance professionals called The Title Web (  It is by title professionals, for title professionals in the attempt to create a repository of information for all to use.  It is free to join and has main and sub-categories to for different types of topics.  In addition, there are regional sections for state specific issues, meetings, continuing educations seminars and more.


Thursday, February 18, 2010

IRS confusion over whether or not a HUD-1 must be signed

I am getting numerous queries concerning the availability of a SIGNED HUD-1 because folks are trying to comply with IRS instructions related to the tax credit program.

The HUD-1 form is part of RESPA.  This link will take you to the pages in RESPA concerning the HUD-1.

Many of you are telling me that the IRS is asking you to provide evidence that individual states do not require signatures on the HUD-1.  Well, my response is that it is a FEDERAL rule, not a state rule.

RESPA clearly says that Signature lines may be added.  That tells me that HUD did not design the form with signature lines, meaning signatures are not required by HUD.

Further, the HUD-1 form is only required when the underlying transaction is a federally related mortgage transaction.  That means that cash purchase transactions may NOT have a HUD-1 form.

I offer the above linked pages to those of you who are having this difficulty meeting IRS rules as evidence perhaps that they might consider changing their documentation requirements as so many of you are in positions in which you have purchased property but because no one knew ahead of time that the IRS documentation rules would be more strict than those of the Dept. of Housing and Urban Development many people may not receive their hoped  for tax credit.

I am certain this was an unintended snafu and would think the IRS would make adjustments to assist taxpayers.  Hope this helps.  ;)

Wednesday, February 17, 2010

Hey, Stewart from GA...

you're welcome and thanks for taking a moment to call.

Stewart is a loan officer who found this post  about calculating escrow, used the formula and found that he could predict the escrows with good accuracy rather than having to guess.  He has since created a bit of software so he could ditch the pencil and paper.

The funny thing about escrow calculation is that most everyone uses software and so that's why most everyone doesn't know the "how to" formula!  LOL  You, dear readers, have the secret.

Stewart, you're a pro.

Monday, February 15, 2010

In a bizarre move....

we had a lender overfund a closing then ask that we change line 802 on the HUD...AFTER closing.


Thursday, February 11, 2010

the unintended consequences of RESPA 2010 and the new HUD

For once unintended consequences are POSITIVE.  Yes, positive.  I sure don't think they intended to do this but by creating a uniform method for GFE disclosure which flows to a uniform method of HUD prep, we in the title world are enjoying UNIFORMITY of INSTRUCTIONS.  I love it.

What was it that everyone hoped to gain with UNIFORM CLOSING INSTRUCTIONS?  Uniformity, right?  Well, guess what?  We've taken a giant step in that direction without even realizing it.  Isn't that wonderful?

Wednesday, February 10, 2010

query: new GFE - FHA MIP refund

This is entirely an educated guess on my part.  I would say you would NOT show the refund on the GFE.  I think you would show it on your Cash to Close Summary or Details of Purchase on the 1003.  I do hope everyone is working with a Cash to Close Summary so that consumers have a clear understanding of the anticipated bottom line.  This is where you would show the seller assist, right?

On the HUD, I'd probably put the FHA MIP refund on page one where the other credits go.

So that's my take without popping up onto the FAQs since I presume you already checked them and the issue isn't specifically addressed there.  ;)

Tuesday, February 09, 2010

IRS and the HUD-1 and the tax credit...what do you think?

Here's a little e-mail chat with a reader trying to help her client.  I am very interested to hear your thoughts on this issue of the IRS requiring that all signatures must be on one piece of paper.


I have a client that is filing the IRS Form 5405 to claim the First Time Homebuyers Credit.   She has a HUD1 that is lacking the seller’s signature.  She has contacted the settlement agent’s office.  They do not have a copy with all signatures on it.  The seller was a bank in NJ.  We are not having any luck contacting it.  IRS advises that in the absence of the signature documentation must be submitted to show that PA State does not require signatures on the HUD1. 

Please forward information where I can obtain documentation to send with the HUD1 and 5405.

Thank you,  Deborah

Hi, Deborah:

It is possible there is just a simple communication issue.  They will likely not have ONE copy with ALL signatures on it but I'll bet they have at least ONE copy with the seller signature.  That's usually the way these types of transaction flow, You have one set signed by the seller and another signed by the buyer, so you just staple them together and that will work because the figures on both sets are the same.  BTW- The seller signed HUD is normally a crappy faxed copy but it's legal. ;)

If your client obtained a mortgage, their mortgage lender should have a copy with a seller signature - even if it was the real estate agent's signature affixed with authority from the seller.

If not, then you can try to find the attorney who handled the sale.  They normally referee getting the seller signature on the HUD in these kinds of transactions.

Good luck!

Thanks, Diane,

But in this case the IRS is not accepting that reasoning.  And neither the attorney or settling agent can provide a HUD1 with all signatures. It wants documentation.  There are many sources on the internet talking about the “fact” that the HUD1 signatures are not required.  However, so far no one can provide a written legal source that verifies that “fact”.


Hmm, well if the IRS is unwilling to accept two matching HUD-1s - one signed by the seller and the other by the buyer, then they are sure being unreasonable as much of the country does their closings this way.  I would raise holy hell with my senator and representative.  I can understand the IRS having issues with having NO seller signatures, but having a requirement that all signatures be on the same piece of paper?  Many people will be cut out of the benefits by local custom and that's a shame.


Monday, February 08, 2010

stand your ground, nicely and with patience......

We have had two closings, make that THREE closings in which the mortgage lender asked us to use different figures on line 801 than we found on the GFE. In each case, after listening to the lenders explain all sorts of methods they wanted to cure whatever problem they perceived, we just quietly said, we can't change that line, it's got to match the GFE, are you sure you haven't considered redisclosure?   In all three cases the lender contact went back to their compliance department and found that there was either a different resolution which worked within the rules or there was a need for redisclosure.  In fact, in one case a compliance team had already sent the redisclosure to the consumer even though the closer hadn't realized it.

By just quietly standing our ground and giving the lender time to think through the situation, we all came to compliant conclusions.  Each case has unique twists and issues that haven't yet been thought through - including internal lender accounting dynamics.  In each case, the lender has thanked us for watching their back and noted their concern that other transactions had closed without question through other title agents who have manually adjusted their HUD to NOT match up with the GFE on line 801.  So, if you are a title agent, check with your staff to make certain that they are not blindly following instructions.  YES, that gives you cover, but we're in this together and helping each other is a good thing, eh?  ;)

Friday, February 05, 2010

it's time to think about escheat's an e-mail from the PA Treasury Dept.

As a former business professional, I know the importance of understanding the various laws and statutes that affect operations. I thank all businesses who comply with Pennsylvania’s Disposition of Abandoned and Unclaimed Property Act and annually file an unclaimed property report with Treasury. To those businesses who do not, I remind you to come into compliance with this state law to avoid interest and penalties.

Unclaimed property is any financial asset that has become dormant, meaning no contact has been made with the owner after a given time period (at least one year or longer). Some examples of unclaimed property include bank accounts, uncashed payroll checks, accounts payable or receivable checks, credit balances, stocks and bonds, escrow accounts, and insurance proceeds. If a business has any dormant items remaining on its books, they must be reported to Treasury. Please note that writing these items off as income does not constitute an account being resolved and is, in fact, illegal!

Under state law, Treasury has the ability to assess penalties and interest to any business or organization that does not file an unclaimed property report by April 15. Yet there are various options available for companies voluntarily to come into compliance for the first time, without the incurrence of penalties or interest, such as our Voluntary Disclosure Agreement Program. Treasury has a team of compliance professionals who can help you determine if you have unclaimed property or assist you in filing your report. You may reach this team at 1-800-379-3999, Monday through Friday, 8:00 a.m.  5:00 p.m. or via email at
Treasury’s Web site,, also has a wealth of information about reporting unclaimed property, including instructions and manual reporting forms, a copy of the law, a free link to electronic reporting software, a dormancy matrix for property types and a schedule of reporting seminars.
We look forward to working with you to reunite unclaimed property with its rightful owner. I thank you in advance for your cooperation.

Yours with appreciation,
Rob McCord

Thursday, February 04, 2010

query: if two unmarried people refinance for the purpose of removing one borrower from mortgage and title in pennsylvania are there transfer tax

Yes.  A new deed will be created as part of the refinance.  When the deed is recorded transfer tax will be due unless the parties have a relationship that is exempt.

So, let's say we have two unrelated individuals who bought real estate together, perhaps friends or maybe they intended to marry but decided NOT to.  At any rate, because they are not related, there is no exemption.  Unless otherwise defined on the deed, we would presume a 50% interest is being transferred.  We can base the transfer tax on consideration if there is a fair market buy-out or we can extrapolate a fair market by using the tax assessment.  To do that you would multiply the tax assessment by the common level ratio factor for the county.  That gives you fair market and then calculate the transfer tax from there.  The Recorder will require that you file - in duplicate -a Statement of Value with the deed which explains the exemption, if any, or how you arrived at the dollar amount being remitted to cover the tax.

Wednesday, February 03, 2010

Just how would a consumer feel if they know their mortgage application

was being produced by a stranger - a "lead generator" overseas?  I'm not sure who the source of this advice is but read it....

"One of my friend who has a BPO (authorized) located India and plans to begin the 1003 campaign through the application. He is currently producing mortgages and transfers of hot lead, I know which are allowed under U.S. law.
Yes, I see no legal problems with data collection of 1003 outside the U.S.. I agree fully disagree with the prolonged use of rooms Telephone foreigners to solicit U.S. consumers, but unfortunately it is not illegal. Here are some additional information. Hope this helps."  source link

Yesterday I had a frantic call from a consumer - a reverse mortgage borrower - whose transaction we closed  recently.  Our consumer was deeply disturbed that he was receiving letters and solicitations from companies who clearly knew he had closed a refinance mortgage.  How could this happen?  What about the privacy disclosure?  I explained that the mortgage document is recorded in the public record and market companies use that information for solicitations.  That made him VERY unhappy.  I understand but there's not much that can be done about it except to boycott the service of companies who use that kind of marketing.

That's why I am posting this.  If you are a consumer shopping for lending services online, please be very careful.  Check to see if the web site you use to input data is REALLY a mortgage lender.  Many are "lead generators" and they don't have to follow the same rules as real mortgage lenders.  Lead generators take your personal and private data and SELL it to lenders.  As we can see by that little blurb some of your personal and private data may pass through the hands of contractors overseas as part of their process.  BEWARE...that's all I'm saying. ;)

Tuesday, February 02, 2010

RESPA 2010 - where do we put deed prep on the HUD-1?

We insure title and performs closings in 34 counties in Pennsylvania.  In ONE of those counties it is customary for the buyer to pay deed preparation.  That county is Bedford.  So, if in Bedford, we would include the deed prep fee on the buyer side as part of title services on line #1101, even if seller paid.  In the case of a seller paid deed prep in Bedford County we would put a credit on the first page of the HUD-1.  In all other counties deed prep would go on the seller side of the HUD-1 in the 1100 section.

Monday, February 01, 2010

RESPA 2010 - We have our first closing stopped due to need to redisclose.

On Friday evening we had a dry closing.  It was a REO closing and though we had an approved seller HUD - stamped and signed "approved" by the seller's attorney, we did not have a seller signed HUD and so we had our Dry Closing Disclosure signed and held documents and money pending receipt of seller signed HUD today.

Much to our surprise, the seller noted something their attorney did not.  There was an addendum to the sales agreement in which the buyer agreed to pay BOTH transfer taxes.  This is a $90,000 transaction and so in that area, each transfer tax is $900.  The GFE and our HUD only had the buyer paying one transfer tax, which is typical in that area and is also what was disclosed on the first page of the sales contract.  What we did not know and the mortgage broker did not know was that there was an addendum changing that portion of the sales agreement.

Interestingly, when we contacted the buyer and the agents, THEY knew about the addendum but apparently no one read it because no one seemed to know that the buyer had agreed to pay both transfer taxes.

I will get back to you with comments concerning how this transaction worked out but we are presuming that the lender will deem this a changing circumstance, redisclose, wait, then close.

This raise red flags all around for better procedures.  We know Fannie Mae, Freddie Mac, FHA and VA transactions have the buyer paying both transfer taxes.  We will now adopt a procedure in EVERY REO of confirming whether or not there is an addendum and who is paying transfer tax.  We'll get that in an e-mail from the seller or their attorney.  This way we can check with the lender to handle a potential redisclosure prior to getting to the closing table.

I can tell you right now that the mortgage broker has a knot in his stomach right now pending the lender's decision of whether they will consider this a changing circumstance.  If not, the mortgage broker stands to lose $900 to cure the intolerance.