Thursday, May 27, 2010

right in the middle of a crazy HUD prep day....the civil defense whistle went off!

After we were in the basement for a few minutes we found out it was a false alarm.  How more wacky could today have been?  ;)

Monday, May 24, 2010

nice job, ALTA!

per email from ALTA, "ALTA's language to limit the ability of the new Consumer Financial Protection Agency to regulate the title industry was included in final passage."

query: what does a FHA spot audit cover

It's been awhile since my last FHA spot audit but I've been through a few over the years. 

The first was the most memorable.  It was in 1978 and I was a young originator.  The FHA auditor walked into our office, unannounced, identified himself and asked for 25 randomly selected files, some closed, most in process.  After he reviewed the files he walked over to my desk for a chat.  He explained that the FHA will criminally prosecute borrowers and lenders who act outside of the rules and that I sure didn't want to wear stripes.  I don't know if FHA auditors still have chats like that with originators but I think it's a good idea!  ;)

I recall another FHA spot audit in the late 80s when Hubby and I had our own shop.  In addition to auditing randomly selected files, I recall that he also checked our signage.

I'm sure they checked more than that but I can't remember.  If you are in the mortgage lending business and your house is in order. you should not be afraid of any auditor.  Run a clean shop and you can sleep well.  None of us look good in whatever the latest is in prison garb.

query: seller won't release earnest money - pa

Earnest money also called hand money is a good faith deposit made by the buyer in a purchase transaction.  Earnest money shows the seller that the buyer is serious and willing to put money at risk in exchange for the seller taking the property off the market while the sale is pending.

When there is a real estate broker involved the money is held in the escrow account of the brokerage.  In FSBO transactions [for sale by owner] the buyer often gives the money directly to the seller.  Alternatively, the money may be held by an attorney or other escrow agent.

Hopefully the parties have signed a sales agreement which clearly sets out the terms of a default and under what circumstances the seller may keep the earnest money.  When the buyer defaults on the agreement, one option the seller has is to keep the earnest money.  Another option is to sue the buyer for specific performance and force the buyer to close.

So, if the buyer defaults, there should be no expectation that the seller will release earnest money.  BTW - changing your mind about the purchase is considered default. ;)

Now, if the buyer did not default and the earnest money is in the hands of a third party escrow agent, say the real estate broker, an attorney or other, then that party can read the terms of the contract and release the deposit without the consent of the seller.  An escrow agent will only do this if the terms are crystal clear.  Otherwise the deposit will sit in escrow until the parties resolve their differences.

If the buyer was foolish enough to give the earnest money directly to the seller and the buyer did not default under the terms of the contract and the seller refuses to release the earnest money, then the buyer will likely have to hire an attorney and sue - or at least threaten to sue.

The worst case I have ever seen was a transaction in which the buyer gave the seller the entire purchase price of $100,000 based upon a few notes written on the edge of a survey map which they all signed.  The buyers were from out of town, looking for land, fell in love with a parcel owned by a man who met their expectations of an old fashioned nice guy.  The seller created such an impression and a sense of urgency - there were other interested parties, etc. - that the buyers whipped out their checkbook and BOOM, there went $100,000. 

This "nice guy" drove 2 hours and arrived at my office a few minutes past five, unannounced, to order the title work.  He told the buyers he would take care of everything.  I truly believe he wanted someone who didn't know him and he wanted to be the one to place the order, thinking he would control the outcome.  I explained that the title insurance was being issued for the benefit of the buyer and that we would keep him in the loop but that we would be communicating with the buyer and reporting our findings directly to the buyer.

As you can guess, the seller wasn't who they thought he was.  He and his wife had all sorts of financial problems and I think they started spending that $100,000 as soon as they had it in their hot little hands.  What we found in title caused the buyer to NOT purchase the parcel.  At my recommendation, they hired an attorney - in fact they ended up working with two attorneys and after a couple of years, I did end up testifying in court on their behalf.  I don't know if they ever recovered all of that deposit.

So, as you can see, be careful about earnest money.  Take seriously your obligations under the contract, think about how and if you have a chance of recouping the deposit if the transaction does not close.  If you do not understand the terms of the sales contract, seek the advice of a good real estate attorney.

Friday, May 21, 2010

hey, Linda...this post is for you!

All title agents reading this post raise your hand if you are constantly asking yourself "Why is everybody trying to get into my pocket?"

The answer is that everybody thinks you do nothing for a living except enjoy a straight main line into pure cashola.  Everybody who is in a position to refer business to you thinks they deserve some of that easy money.

Why does everybody think you do nothing?  They think that because you give away our work product for free ALL THE TIME.

They think YOU do nothing because there are a bunch of no nothings with licenses acting as title agents who are completely supported by their underwriters and who DO NOTHING and charge consumers as much or more than you.

How do we get people out of our pockets?

Support regulators who want to raise the bar for licensure because apparently we cannot depend upon underwriters to keep a clean house.

Put pressure on your trade groups to champion payment for services rendered.

Until we as an industry step up and get serious about the vital work we perform, we will be seen as expendable.

Monday, May 17, 2010

well, isn't this special....

According to two EMC analysts, they were encouraged to just make up data like FICO scores if the lenders they purchased loans in bulk from wouldn’t get back to them promptly.See story on Housing Wire.

any title attorneys out there want to comment?

Searching for info on title insurance claims and found your blog.  Awesome there's someone out there explaining how this stuff works, thanks!!!!  Any chance you can offer an opinion on our issue below?

We have First American Title Ins. Eagle Protection Owners Policy on our home bought in 1999.   Many years into our ownership in 2008 our city building department came to us to enforce an old order to comply for an unpermitted attached deck many years before our purchase of the home.  This was our first discovery of this since the sellers did not disclose the open issue nor did we uncover any such notices during escrow.  But after further research, the orders are valid and enforceable and now we had to do an extremely costly amount of geological, engineering and construction work ($100K+)  to bring the structure into compliance and satisfy the city.

The sellers avoided our demands for repayment, so we sued them for fraud and have a case pending that is now being sent to arbitration.  We have a strong case on the facts but our wallet may run dry before we get to the end of it as the sellers are doing all they can to delay and run up our costs.   We may actually have to abandon the suit vs. risking going even further into debt to finish the fight.

On suggestion of a friend I had a look at our title policy, originally I thought it was excluded but because the city has shown this issue was open and enforceable from way back when, it now seems we might actually have a claim against the building permit risk since the notices were on record prior to our purchase of the home and the policy.  BUT we're already well down the road in a legal action.   Will the fact we took action against the sellers on our own and are already well down that road impact our ability to make this claim to the title insurance co?   The liability cap ($25K) is well below our damages, but in the end it may be all we can get because we can't afford to continue chasing the sellers who seemingly have the money to fight it.

Thoughts?  Thanks!


Morning, Al: 

Remember I am not an attorney.   Though I can offer enhanced coverage, I've never sold it.  Your case may be just one of those rare ones in which the enhanced coverage is worth the extra premium, but I am also thinking this kind of case might be covered under a regular policy.  [On a side note, I'd be interested to know if your were given a choice of regular owner coverage versus enhanced.  I was shocked a few years ago to find many title agents simply writing enhanced and getting a higher premium without discussion with the consumer.]

I would definitely file a claim because I think there's a good chance you could recover some of your loss.  I'd also be inclined to wonder why your attorney did not advise you to file a claim earlier in the process.

You are a consumer and a layman.  You hired a professional who should have thought about title insurance as one avenue for resolution.

Remember to file your claim by certified mail.  There are lots of claims being processed right now.  You may consider sending a copy of your policy - highlighting the section of the policy you think covers the matter - with the claim letter and copying your state department of insurance.  I suggest this because state regulators are looking very closely at title insurance.  They are just now starting to understand how it works and how better to regulate it.  This may help you as the notation of a copy to the regulator might cause the title company to find in your favor because there is a bright light shining on the matter.

It is a shame because this is something the title agent could not have discovered unless they failed to obtain municipal lien letters.  There is also the possibility that the title agent DID get letters from the city and the CITY failed to disclose the pending order.  In any case, under the enhanced coverage of the Eagle policy, it sounds like you might be covered so go for it.  Good luck and I would be very interested to hear the outcome.  If you think of it, let me know.

I'm going to post this case on the blog in case we have some title attorneys reading who might want to add a thought or two.

Thanks for sharing your case and thanks for reading!


Tuesday, May 11, 2010


I am of the opinion that giving property reports away for free is a violation of RESPA and at least three state laws, Pennsylvania, Colorado and Washington.

ALTA doesn't think that's a RESPA problem, at least according to their outside counsel.  Kurt says "Just to let you know, I had our outside counsel run this through a RESPA scrub and he does not believe it to be a violation."

Okay, well that leads me to ask when will ALTA take a leadership position and stop supporting systems that give our work product away for free.

There is no reason to give away title insurance commitments and property reports for free unless you expect to get referrals.


Saturday, May 08, 2010

query: I recently found out that a piece of property I bought had a strawbuyer on it back in 1955. How does this affect my title?

I wouldn't worry.  A strawbuyer does not necessarily mean that a crime has taken place.

For readers who do not know what a strawbuyer is, let me give you my definition.  Think of a strawbuyer as a fake buyer, like a scarecrow made of straw, who stands in the place of the farmer in the field.  A strawbuyer stands in the place of the real buyer to hide the identity of the buyer.

We think of strawbuyers as being illegal because they were used in recent years to defraud mortgage lenders and others, sometimes as part of a fraudulent flip.

We all know that guns do not commit crimes but a criminal can use a gun as a tool.  Likewise, criminals can use the strawbuyer as a tool.

I always hope that folks who buy property also buy an owner title insurance policy.  If so, an illegal transaction - perhaps involving fraud - that causes the property owner to suffer a loss, would be covered by the title insurance.  So to my inquiring reader, if you have an owner title insurance policy don't worry about fraud in the chain.

Now, I am sure some are asking WHY parties might use a strawbuyer at all?  The query dates the transaction back to 1955.  That was a time during which some property sellers felt very comfortable discriminating against Jews and blacks and lots of other people for lots of other reasons.  Strawbuyers were a commonly used tool in those days to assist homebuyers in acquiring property where they felt the price or availability would be altered if the identity of the actual seller were known.

Friday, May 07, 2010

I still respect the opinions of Paulson, Bair and Bernanke.

While reading this article on Housing Wire this morning, I remembered how strongly I believe these three understood the crisis and that they were right about TARP.

TARP was a risky move that went way beyond what they would have like, in my opinion but I believe they felt it was a necessary step to calm the markets. I agree.  What they and I failed to see was that TARP was a peek at heaven for ignorant politicians.  If they had been able to control and limit the outcome, then the medicine prescribed by these three financial doctors would have been risky but necessary and we'd have just moved back to some sort of normalcy.

Once economically ignorant politicians realized just how easy it was to spend borrowed money under guise of disaster recovery, all hell broke out and now we have a much more serious long term problem even while the economy is recovering.  I do some strongheaded learned candidates of both parties step up, run and win so we can fix this mess before we look like Greece.

morning chuckle

First American's thorough title searches, title clearance and title insurance policies help to produce clear property titles and enable the efficient transfer of real estate. Source.

OAITA has update on First American/Bank of America case

The high-octane lawsuit currently pending in North Carolina between First American, United General Title and Bank of America took on a new layer this week as First American filed its Answer and Counterclaim to the Bank of America Complaint.  Read more on OAITA.

Tuesday, May 04, 2010

just cause HUD chose restraint for 180 days, what about other regulators?

On 11/13/2009, HUD issued release No. 09-215 indicating that for the first 4 months of 2010 they would "exercise restraint in enforcing new regulatory requirements under RESPA, due to take full effect Jan. 1, 2010."

Has anyone been examined during this time period and what was the approach of the examiners? Despite our Bank's significant and documented good faith efforts to comply, our OCC exam team completely disregarded those efforts and treated a handful of HE loans that provided the 'old' GFE as violations of RESPA. (As of this date, we are finally in full compliance.)


Sunday, May 02, 2010

I feel like a kid finishing a term paper at the last minute.

The  PA Data Call spreadsheets are due tomorrow.  I have Part Two finished and most of Part One but we got really really busy at the end of the month and  I didn't finish and submit. 

Today's the day.  Glad it's cloudy and might storm.  Let's hope we don't lose power.  OH NO!  I hadn't thought of that.  Yoi, double YOI!