Wednesday, July 28, 2010

The seller did his own title search and.....

he says someone at the courthouse did his deed for him.  Hmmmm....

Well, the prior vested owner was a man, we'll call John Smith.  Our seller's deed was from a woman who says she was Mrs. John Smith.  The deed says John Smith is dead and that Mrs. Smith owns the property by operation of law as having been his wife.

Well, that's wrong.  She wasn't in title so does our seller actually own the property?

We asked the seller to produce an original death certificate.  The plan is to verify that Mrs. Smith was married to John Smith at the time of his death and try to figure out where an estate might have been raised, if any, etc.

Our seller cannot seem to get a death certificate so we say John Smith is not dead and therefore our seller does not own the property.  How about them apples?

Will be interesting to see how this plays out.

Tuesday, July 27, 2010

just a note to say hello

Our two most interesting cases pending now are one involving a Power of Attorney for a buyer and another in which the neighbor stepped forward on the eve of closing to say the driveway is on his property.

Both are cases of info coming in really late in a transaction and so both are delayed while we work out solutions.

In the case of the Power of Attorney, the buyers told the loan officer that they intended to use a POA because the husband is employed by the military and working in a war zone.  He comes home once a month and was sitting right in front of the loan officer while they had this conversation.  Did she think to call us or her manager?  No.  She told them it shouldn't be a problem and asked that they send a copy of the POA to her.  Well, when we finally heard about it and had a copy in our hands, we noted that it was a general POA rather than a specific POA which is preferred when used by a borrower in a mortgage transaction.

As the title agent, the risk to an insurer when using a general POA for a mortgage is that the principal may challenge the validity of the mortgage on the grounds that they did not intend that the agent mortgage the real property.  It's a stretch but it's a risk.  I figured I'd reduce that risk by asking the mortgage lender to approve the general POA in writing after I had notified them in writing that it was a general POA and not the usual specific.  If they said okay, then I had a paper trail for the title insurer to fight off a claim on that issue.  The notice to the lender in writing - via email - fulfilled my fiduciary duty by raising the general versus specific issue to be sure the lender was making an informed decision.

The underwriting guidelines for the mortgage program absolutely require a specific POA, no wiggle room.  So we did a fast prep of a specific POA including a military style notary acknowledgment and emailed it to the buyer.  He, of course, if now back in the war zone and transporting this document back to us is likely to take 14 days.  Their contract was for a July 31st closing so they are looking for an extension.

In the case of the driveway, folks were supposed to go out and take a look see last night.  I am waiting for a call.  As always, we have so far recommended to the buyer THREE times in writing that she get a survey.  She has signed our survey hold harmless.  Our position as title insurer is that we don't care about the driveway because she has total frontage on a public road and therefore our insurance of access is covered.  As the fiduciary for the lender, however, we want to know just how much of the driveway is on the neighbor's property.  If access to the driveway is totally blocked, then the lender's collateral may be diminished and they'll likely want a right of way.  The lender is part of the email conversation on this pending issue so they have been fully informed.

We did find on record a survey done a few years ago which shows the house but not the driveway.  We can see that the surveyor located or set three pins on the front lot line.  I suggested that they take a metal detector out there last night and see if they can find the pins.  The neighbor may be entirely wrong about the location of the lot line and the driveway.

If we are talking major blockage and the lender or buyer want it resolved, we will require a survey along with a right of way.  If its just a tip of the driveway, we'll settle that with signed disclosure and written acceptance by both lender and buyer.

That's it for now.  Back to work!  ;)

Tuesday, July 13, 2010

you probably know by now how I feel about FICO scoring...

I'm not a fan.

I think FICO got us into this credit mess by creating and supporting the false belief that automated underwriting could replace expert human analysis and judgment.  Though developed as a tool, it replaced humanity in the lending process.  NOW, it's time to let go.

We don't have subprime lending.  It's basically gone.  Hard money lenders are few and difficult for consumers to reach if at all.  That means many families and individuals will voluntarily or with little other choice, start to live within their means and pay cash.

Heavens!  What shall we do?  Isn't this a good thing?  Consumers learning to manage their money?  Yes.  I say it is, but it won't be a good thing if these consumers need or desire credit ever again.

Once a person recovers from bad money management and proves an ability and willingness to repay obligations, oughtn't creditors take a chance and lend?  I say yes, however, I suspect lenders who rely upon FICO scoring will say no.  Living without credit does not a high FICO score make.

If FICO won't change the calculations and  reward conservative cash based living and lenders are married to using FICO, then how does a deserving potential reformed or new borrower find a lender?

helping a consumer deal with reality

Back in April we received a title insurance order for a vacant lot on which the buyer planned to build a new home.  It's a cash deal and it still has not closed.  Why?  Well, the seller didn't realize that he had a mortgage on this lot and now we are working through a long process of obtaining a release.

Why didn't the seller know about the mortgage?  Well, the purchase of the adjacent lot was made after he purchased the main property, the lot with his house.  He had purchased the adjacent vacant lot with cash.  What he didn't realize is that when he later refinanced, the mortgage lender - Countrywide - took both parcels as collateral.  We don't know if that was intended or simply an accident, however, it does point out how careful a property owner should be when offering collateral for a mortgage.  Don't assume you and the lender are on the same page.  ;)

Anyway, our transaction is further complicated because the seller hasn't been making mortgage payments.  We're dealing with Bank of America - the new servicer of the old Countrywide mortgage - and they in turn must deal with Fannie Mae to get approval for the release.  It's a time consuming process requiring at least one appraisal but it IS slowly moving forward.

So, yesterday I received a call from the real estate broker.  She had me on speaker phone with two agents in the conversation - all talking over each other.  The broker called me to say they love our company, have never had a problem, but she cannot understand why we haven't closed this cash deal - it's been over two months, etc. etc.

I pulled the file, reviewed the copious notes by DH and proceeded to explain the reality, basically as I have done here for you.

Yes, I understand that this is not what the buyer expected and that they had hoped to get construction started before school starts.  No, I do not know how long Fannie Mae will take to approve the release.  Can she call Fannie Mae?  Sure.  Do I know who to talk to?  No.  Will I call? No.  The release was sent to Fannie Mae by Bank of America on June 29th.  I think we are still in a reasonable processing time.  How much longer will it take?  I don't know.  Two weeks?  Perhaps.  Six months?  I doubt it.

While we were having this conversation one of the agents in the room had Fannie Mae on the phone.

[pregnant pause for effect]

I suggested to the real estate broker that the best service she could do for her buyer is to help them understand that they have a seller that simply did not know about the need for a release.  Releases take time and they need to be patient.  The mortgage lender and Fannie Mae are motivated to get money and as long as the money being offered for the release is reasonably matched to the value of the vacant lot, I see no reason why we won't come to a successful conclusion.

She did not find my advice helpful and basically wanted to push me into doing a brow beating upon Fannie Mae in her stead.  I refused and said I would certainly make a call if I thought it would help, however, in my professional opinion the best course at this point is to be patient and wait.

When I have a conversation like that with a real estate broker I realize I may be doing so at the peril of not doing business with them again.  I have found, however, that being kind and using the tough love of the truth is better in the long run.  Many will see that and appreciate it and those are the real estate agents I like to work with.  If I spend my time doing the bidding of a person who is not grounded in reality, the consumers I am assisting will not be well served and I will be miserable in my daily tasks.  I'd rather be happy.  ;)

I get a kick out of seeing Title Insurance Talk translated into a foreign language.

Last year I noticed a post had been translated into Vietnamese.  Last week I saw one translated into Spanish for a Chilean reader and then this morning I noticed another translated into Dutch for a Belgian reader.  Cool. ;)

Thursday, July 08, 2010

LOL....I'm sorry but this makes me laugh.

The vagueness of the individual factors is compounded by the subjective balancing process inherent in the test. HUD explains that the ten factors “will be considered together in determining whether the entity is a bona fide settlement service provider.” But HUD gives no indication how many factors might be determinative, or which factors might weigh more heavily in the analysis. Any entity wishing to operate as an ABA (an arrangement RESPA specifically condones, with certain limitations) is thus confronted with a massive gray area. At some point within that gray area, both civil and criminal liability might attach. But the test gives no indication of where that point might be. Thus, the regulation does not contain “sufficient exactness to prevent arbitrary enforcement and give notice of what an individual must do to comply with the enactment.”Belle Maer, 170 F.3d at 559.

source document 

DUH!  It's gray and vague because that is what the industry establishment wanted!  They specialize in lobbying for vague rules so they can make a mint teaching everybody how to interpret and beat the rules.  They LOVE living in the gray because the line moves with the political environment. This is hilarious.   This is fascinating and in the interest of preventing a sham explosion of any kind, I do hope HUD and state insurance regulators will take note and provide clear guidance.  Need help?  I'm sure there are lots of us with good ideas. ;)

sham test unconstitutional?

The U.S. District Court, Northern District of Ohio, Western Division in Toledo, Ohio has issued a Memorandum and Opinion Order decided by Judge Jack Zouhary which holds that HUD's 10-Part Test to determine whether a controlled business arrangement is a sham entity or not is unconstitutional. The case is styled Erick Carter, et al. v. Welles-Bowen Realty, Inc., et al. and involves two controlled business arrangements operating in Toledo, Ohio which are co-owned by two of the largest real estate firms in the area and Chicago Title.

Read more on the OAITA blog.
WILLIAMSPORT — A State College businessman who admitted embezzling $1.6 million while serving as an agent for Ticor Title Insurance Co., based in Philadelphia, has lost his bid to be given a sentence lighter than called for by sentencing guidelines.
In an opinion issued Friday, U.S. Middle District Senior Judge Malcolm Muir said while Ellery A. Crissman’s community activity may justify a sentence at the bottom end of the guideline’s range of 51 to 71 months, they are not so extraordinary to merit a departure from that guideline.
Crissman, who lives in Lock Haven, pleaded guilty in September, and is scheduled to be sentenced in August. The guideline range calculated in a presentence report includes enhancements for the amount of financial loss, number of victims (more than 50) and abusing a position of trust.

on support of TARP

Against lots of vocal opposition, I supported TARPThis is why.  The assistance was necessary to stop a spiraling dynamic and prevent a banking disaster.  It was a carefully thought out plan with a way to recover funds when the danger was clear.

The unfortunate unintended consequence was that politicians across the nation saw it as a GO signal to borrow in previously unthinkable levels against the future wealth of the nation under the guise of protecting the NOW without any real understanding of what they were doing to the FUTURE.

For at least a year prior to TARP I had been watching the big three - Bair, Bernanke & Paulson - react and carefully work as a team to navigate the financial markets through what was certainly the most rocky and scary happening since the Great Depression.  I know they approached the extremes of the TARP plan with fear and reluctance.  Who would have guessed, certainly not me, that it would trigger a demonstration of full blown economic idiocy by our politicians. 

If they HAD been able to see the unintended consequences, do you think they would have proposed the TARP plan?  It's a hard call, but I'd have to say NO.  I think they'd have more carefully disguised the anticipated cost and perhaps approached the fix incrementally rather than lay out a gameplan for approval of BILLIONS in one vote.  They inadvertently gave the spending addicts in power a "how to" lesson in tapping into the nation's wealth.  Like stupified lottery winners politicians have gorged on the thrill of spending and we still don't really know how that story ends but I have to say TARP started it and WOW, what a hard lesson.  I just had no idea how really ignorant most politicians are.  I always kinda thought it was a disagreement of principles but now I think it's just plain ignorance.

Wednesday, July 07, 2010

just got freaked out by a tax collector

If you live in a metro area or some other place of the country with professional tax collection, you just probably cannot believe how we collect property taxes in most of Pennsylvania.  Each municipality has an elected official in charge of the tax collection.  Many are part-time and work out of their homes.

I just got off the phone with a new tax collector who called because she could not match up the amount of our check with the taxes owing.  We sent in tax at penalty having just missed the face due date of 6/30.  The face amount is $86.61 which makes the tax at penalty $95.27.

This young lady doesn't understand how to calculate percentages, doesn't know what a penalty is and is sort of out to lunch on the collecting property tax business.  Apparently her mother used to be the collector and now she has the job.  Wow.

I cannot blame this young lady.  She seems nice enough and you don't know what you don't know until you know it, eh?  I've got to say the system ought to have a better selection process or perhaps her mother should have taken the training to a level of adequacy.

On another tax collector freak out note, I am taking a tax collector to the district justice because he collected the same tax twice and refuses to release the funds.  He also refused to claim the certified letter we sent.  We'll be sending the constable for him soon.

Tuesday, July 06, 2010

short sale lender wants buyer docs? why?

This is a first.  We just got a post closing request from a real estate broker for "a copy of the Note, Homeowners Insurance Dec Page and paid receipt, Approval letter from lender or and Amended approval Letter."

Say what?  Why?  What business are these personal buyer documents to the seller's mortgage lender?

Here's my response:

"To guard privacy, we release documents when requested by the principal.  As the documents you are requesting are buyer documents, I need a written request from the buyer directing that we release them to you.  They can fax it to me [724-238-7830] or send me an e-mail."

If the buyer wants to share, I don't care but I do wonder what this is all about.  We read the terms of the short sale prior to close and there is nothing in there which indicates that this documentation is part of the deal.

Sunday, July 04, 2010

query: title company will stop pay on refund check unless new HUD is signed

Interesting topic.  If you check the documents signed at closing you should find one or more in which you, the borrower in a mortgage transaction, agreed to cooperate and sign corrective documents as necessary.

If the title company has been charged by the mortgage lender or some other party to have a corrective HUD-1 signed and you are not cooperating, they may choose to use whatever means they have at their disposal to get your cooperation.

Stopping payment on a check is one way to get your attention, eh?