the junk junkies just never learn, do they?

I've been slowly watching the return of articles pushing automation in mortgage underwriting and mused that it wasn't taking very long for people to forget that the loss of competent human credit analysts is what started this whole mess.

This morning, this article popped up on Inman and I am simply amazed but I guess shouldn't be surprised that folks just don't get what credit underwriting is all about.

With so many people now saddled with poor credit, reestablishing "nonprime" lending is increasingly important to the future of homeownership, researchers at Harvard University's Joint Center for Housing Studies argue in a new report.

The hardest lesson I learned as a young underwriter is that some people are not willing or able to repay and that placing them in a house, even when the lender isn't a predator and the consumer fully understands the disclosures, is NOT helping them.   It only leads them to foreclosure.

Trust me.  Don't walk down this road again.

the dangerous dangling lot

You might not think of an extra lot as being dangerous but from a title insurance perspective, the extra lot causes all sorts of misunderstandings and potential for loss, especially when the lot is forgotten or not considered.

A recurring problem surfaces in foreclosure.  If a title agent only places a mortgage upon the lot on which the house sits but doesn't consider discussing the adjacent vacant lot with the mortgage lender, you have potential marketing issue if the lender forecloses.  Many of these adjacent vacant lots only have value as a yard extension for the house and often aren't good building lots.  So, when the REO department of the lender goes to sell the house and doesn't have title to the adjacent lot, how does that impact marketability?

We've run into this a few times and often the extra lot isn't discovered until we do our title work.  The new buyers then have to decide if they want to track down the vested owners, the folks who lost their house,  wait for the lot to go up for tax sale as it often does, or cancel the contract.

We have a new order in which the sister of a foreclosed upon borrower is buying the house and the adjacent lot.  She's buying one from the REO lender and the other from her sister.  Interestingly, the house with the lot is going for a really low price because the lender discovered that most of the house sits on the adjacent lot still owned by the sister and not the one on which the mortgage was placed.

question to settlement agents

Are you seeing a drop off in the number of transactions with home warranties being sold as part of a purchase transaction?  I am.

Interesting, huh? 

interesting observation on RESPA 2010

How the industry is faring with new RESPA forms After eight months of using the new Good Faith Estimate and HUD-1 Settlement Statement forms, mortgage lenders, closers and the legal community are at a calmer place with implementation than they were on Jan. 1. But is it a perfect system yet? Two attorneys say no, with one saying that his firm is performing half of the closings per month than his company conducted before the forms were implemented.

You need to subscribe to RESPAnews.com to read the article.  But from this blurb we see feedback from an attorney who says his firm has lost business since the RESPA implementation.

Well, I'm from the flip side of that comment.  Our office has seen an increase in business from various sources since RESPA 2010 was launched.  Why do I think that happened?  Well, we embraced the concept early.  Our staff was fully trained and prepared so that when lenders weren't sure, we were able to assist them.  We see RESPA 2010 as a positive step forward and that attitude makes all the difference.

We hear from our lender friends that some title agencies and attorneys do nothing but grumble and make their already stressful jobs harder.  So, cheer up my fellow title agents and attorneys.  A smile and a kind "we're in this together and we'll make it work" attitude is a good marketing strategy. ;)

query via email: Is it legal to have a simultaneous closing?

Hi Diane,

My question concerns methods of closing. Is it legal to have a simultaneous closing?

In other words on an A to B and B to C purchase where the bank is A, I am B, and an end buyer is C.

At closing is it legal for B and C to sign papers, with the funds from C put into escrow, and then A and B close using funds from escrow on first signing to fund that transaction?

I hear some Title companies will and many will not. I would like to know the legalities on the issue.

Thank you, R

Hi, R:

I am not an attorney and am unable to answer your question about legalities.  As a title insurance agent, I can help you understand why I may or may not handle a transaction like this.

I insure title in PA and so there may be issues in FL of which I am unaware.  In PA the Dept of Revenue considers, as do I, that these are clearly two transfers.  Even if there are not two deeds in PA, both transfers are subject to transfer taxes.

When a transaction like this is presented, a title agent will consider whether or not there is a potential for fraud.  We insure against fraud and we also do not want to collude to defraud another party.  A test, then, is whether all parties - A, B and C - are aware of the simultaneous close.

This is the case in relocation transactions. In those cases a relocation company has advanced funds to a homeowner and holds a signed deed in hand pending the sale of the property to a buyer.  The buyer deals with the relocation company but at closing there may be two deeds - one from the owner to relo, then another from relo to the buyer - or there may be just one deed from the owner to the buyer.  In both cases transfer taxes are paid twice.  Everyone is aware of the nature of the transaction.  There is no fraud and there is no harm.

As to the specific transaction you mention:

"In other words on an A to B and B to C purchase where the bank is A, I am B, and an end buyer is C.

At closing is it legal for B and C to sign papers, with the funds from C put into escrow, and then A and B close using funds from escrow on first signing to fund that transaction?"

A title insurance agent is in the business of insuring title.  If the closing vests title in B, then B is the consumer and the one being insured.  The fact that C gave B the money, has nothing to do with the title agent.  If you then expect the title agent to convey from B to C, that's a second transaction and though it may happen at the same table, it is really happening after the first closing.

Since this type of closing has so often been used as a vehicle for fraud, honest title agents are hyper-sensitive and for that reason would be likely to pass on taking the business unless they are absolutely comfortable that everything is above board and there are no shortcuts.

I hope that explanation helps and thanks for reading!  ;)

Diane

speaking of escrows

What do you think?  If an agent is no longer representing a particular underwriter, doesn't it make sense that the underwriter should take the escrows related to their policies?

I was thinking about that lately and it makes sense to me. 

abandoned escrows

It still blows my mind how many abandoned inheritance tax escrows we have every year.  I've got thousands of dollars sitting in escrow that I need to get over to the Department of Revenue.  They in turn will send us a release for our insured property and we can then file it at with the Register of Wills.

Each year I work with a different person at the Department. Most are just happy to get the money and send releases quickly.  Last year, the person charged with dealing with our escrows was a tiny bit perturbed and the entire process was more time consuming than it needed to be.

As soon as I have a bit more free time I'll process this year's batch.  Hopefully it won't turn into a make work project.

Hello to fast reader in the Netherlands. :) May I help you find something in particular?

This is the little blog that could. ;) Title Insurance Talk sits out here in the web ether answering usually 100 to 200 questions at day.  Most hits are specific queries - questions to search engines.  I always hope YOU, the reader will find what you are looking for.  If not, if it's a relevant question we haven't covered before, I'll do a post.  Some hits are regular readers and I love seeing your visits because it feels like a little title community.

Today, I was really surprised to see close to 500 hits and the day isn't over.  I wondered if I had said something that caused a stir.  Unusual hit volume on this blog usually means a viral topic like the old notary signing agent discussion.

Today, I see the increase in hits is coming from one source in the Netherlands.  So, just wanted to say hello and thank you for reading.  ;)

note to testy comment person

Roger, wilco and out.  ;)