Thursday, June 24, 2010

gee, Charles, you didn't look very hard...we've been out here talking with consumers for YEARS

"We decided that the only fair option is to let the consumer select a title company they can trust, rather than leave that decision to the financial institution" says Charles Marino, CEO of Pennsylvania Title Company. "We don't know of any other title companies who are reaching out to the end user like this, and we feel it will be a positive direction in which to take our company" says Marino.

Read more on Newswire.


I'm always happy to see a title insurer reaching out to consumers.  Shopping?  Check out their web site, then check out ours.  We have the Choose and Save Program which is the most affordable way to get title insurance and settlement services in PA, at least as far as I can find.  We close 8 to 8 Monday thru Friday and 10 to 5 on Saturday - no charge for after hours closings, just to make it convenient for YOU, the consumer.  If you opt into Choose and Save, we come to YOU for free.

Chicago Title held liable for fraud by employees

Fidelity National Financial Inc.’s Chicago Title Corp. and Chicago Title Insurance must pay $5.7 million in punitive damages for the role some employees played in a $30 million real estate scam, a San Diego jury said today.

The companies also were told to pay a share of $1.11 million in compensatory damages the California state court jury awarded to three investors who sued.

Read more on Bloomberg.

Tuesday, June 22, 2010

error in proration or lender escrow?

Diane,
I did not see a link to allow a new post on your Title Insurance Blog, so I wanted to email you.  I read many of the posts and several came close to my question, but as always a little different.

We recently purchased and closed on a condo.  Afterwards (about 10 days) my closing attorney contacted me about an error found by the seller on the HUD-1.  It was missing prorated insurance on line 409, which was blank on the executed HUD.  They are asking for another $1,300 to cover 10 months of the pre-paid insurance.  I did pay a similar amount into an insurance escrow.  I would expect that the escrow or the new HUD is incorrect and that I would be paying the amount twice.  I would also think that once the closing is completed and signed, my responsibility has been met. 

Any insight would be appreciated.
Thanks,
Don

Hi, Don:  The proration and lender escrow sections of the HUD-1 are separate and distinct. 

The mortgage lender sets up an escrow to pay the insurance bill the NEXT time it is due.  What you want to do is find out when the next invoice will come out for insurance.  Count the number of mortgage payments you will make between closing and the due date.  That's how many months the lender should collect.  They are permitted to escrow a cushion of up to 2 additional months.

If the seller prepaid insurance beyond the date of closing AND your sales contract included agreement to prorate insurance, then you do owe the seller for insurance paid beyond the date of closing.  Errors like this do happen sometimes and if the title insurance agent was forced to take you into court, they would likely win because - if the contract called for it - you made the agreement.


I would check to make sure the mortgage lender was given the correct date for the next insurance bill.  If the seller paid it so far in advance, it's likely that the lender would not have to escrow so much for that item.


Thanks for reading and I plan to post this later today because it will help folks in a similar situation.  ;)


Diane

Monday, June 21, 2010

read this article in the Baltimore Sun, please

Government knows it has a problem.

In a recently concluded report, the Commission to Study Title Insurance in Maryland, appointed by the legislature two years ago, wants the insurance commissioner to study setting up a guaranty fund to pay back future victims. It also suggests making title-insurance underwriters more responsible for the behavior of agents such as Sybert who represent them at the closing table.

Those are decent ideas. But the report lacks a sense of urgency and outrage over the mounting rip-offs. It seems far too easy to obtain a title-insurance agent's license in Maryland; there are more than 400 agencies. Why Sybert was allowed to stay in business with his blemished record is a mystery.  Here's the whole article.


As an honest hard working title insurance agent, like all honest hard working title insurance agents, it galls me to no end that underwriters and regulators don't take our role as the guardians of the gates of fidelity more seriously.  Title insurance agents more than any other party in a real estate transaction have the ability to detect and stop fraud.  We also have our hands on millions of dollars and no one seems to understand how critical the role of title insurance agents can be in maintaining a secure and stable real estate market.  We can't control natural market swings but we can, if we aren't working under conflicts of interest and have been vetted for security and competency, do much to eliminate fraud theft and abuse.

We have to work everyday in an industry filled with crooks and that puts our livelihood at risk because people can't tell the difference between players.  They trust that a license to operate means something.  

Even in PA where we have a good investigative insurance department staff, the oversight of escrow account practices seems to lay in a black hole between the Department of Insurance and the Department of Banking  Lots of crooks in all states have been caught and taken out of the business in these last couple of years or so, but we still don't have good vetting in place to create licensure that means something.  I know regulators and underwriters are working on it.  It's hard because there is a political dynamic underlying the entire process.  Isn't that surprising...ha-hah.  When so much money is in play, there is always a force working to protect referral structures.  If you are a consumer, please be careful and make certain YOU select your title insurance agent by shopping for price and quality of procedure.  Talk with people and see if you think they actually "know" their product.  You need title insurance.  The protection of the product is real, but you do need to be careful that you aren't being steered or lured into a bad situation.

Good luck to best wishes to all those doing it the honest way.  There are more of us than the bad guys, so hang in there and keep on keeping on...we'll fix this. ;)

Friday, June 18, 2010

Just because the grantor is FANNIE MAE you ought not to overlook review of the deed and power of attorney.

It's frustrating.  FANNIE MAE does not release the deed for review prior to closing.  We have to wait for a courier delivery of the original which arrives on the day of closing.  That means we have no opportunity to find problems before the last minute and usually everything is okay but not always.

This morning JC reviewed a FANNIE MAE deed for a closing in Somerset County.  The deed referenced a power of attorney which had been previously recorded.  Following procedure, JC pulled a copy of the POA off the Recorder of Deeds web site and found that it had expired in January of 2009.  Yes, that's right -EXPIRED JANUARY 2009!

I wonder how many FANNIE MAE transactions closed in Somerset since January 2009.  It's not a high volume county, so probably not many but it does make you wonder, eh?

Anyway, this is the second expired POA JC has found in recent months.  Is anyone else looking at them before they close?

It's an easy fix.  The attorney for FANNIE MAE just gets a new original to us by courier and we record it with the deed.  The sellers are never happy because we have to do a dry closing but that's better than creating a cloud on title and it's out job to protect our insured buyer and lender.

Wednesday, June 16, 2010

WASHINGTON — The Federal Housing Finance Agency has ordered Fannie Mae and Freddie Mac to delist from the New York Stock Exchange and any other national securities exchange.

For more information, visit washingtonpost.com:
http://link.email.washingtonpost.com/r/U38ITL/O9UFJ/HSF107/H1TXYW/B985Y/JY/t

Monday, June 14, 2010

query: what does owners extended coverage per rate filing mean for closings

hmmmm.....

I'm guessing the buyer bought extended owner title insurance rather than the regular owner title insurance which is less expensive.  The "per rate filing" just indicates that the charge for extended coverage is determined by a filed rate, likely with the state insurance department.

I'll further guess that the buyer didn't get a moment in which to choose whether or not to purchase the extended coverage.  The "per rate filing" lingo makes me think the party who added it might want to make it all look official so the consumer doesn't ask questions.  That could just be cynicism on my part, though, because it really kills me how many title insurance agents place consumers in higher priced coverage without asking, "Mother, may I?"

Conversely, we have the entire other school of thought in which a title insurance agent never offers owner coverage and just slips a little waiver under the consumer's pen at closing.  All this under the guise of making their pricing look more competitive so they get more referrals from lenders and real estate agents - ignoring the big but......  BUT -  the consumer doesn't know THEY HAVE ABSOLUTELY NO COVERAGE HAVING ONLY PAID FOR A LOAN POLICY. 

So, over pay or under pay, I don't care as long as the consumer gets to make an informed decision.


Let the consumer, the one whose money is in play make the decision, eh?
But, he warned that restricting yield spread premiums (YSPs) and limiting how much a loan officer can make would impact lenders' ability to attract and retain qualified loan officers on their staffs.

Found this sentence is this article and it kinda makes me nauseated.  You see, I think reducing the amount earned by loan officers per mortgage transaction will reduce the origination capacity down to a level that more accurately reflects the true nature of the job and might even burst the compensation balloon that maintains upward pressure on appraisal numbers.

In my humble - perhaps vintage mortgage lady - opinion, the cost to the consumer of mortgage origination could be reduced if we returned to a system of a commissioned loan officer supported by a salaried processor.  Even with software support, the task of mortgage processing placed back into the hands of efficient clerical support frees up the time of a loan officer to handle more volume.  A loan officer whose time and effort have been freed to handle a larger number of transactions does not have to desperately grasp so much income from one transaction.

I see it as a win-win-win.  The consumer gets a better price, the loan officer gets the peace of mind to concentrate on origination instead of the extreme multi-tasking of also being a processor, and the mortgage lender gets a better mortgage application package because it's been processed by a person with the right set of skills to do the job.

I see no reason why a loan officer whose time has been freed to handle more volume can't make a nice living making 40 to 100 basis points per transaction.  Do you?

Sunday, June 13, 2010

oops...missed two items in foreclosure.....

Usually the foreclosing mortgage lender buys the property at sheriff sale.  Sometimes a third party decides to outbid the lender and that's what happened on the case sitting in our office.  Not only did a third party decide to outbid the lender but they immediately listed the property for sale and it went under contract BEFORE the sheriff's deed was recorded.  So that's a pretty good indication that the property is worth more than the amount needed to make the mortgage lender happy.  The third party stands to make a fast buck on the transfer, right?  Well, maybe yes and maybe no because the property came through foreclosure with TWO title clouds.

The buyer hired our office to handle the conveyance and issue title insurance.  We found an unsatisfied mortgage for a prior owner and we also found an installment land contract without resolution.  The contract was signed by the folks who lost the home in foreclosure and it was recorded after their mortgage.  We found no release or notice given to the buyer in the land contract.

We raised the two issues - unsatisfied mortgage and lack of notice on the land contract.

Turns out the unsatisfied mortgage had been missed by the foreclosing attorney's abstractor AND the third party's abstractor.  That's odd but they did some research and apparently found the original satisfaction was sitting in a title agency file and are in the process of having it recorded.  Okay, that's one problem fixed.

The lack of notice on the installment land contract is a bit of a sticker problem.  You see, there is a letter in the sheriff's file showing that someone, perhaps the sheriff, raised the lack of notice issue with the foreclosing attorney.  The letter is from the foreclosing attorney who agrees that they failed to notify this person, however, since the property was posted and they did send a generic "tenant/occupant" notice to the premises it was likely that this party had been notified as there was a good chance he was living there.  Besides, the letter went on, any third party purchaser at the sheriff sale would be taking the property subject to installment land contract interest anyway.

Well, the third party who now is selling the house reads that letter as a green light.  I read that letter as a cloud on title and am not willing to insure over the interest of the person holding an equitable interest under the land contract.  The contract itself shows that he paid a substantial deposit so without specific notice, I think it's a claim waiting to happen.

Since our buyer is a cash buyer, the decision is theirs whether or not to close.  I can close by putting an exception in their title policy for the installment land contract.  If I were the buyer, I'd not do it, and I doubt that they will.

This third party - now seller - in my opinion will have to fix the notice issue or hope for a less than fully informed purchaser.

query: do mortgage underwriters contact the IRS

At closing, most mortgage lenders require that the borrowers sign an IRS form 4506 which gives them the right to obtain a copy of the borrower's income tax form.  Mortgage lenders DO contact the IRS routinely as part of a good quality control program.  It's a fraud prevention tool and they DO catch fraudsters using this method.

I strongly advise against falsifying tax forms used in a mortgage application.  Though it is rare for the mortgage underwriter to contact the IRS prior to loan approval, they may flag a questionable file for quality control review immediately after closing.  Either way, if you lie, you'll be caught.  If they check prior to closing, you'll simply be denied.  If they check AFTER closing, you may be prosecuted.

hmmm...a word about a potential title insurance claim

In 2006 we insured a transaction for property which sat in two different municipalities.  The house and most of the land was in one and the back 50 feet of land was in another.

I received a letter last week from the grandfather of the insured stating that we had failed to clear title on the 50 feet and that we had better pay roughly $700 to resolve the matter and that his granddaughter ought not to have to wait for the title company.

Anytime a potential claim is raised I always contact the parties immediately and review the file.  I called the gentleman who wrote the letter and left a message then I immediately drafted a letter to our insured with a copy to her grandfather including a copy of her owner policy, instructions for filing a claim and asked that she contact me with some clarification of what they meant by failed to clear title.  I had reviewed the file and there wasn't anything that stuck out as a problem but I did notice that the abstract had been performed by the underwriter.

Well, the grandfather called me a day or two later and said that prior to sending me the letter he had filed a claim on behalf of his granddaughter and that he had paid the roughly $700 to the county to buy back the 50 feet in the rear of the insured parcel.  He said we had failed to clear taxes on that parcel and that the county had taken it in a tax sale. 

Huh?  Well, that raised three issues in my mind.

First, there wasn't anything pressing for me to do because he had already paid the county and filed a claim so the matter was in the hands of the title company attorneys.  The next step will be a request from the title company for our file information so they can process the claim.  I expect I'll receive that soon.

Second, in my fast review of the file I only saw one tax number on the cover sheet.  We have a system in place to quadruple check tax numbers and so if a file moves through that system with an undiscovered tax parcel, it's because someone was asleep at the wheel.  That someone could be the seller or a real estate agent or the abstractor or someone in my office, maybe even me.  It would take more thorough review of the file to determine what may have happened and I know that review will take place as the claim is being processed.

Third,  if taxes aren't being paid on a parcel the tax collector and the tax claim bureau send out notices.  Prior to a tax sale taking place, the property is posted and advertised and the vested owner is notified by certified mail.  Our insured, the granddaughter, had to have ignored all of these notices.  We insured a conveyance in 2006.  This is a claim in 2010.  I wonder what tax years were delinquent and the basis of the tax sale?

It will be interesting to see how this works out in the end.  I'll share the findings when available.

Thursday, June 10, 2010

a sure sign of trouble.....

Former Priority Search workers interviewed during the investigation verified that Sichler oversaw all business operations, with one former staffer describing her as an “absolute control freak” who insisted on opening every piece of mail and maintaining exclusive control over all company bank accounts and finances.  Read the rest of the story of theft and dishonor.  What a creep.

Monday, June 07, 2010

ERIN TOLL....

Erin:  You topped my list of industry heroes.  I hear you are leaving the public sector for a real estate career.  GOD SPEED, LADY.  I wish you well. ;)

Radical

Wednesday, June 02, 2010

query: what is it called when you have a signed contract and one party wants to amend it and the other doesn't so the first party refuses to comply with the contract until the other signs the amendment

I'd call it a breach of contract in which case you may wish to consult your attorney for advice.

June is do or die month for the federal homebuyer tax credit.

That means we can expect a HUGE closing traffic jam at the end of the month.  If you are refinancing or buying and expect to close during June, plan to close as soon as possible.  Please try to close in the first half of the month if you can because closing during a volume crunch is not pleasant.  There can be document or funding delays. You won't get a great selection of time, dates or location.

It's entirely possible that homebuyers have managed to close early and we won't have a last minute panic but why take the chance?  If you can manage to close before the last week of the June, well I'd advise doing it.  ;)

query: falsifying Schedule A of the title insurance commitment

You have me really curious.  The only section of Schedule A that might cause harm if falsified is the title vesting area.  I can't think of any other item on Schedule A that would service a fraud.  The title vesting area is where the proposed insured buyer or lender learns who owns the property now.  Unless someone forges the title insurer's signature on Schedule A, you'd have to have a thief and a liar with a title insurance license.

If you are a title insurance agent and someone is suggesting that you falsify Schedule A, tell them NO and walk away from their transaction.  Anyone who would suggest that you commit a crime is not someone with whom to transact business.  They are trouble with a capital T.  They will use you and abuse you and everyone else in the transaction.  Frauds are not nice people even if they seem charming.