helping a consumer with a Good Faith Estimate error

I was recently contacted by a new title insurance consumer, a homebuyer, who asked if I had worked with the mortgage lender he had selected.  I didn't recognize the name of the company but assured him that we work with many diverse lenders and would help this lender with the nuances of Western Pennsylvania customs in real estate, if needed.  This homebuyer then said he had talked with some local lenders but had selected this remote lender because the interest rates were all about the same, however this lender had quoted significantly lower closing costs.

I offered to give him a specific quote for title services and also explained our Choose and Save Program.  We compared my quote with what was on his GFE.  I noticed that the mortgage lender had disclosed title services at a level equal to our C & S and that's unusual because lenders tend to allow for optionals fees - such as settement fees and courier in their GFE quotes.  The great thing about the RESPA 2010 GFE is that mortgage lenders tend to give conservative quotes and that's a good thing for consumers.

At any rate, since this lender gave what I thought was a lowball quote, I asked about other related costs on the GFE and we discovered that the government recording fees were a low quote as was the transfer tax.  This remote mortgage lender had underquoted the transfer tax by half and as you know - there is no tolerance for error in the transfer tax.

The homebuyer said he had used the GFE to make his decision and had already applied to this mortgage lender.  He decided to go ahead and place his Choose and Save order using our web site and said he would contact the lender about the transfer tax.

A few days later the homebuyer - now my customer - forwarded an email he had received from his loan officer.  The loan officer reminded him that he had correctly quoted the transfer tax in an email but for some reason the wrong figure was placed on the GFE.  The homebuyer had copied his real estate agent on our emails and he asked us both for advice.  He agreed after going back to review emails that the loan officer had mentioned the correct figure in an email, however he had used the GFE as his decisionmaking tool.  The real estate agent deferred the response to me and this is what I said:

As we discussed, the purpose of the GFE as a consumer tool is to assist the consumer in selecting a mortgage lender.  The new uniform GFE which was introduced in January of 2010 has certain regulatory requirements for accuracy which include some at zero tolerance and some at 10% tolerance for errors. 

The transfer tax section is ZERO tolerance unless there is a changing circumstance which created an error beyond the control of the lender.  For instance, if the sales agreement had contain an error in the location of the real estate which resulted in a transfer tax misquote, then the lender could re-disclose.  If the lender simply gave the consumer the wrong information, then the RESPA rules call for the lender to pay the difference.

These new tough guidelines were instituted because we had a huge under disclosure problem which caused many consumers to select lenders who were less than truthful or competent in disclosure.  HUD raised the bar with penalties to protect consumers.

Here is the contact information for RESPA.  These folks can answer questions and may even contact your lender for you.

This is a classic case of a consumer selecting one lender over another because of a misquote.  As you said in our discussion the other day, the interest rates were pretty much the same and you selected this lender because the closing costs were lower.

We are all human and make mistakes.  An honorable company would handle this type of mistake within the law - make good on the regulatory requirement and give you great service.  A different type of company will give you grief.  I would go to a managerial level to see how the company wants to handle your file.  The loan officer may not speak for their compliance officer.  As a business owner and manager I would want to handle this matter myself rather than have an employee cause a RESPA complaint without my knowledge.

It is your transaction and so you need to decide whether or not to stick with this lender.  We'll work with whatever decision you make.

The good news is that his mortgage lender had already reviewed the case and decided to make good on the regulatory tolerance cure even before he got back to his loan officer.  The lender will pay roughly $1700 into the transaction to resolve this RESPA matter.  This is an honorable mortgage lender and a smart consumer!  ;)

CFPB

get to know Elizabeth Warren

query: what is the difference between a title commitment and title insurance

If you have ever applied for a mortgage loan, then think of the title commitment as being the same as the mortgage loan commitment letter.  The purpose of the title commitment is to formally state that the property has been approved for title insurance subject to certain conditions.

A smart consumer will obtain a copy of the title commitment prior to closing and READ IT.  This is your chance to know what you are buying and to understand the exceptions to your coverage.

The title commitment typically has four parts labeled Schedule A, B1, B2, and C plus a jacket.  The jacket of the title commitment gives you important information such as definitions, explanations of important basic coverage such as access to the property, and lays out certain basic exceptions to coverage.  This is all very important and so be sure you obtain a copy of the jacket and read it, too.

Schedule A identifies the proposed insured owner and/or lender and the amount of the proposed insurance coverage.  Look to be certain your name is spelled out as you want to see it on your deed.  If it is misspelled on the title commitment, it will likely be misspelled on the deed.  The Schedule A also tells you who owns the property now and when they purchased it.  Take a peek at that information because sometimes you'll find out that the person with whom you negotiated your sales contract may not be the current owner.  How might this impact the terms and conditions agreed to in your contract?  Ask questions as needed.

Schedule B1 lists conditions which must be cleared prior to the issuance of the title insurance.  It may also contain notes or disclosures so you need to read it carefully.  One of the key conditions which must be fulfilled prior to the issuance of the title insurance is that you must pay the premium for the coverage.  This means you do not have any title insurance coverage just because you have a title commitment in your hand.  All you have is a proposal to insure.  It's like a bid from a contractor.

Schedule B2 tells you what will NOT be covered by your title insurance once the policies are issued.  There may be some items listed which can be removed as exceptions prior to the issuance of your policy but do not assume removal.  Ask questions.  What you want to see in Schedule B2 are specific restrictions or conditions and rights granted to others that may impact your use and enjoyment of your real estate.  If you see recitals which refer to specific documents of record, you can request copies of those documents. The clause might say something like "Exceptions, restrictions and conditions as set forth in Book 3, page 252."  In Pennsylvania, the title agent must provide copies without charging you a fee.  You may find a condition which says you cannot park a mobile home or trailer on the lot.  What if you have a RV which you planned to store on your new property?  You'll need to get clarity on that restrictions prior to your purchase.

There are some cases in which we find no specific exceptions.  In these cases, you will see only the basic general exceptions to coverage such as taxes which are not yet due an payable. If you see the words RESTRICTIONS or CONDITIONS or COVENANTS but you do not see a specific reference to a document which might give you a clue as to what these exceptions are then you may be dealing with a title agent who has not done a thorough search.  Some companies will put a broad general exception in a title commitment which excludes all restrictions which may be found on record but they do not do a decent search to find these documents.  I am of the opinion that a general exception of this kind is less than adequate and evidence of a crappy search or examination.  Granted there may be cases in which a plan is referred to in prior deeds but never recorded and therefore would be listed as an exception even though a copy is not available, however, you would at least have this knowledge and an explanation for the absence of documentation.  No reasonable specific explanation means you are being sold less quality than I would buy.

If you plan to install a pool or build an addition and you see rights of way listed in Schedule B2, you ought to locate the rights of way on your lot so you aren't building on a place that could later be the cause for removing your improvement.  A competent surveyor can research and add the location of rights of way to your drawing so you can see them in relation to the house as it sits upon the lot.

Schedule C describes the land to be insured.  Don't make any assumptions about this description being correct. I highly recommend that you have the land surveyed so you can see how the description maps out and can verify that this is the land you walked and intend to buy.  If you opt to not have the property surveyed, then request copies of the development plan or tax map and check it carefully against the description in Schedule C.  If it doesn't make sense, ask questions. 

When you go to closing compare the name of the title insurance company shown on the title commitment to the title insurance company shown on page 2 of the HUD-1 Settlement Statement.  If they do not match, insist upon a correction.  This is very important because if the title agent is a crook or negligent and you never receive your title insurance policy after closing, you will need your title commitment and evidence that you paid for the coverage in order to make a claim.  If the HUD-1, which is your evidence of payment, doesn't clearly include the name of the company on the title commitment, there is a chance your claim will be denied.

So, if all goes well - as it should - you should receive your owner policy within 60 days after your closing.  Look for it.  If you don't receive it within 60 days, call your title agent because something is wrong.  If you aren't being satisfied, contact your state insurance regulator.  They will want to know there is a licensed agent who is not performing and they will assist you.

When you get the owner policy, compare it to the title commitment.  The owner policy has three parts plus a jacket - all of which you should read.  Pay special attention to Schedule B which lists the exceptions to coverage.  Just make certain that no exceptions have been added that are not listed on the title commitment or agreed to by you prior to closing.

In review, the title commitment is a proposal to insure.  The title insurance will be in place once you have closed and have in hand evidence of payment for the coverage which matches the title commitment.  The title insurance coverage will be confirmed by receipt of the  owner policy which should arrive within 60 days after the closing.

Be a smart consumer.  Select your title agent carefully.  Request copies of important documents and read them. If you get any resistance from the title agent with whom you are working, fire them and find a responsive and competent professional.  ;)

I watched this video this morning and tried to post a comment. I was blocked by the site's blacklist. WAH???

Here's my comment:


I hope for good results from the Consumer Financial Protection Bureau.

In response to your video, the bigger issue with these so-called "in-house" providers is the underlying conflict of interest.

The consumer loses their position as owner of the transaction as providers are motivated to serve their customer, the source of referrals.

I've been in this industry for over 35 years and watched on the front lines as real estate brokers in the quest for new profit centers invaded related businesses.  The unintended consequence was a collapse of the entire system.  I have never placed blame for the credit crisis on the Community Reinvestment Act or other government initiatives.  The media and others focused on these programs because they are easy to understand.  The real culprit was the controlled business crack in the dam of RESPA and the slow degradation of standards which started after large real estate brokerages entered the field of mortgage brokerage and changed the relationships in mortgage banking from separate but equal to that of master and slave.

We can fix this.  We can identify and remove systemic conflicts of interest, restore good practices and heal our industry.

And here's the video:

Google is cramping my blogging style.

For years I've been able to blog on the fly with two email browsers up and running.  One for dianecipa@gmail.com and the other for dcipa@tcsclosing.com.  They both sit on Google platforms.  The gmail account was based on my original tcsclosing email address and so now Google doesn't want to have conflicting accounts open at the same time.

Google - You're killing me!!!

My blogs are accessed through my gmail account which I can't access without turning off my regular email, I can't swing up and grab stuff on the fly.  Why do you care?  Well, just today I was reading an interesting article that I wanted to share with you and comment upon but it takes WAY too much time to do all that signing in and signing out and back, etc. to interrupt what I am doing and so there's no blurb or link in this post but I WILL say this:

In reference to the consideration of the Qualified Residential Mortgage......

HAH..found the article with a fast Google search...this is the part that I found interesting.

"I am thoroughly disappointed that the regulators did not follow our legislative intent and instead are promulgating a rule that would restrict access to affordable mortgages in this country," Isakson said. "We don’t have a down payment problem in this country, but rather an underwriting problem. I strongly urge regulators to rework their overly rigid down payment requirement for QRM. If left as is, it would make recovery in the housing market almost impossible."  Blurb from Housing Wire.

While I agree that we don't have a down payment problem in this country, but rather an underwriting problem, I disagree ENTIRELY that the solution is underwriting via the title insurance examination.  WHAT?  Are you crazy?   That's not mortgage underwriting.  Trust me.  I've done both and they are entirely different in purpose and process whether automated or performed by competent human beings.

The underwriting we need is a restoration of standards and a weaning off the automated style.  I say go back to 1995 guidelines - heck, maybe go back to 1985.  Bring back humans who understand how to do risk analysis and teach a new generation how to underwrite mortgages.  Put a solid quality control program behind the process to monitor compliance and you can safely make residential loans with small down payments. 

Pull out the old books.  Go back to basics.  Scrap FICO scoring.  Teach lenders how to lend.  We are human beings.  We ought not to be judged by computer models.  Use established guidelines coupled with judgment.  We can do this.  We can restore and heal the business of mortgage lending.

tsk tsk Mr. Allen ....bad CEO bad CEO

ALEXANDRIA, Va. — The CEO of what had been one of the nation's largest privately held mortgage lenders was sentenced Tuesday to more than three years in prison for his role in a $3 billion scheme that officials called one of the biggest corporate frauds in U.S. history.

The 40-month sentence for Paul R. Allen, 55, of Oakton, Va., is slightly less than the six-year term sought by federal prosecutors.

Read more on HP.

I want to teach the world to sing in perfect harmony. ;)

Hey, why not, eh?

Here's some news.  Yours truly, the Title Insurance Talk lady is looking for a new path, a new challenge.  I have a wonderful replacement, an employee who I trust implicitly, to buy my business so I can move on when I find that next thing I want to do.  It's time. ;)

What do I WANT to do?  I'd love to find a place in which to help restore good practices in mortgage lending and title insurance.  I'm old as dirt - 55 in real life - but I feel like an old sage or maybe old crone when I talk with young people in the business.  I was there when most of your disclosures were born.  I had to calculate my APRs manually.  I typed - with carbon paper - and hand delivered mortgage application documents because we never heard of fax machines or email.

Okay, so we don't miss that stuff and we are thankful for the technology we use as a tool.

What we do miss or should miss is the connection to why we live with all this language in the disclosures.  What were the problems they were meant to fix and how do we create a real estate transaction that serves the public well and makes it a WIN WIN for consumer and lender or insurer?  There is a balance and it's not too hard to find, but you need to know how it all fits together and that is something I do know and I'd like to pass it on.........


...or maybe I should just go fishing. ;)

Here's a fraud case to watch.

MURRIETA, Calif. (KABC) -- A family is being told the house they thought they bought in Murrieta actually belongs to someone else. The family says they can't stop making their mortgage payments. 

"Even though you've made your payments in full every month, you could get a knock at the door saying get out," said would-be homeowner Charlie Zahari. "If you look at it, we're renters in a house we can't move out of."
That was hardly the feeling last summer where there was all the euphoria of buying their first home.

Read more on ABC.



Fraud is a primary reason to buy title insurance.  This case clearly demonstrates the risk.  Now, it will be interesting to see how the title insurance underwriter defends the title or covers damages for the lender and owner.   dc

There hasn't been too much to talk about in title lately.

Or maybe I'm just not feeling compelled to post.  Hmmm....what is an interesting case?

Well, here's an interesting situation.  It's not new but it's always good to do a repeat.

We have a terrific program called Choose and Save.  We're closing a transaction today in which the consumer found us and our program while shopping on the web.  He was  tough shopper and checked with  numerous title agencies.  Once he decided to use our services he had a heck of a time getting his real estate company and mortgage company to permit it.

This real estate company has a affiliated mortgage company and title insurance agency and though the law prohibits their requiring use, they make it seem like the consumer MUST use their companies.  They even slip in an exclusive use approval paper under the consumer's pen before the consumer even is aware or cognizant that they have a choice.

So,  our kudos go out to our brave and persistent consumer who not only will save himself two or three hundred dollars but is also saving his SELLER money, too.

We got a nice referral from him yesterday for a co-worker who is also doing some shopping around and standing up to the same real estate company pressure.  CONSUMERS HAVE CONTROL.  USE IT!!! 

I have to say that when I have an opportunity to chat with a shopping consumer who is web savvy they always opt into Choose and Save.  It's a great deal and the best way to buy title insurance in Pennsylvania.

Well, here's a case that will cause regulators to notice escrow accounts.

MINEOLA, N.Y. (CN) - TitleServ, one of the largest title agencies in the country, swiped $7.9 million from customers' escrow funds, the underwriter WFG National Title Insurance Co. claims in Nassau County Court.
     New Jersey Title Insurance Co. has filed a similar complaint against TitleServ, which "was authorized to write title insurance policies in at least 26 states, including New York, on behalf of plaintiff," according to the complaint.

Read more on Courthouse News.