Saturday, November 26, 2011

My friend was steered against his will and used the incident to teach the title agent a lesson or two.

I have a long time friend who is a savvy consumer of real estate.  He, like me, comes from a family familiar with the business of real estate from the inside.  So any provider of settlement services had better be on the up and up or else. ;)

Since we introduced our Choose and Save Program several years ago, we've processed many transactions for my friend who has argued with me that we aren't charging enough.  He may be right but I like the structure of the program and am convinced it's a good win-win for The Closing Specialists and our customers.  We get alot of repeat business through this program. ;)

At any rate, my friend was assisting his son and daughter-in-law through a refinance and planned as usual to take advantage of Choose and Save.  When they selected a mortgage lender, the loan officer presented a REPSA affiliated business disclosure.  My friend drew a big X over the form and added the language that they would be using The Closing Specialists for title insurance and closing.  The loan officer said okay.

Three weeks later my friend called to say the file was in underwriting and that he wanted to await the final approval before placing the order through Choose and Save.  He was waiting because there is a $300 non-refundable deposit paid when you order title in our program.  I said he needed to check with his lender because a file in underwriting typically has a title insurance commitment in place.  He checked and yes, the loan officer had forgotten and placed the title order with his affiliated company.

There were some other complications including a rate lock expiration and so I said that though I'd like the business, I'd also enjoy helping them get the title agency to give them pricing that was equal to our Choose and Save plan. The day before closing, my friend obtained the draft HUD.  We identified the fees that would have been waived under Choose and Save and he insisted that the title agency waive the fees.  They objected but the loan officer absorbed the cost.  The savings was around $250.

Then we checked the title insurance premium.  Since my friend's son had an unsatisfied mortgage with a local bank on record that had been originated within the last two years, we new they qualified for the PA refinance rate of 70% of reissue rate.  Check our title premium calculator to see the difference.  The title agent wanted to charge the reissue rate and was refusing to follow TIRBOP rules.  It took a few emails of the language in section 2.8 of TIRBOP and finally my friend had to read the sentence word by word and get the title agent to understand the simple language contained in the rule.

My friend offered to close in protest and resolve the matter post closing with the appropriate regulatory authority and with that the HUD-1 was adjusted by the title agent and they moved forward with a closing priced as it would have been if he used our Choose and Save Program.

Let this be a lesson to consumers to not give up and to stand your ground.  You can shop for title insurance and settlement services.  Do not allow someone to make these decisions for you.  ;)

spousal waiver versus having the non-vested spouse simply sign the mortgage

In Pennsylvania and some other states, a spouse may not be vested in title but may have marital rights to real property.  In these circumstances, when the marital rights may take priority over an insured mortgage, the title agent may require that the non-vested spouse sign the mortgage.  Their signature on the mortgage does not make them a borrower.  It simply allows the mortgage lien to be put into a position on the public record which has priority over their marital rights.

Why do title agents have this requirement?  Well, if a foreclosure takes place, the mortgage lender must be able to enforce their lien authority and take possession of the property.  If there is a spouse whose rights take priority over the mortgage, the lender can be blocked in court.

We deal with one local bank whose lending rules call for a spousal waiver form rather than having the non-vested spouse sign the mortgage document.  We argued against the use of the spousal waiver form because, even if recorded, it may not be discovered at a later date during a foreclosure thus creating the possibility of a title insurance claim by the lender.

We offered a compromise by agreeing to use the form but including it as an exhibit with the mortgage document when recording rather than recording it as a separate document.  A title searcher working for a foreclosure attorney might miss a separately indexed document but they will surely find the mortgage being foreclosed upon.  The local agreed and so we have been able to move forward insuring these transactions by including the spousal waiver as an exhibit in the mortgage document.

This has lead to numerous objections by Recorder of Deeds offices who get confused and think that we want the spousal waiver indexed.  We don't.  We want them to consider it a page in a mortgage and we ask for no additional notations on record.  A few counties have refused to record our mortgage in this way and we have asked them to cite a statute which would support their refusal.  They can't and so they always record the document.  I have had to speak with the a couple of solicitors who always support our position and instruct the ROD to record the document with an exhibit.  I am including this information for the benefit of those who would like to use the method of recording a spousal waiver as an exhibit but meet with opposition.  Stick to your guns.  You will prevail.

So, in wrapping up I think it's better to have the non-vested spouse sign the mortgage document.  It's the easier method but if your mortgage lender objects and wants a spousal waiver, then I highly recommend that you record it as an exhibit and not as a separate exhibit.  In this way you do your part to avoid a claim if the property ever goes to foreclosure and in the end that's what we do for a living.  We do our best to avoid creating future problems for our insured lenders and consumer.  ;)

query: who underwrites for "XYZ" title

Well, I hid the name of the agency in the query. ;)

Contact the state insurance department and ask for the name of the underwriter(s) who sponsored the agency in the licensing process.  Title insurance agents represent underwriters and so the identity of the underwriter(s) for whom the title agent issues policies is known to the regulating agency.

Monday, November 21, 2011

query: title agency pocketed fee and never purchased insurance

You may still have evidence of insurance.  Look for the title commitment.  If you don't have a copy, ask your mortgage lender for a copy from their file. Next look at your HUD-1 Settlement Statement.  Does it say that you paid a premium for title insurance?

A copy of a fully signed HUD-1 combined with a copy of the title commitment can be used to show evidence of insurance.  If the title company won't accept this, then contact the state department of insurance or the attorney general's office.  The title company is responsible for the actions of their agents and if they had a crook out there taking your money, that's their problem, not yours.

Friday, November 18, 2011

fraud in the chain

A title insurance company was forced to pay a man more than $90,000 after a woman fraudulently signed the man's name to papers, in effect deeding his property to another person without his knowledge or consent, according to a recently filed lawsuit.

Ticor Title Insurance Company filed a lawsuit Nov. 7 in St. Clair County Circuit Court against Yvette Reed, Diane Lee, Joseph Reed, Alfredo Vallejo Jr., RLI Corp., CNA Surety and All-American Escrow and Title Services.

Read more in Madison Record.

The owner of this property had an owner policy and so was able to have the title insurer defend the title and settle with a defrauded owner.  We have chats with folks all the time who are trying to understand the value of title insurance, especially after they have gone to the courthouse and looked at documents and decided that maybe there is no need for the insurance.

Just the other day I had a chat with a consumer getting ready to plunk down over one million dollars in cash for a home that had been constructed a few years ago.  His logic was that he would be the second owner and it was in a reputable plan so how risky could it be?

I explained that the biggest sources of claims against title insurers are those that can't be found in a competent search by a professional.  These are FRAUD, ERROR, and MALFEASANCE.

In the case outlined in the article, a notary enabled a fraud.  The fraud wasn't in the current transaction.  It was in a past transaction.  Unless a title examiner had reason to suspect the fraud, the deed on record would be considered legitimate.  Once the damaged person - the victim of fraud - stepped forward and made a claim of ownership, the insured property owner was able to file a claim and have his title insurer take over the matter.

If the home owner had neglected to purchase an owner policy, the owner would have been entirely alone facing the defense of ownership.  They would have had to hire an attorney and file suit against their seller - a long and costly affair.

Our cash plunking consumer made the right choice and decided to purchase the insurance.  ;)

Thursday, November 17, 2011

query: After I submit the conditions to the underwriter, will they scrutinize my file again

They may, especially if the underwriter is getting an off vibe that something is amiss.  Even if they don't and you close, they may still do a post closing quality control re-verification and re-underwriting. truthful.  ;)

Wednesday, November 16, 2011

"simmering below the surface" removing escrow responsibilities from title agents

If title agents don't move the money, who will and how much more will it cost the consumer?

This isn't a problem of changing roles, it's a problem of setting enforceable standards for escrow management and then policing the agents.

Defalcations were rare back in ye ole days before affiliated businesses and the subprime mentality of no oversight.

Hey, NAIC, ALTA and state insurance regulators - can you not just do a better job of vetting licensees? 

insurable title

Two title agents, an underwriting attorney and a real estate agent had a chat yesterday concerning insurable title.

Back in 2004 we issued an owner policy - insuring over an unsatisfied mortgage.  We had discovered the mortgage and requested a release.  It was a hefty developer's line of credit.  We were offered indemnification and accepted it.

Our insured owner is now selling his property and the buyer's title agent had a big freak out over the unsatisfied mortgage and had the real estate office contact me.  I looked at the file,  noticed that our underwriter at the time is now a part of the underwriter who had issued the indemnification and figured there was a good chance that the new insurance was being written under the same company.  I faxed over the indemnification letter.

The response was that they are writing through a different underwriter who will NOT accept indemnification, so I requested a copy of their title commitment.

I emailed the title commitment, the indemnification letter, and the owner policy to the underwriting attorney who had issued the indemnity in 2004.  She responded that they would issue a new indemnification or would offer to insure the buyer through any of their companies.

The real estate agent responded with a question:
"Your indemnification will only be for the current owner’s policy amount, which was $110,000.00, correct?" 

The underwriting attorney responded:
"Yes, that is correct.  Your proposed commitment indicates that you will be insuring for $108,500.00 so I’m not understanding why your underwriter will not accept an indemnity letter."

The real estate agent responded:
"They might be okay but the buyer might have a concern.  I’ll  let you know.  Thank you."

I responded:
"I'm sure your buyer has a copy of their sales contract.  The definition of marketable title being granted by the seller in the PAR contract is premised on insurability by a reputable title company at regular rates.  You have that so I am hopeful this closing will move forward."

Wednesday, November 09, 2011 have the power

Take a moment to read the question being posed to readers of the ALTA newsletter.  Now notice how many title insurance folks do NOT market to you directly for their business.  What does that mean to you?  It means that the real estate agent or the mortgage lenders are their perceived consumers and thus more important to these providers than YOU the real consumer, the one who pays the bill.

In order to produce a marketplace in which the actual consumer of title insurance and settlement services - YOU -  benefits, you need to use your good buying skills to force this industry to pay attention to what YOU desire - quality service, convenience and a lower price.

Until you start using the buying skills taught to you by your parents - you know, the way you buy a dishwasher or a car - you will perpetuate a real estate closing world in which attorneys, title agents, notaries, mortgage lenders and real estate agents are catered to rather than YOU.

It's YOUR transaction.  YOU have the power to create the marketplace that serves YOU.  If a whole bunch of YINZ [LOL I couldn't resist.] pressure the local market, guess what?  You all start to reap the benefits.  ;)

The other item I'd like you to notice is how many title insurance folks said they TRIED to reach out to consumers but had no results.  That's because the collective YOU aren't out there shopping.  If YOU were out there shopping YOU would find the title insurance folks who are also trying to create a more competitive marketplace.  Most of us don't like the way title insurance is sold and want to change the system but until consumers start shopping around nothing will change.  YOU have the power.

Does your company do any direct marketing to consumers? If you do, please leave a comment describing how you reach out to the consumer.
    We plan to in the near future14.71%
    We have in the past but saw no results35.29%

Monday, November 07, 2011

query: are dry closings the mortgage brokers fault

A dry closing is any closing that is suspended for some reason causing the funds and documents to be held in escrow while a problem is resolved.  It is important to remember that a dry closing isn't really a closing at all.  It's an ALMOST closing - close but no cigar.

As each transaction is unique so are the reasons and the blame.

query: do I have to have title insurance for a HUD loan

If by HUD you mean FHA, then yes, you will be required to purchase a LOAN policy of title insurance.  I suggest that you also buy an OWNER policy so you are protected as well as the lender and HUD.

Thursday, November 03, 2011

KICKBACK disguised as "work share"

The previous post is an email I sent to our agency rep who is also responsible for the bank owned title agency.  She could not understand why we objected to this kind of treatment from this mortgage lender and wouldn't just close the deal.  If we walk away from the transaction we lose roughly $170 in out of pocket cash for the abstract and lien letters.  If we close the deal as proposed by FNB we net about $150 after paying for abstract and our closer.  None of this takes into consideration our overhead and other employee time.  It's a LOSS either way so I say forget it.  We quoted our fees at the outset.  The consumer had the opportunity to opt into Choose and Save and get a better deal.  This bank owned title agency wants money for nothing.  They perform no work under this "work share" arrangement other than to retype the title commitment we have already created.  I call this a KICKBACK.  What do YOU call it?

Wednesday, November 02, 2011

just sharing a bit of what consumer don't know about those bank owned title agencies.....

Just a follow up on this FNB situation.  I spoke with John this morning and he said you have some kind of list for an agency work share deal with FNB that mimics the approved attorney program.  Presumably that deal doesn't pre-define who gets what share of the premium.

Anyway.  As you know we offer consumers the most affordable option in PA for obtaining title insurance and settlement services through our Choose and Save Program.  We work for less and the consumer pays less.  We think it's a win-win.  We made a business decision that we would NOT work through these lender owned programs who overcharge consumers while making us work for even less than we would earn under C & S.

The title order in question was placed with us after JC spoke with the LO and gave her our normal fees.  So we are in a position of FNB coming in after we processed the order and expecting us to conform.  In a case where we would normally be earning roughly $1100 they want us to do all the work and take $473.  We refuse.

We are giving them THREE options:

1.  Let us close the deal as sole agent.
2.  Let us close deal under work share and we will reduce our earnings to a level equal to what it would be under our C & S program.
3.  Tell the borrower to go elsewhere and start over with a different company.  We will not release our abstract or lien letters.  We have no relationship with FNB to burn.  Cathy Cook burned it a long time ago.  As I have already released my title commitment, I am emailing you this information because I will be wholly unhappy and will file a complaint with OR if FNB uses our work product to close and insure this transaction.  They bargained outside of good faith and I'd rather eat the cost of the abstract and lien letters than to do any additional work as a slave taking crumbs.