Friday, June 29, 2012

tax amount calculated incorrectly on HUD-1


A tax amount was calculated incorrectly on my hud-1 statement in my favor.  The settlement lawyer called me and requested that I pay the money back; which I believe I should.  However, there is no correction being made on my statement.  My question is:  Shouldn’t I get a corrected Hud-1 statement to show my true settlement cost.  Also is this even legal without a correction?

I would really appreciate an answer as I researched this and can’t find anything that covers this situation, I am being harassed at my job and receiving phone calls on my cell asking for the money.

I not really sure what’s the right thing to do.

Thank you,
L

Hi, L.  If the taxes that were incorrect impact the prorations on HUD-1 keep an eye on the 1099 if one is being issued to the IRS.  You want to be certain correct figures are given to the IRS.  Otherwise, I think you should expect a letter from the attorney explaining what happened and evidence to support the tax figures.  You are honorably correct that you need to make right an error but I wouldn't give money unless I had documentation for my records.  You can use the letter and evidence in addition to your HUD-1 statement as a formal record for your tax preparer.  These things are often resolved without redoing the HUD-1 statement.

Thanks for reading and sharing.  Hope this helps.  ;)

Diane

PS  Hmmm..not to confuse - when I mentioned the IRS 1099 I was presuming you were the seller.  If you were the buyer and you had a mortgage lender, then your mortgage lender needs to be part of the decision whether or not to create a corrected HUD-1. If they don't care, get that in writing - email is fine.  ;)

abandoned road ownership dispute

Hi Diane,
We own a property that sits on an abandoned town road in Connecticut. In the original deed dated 1947, the owner of the land from which our property was originally subdivided, transfered all right, title, and interest to the center line of the road to our property boundary as extends along the length of the boundary along the road. This language is consistent throughout our title lineage. Our neighbor who is the grandson of the woman who was the original seller on the deed in 1947 and shares the same sir name, inherited a very large remaining land plot, previously a farm, in 1963 when this seller died. In his probate deed, he does not acknowledge the sale of this portion of the road and adjoining property and refers exclusively to the co-ordinates on a newly created subdivision map which he ordered dated 1963 excluding any language in his deed as to his boundary as the center of the road  and makes it appear that the road is an "easement" vs. abandoned road that he created to run through "his property".  In past history, he has tried unsuccessfully to relocate this road to afford him enough land acreage to secure a building lot which the road is preventing him from procuring as it stands. Recently he decided to build on a portion of land on the other side of our road (he has enough land for one lot) and submitted a map to the zoning department claiming ownership of the entire road and adjacent property to our property line...this map was certified by the zoning department with no reference to the language of our deed or our stated boundary as the center of the road and is subsequently he is claiming all the property from the center of the line of the road to our boundary which is about 15 feet from the road and 250 ft along our boundary.  Our attorney has requested that the surveyor acknowledge our deed, and revise the map accordingly but the owner and surveyor who are friends, are ignoring our request. My attorney is advising us to do a "quiet title action" to clarify the language in our deed but this will cost us a lot of money and put our deed up for question before a judge. My attorney asserts that there is a "cloud" over our deed due to this situation. My question is....will our current mortgage lender's (major bank) title insurance have their attorney fight to clarify this for us, or will our title insurance pay their attorney to defend our title to remove this cloud over our deed. Because we are still under mortgage for 18 years, do we have the right to defend this title that the bank technically still owns? 
Thanks,
J


Hi, J:  I would suggest doing two things:


1.  The surveyor is working for the other landowner.  You need to get help in another direction.  Have your attorney send a letter to the municipality advising them of the boundary line dispute - include the evidence you have in your chain of title.  Your attorney should warn them to delay approval due to pending legal action and suggest that they may be at risk of a lawsuit should they proceed with approval of your neighbor's application after having received constructive notice of the dispute. I suggest this be sent via certified mail.  You could also write this letter yourself if you prefer.  Remember I am not an attorney but I think this approach will be helpful because most municipalities are afraid of lawsuits and most try to treat citizens fairly.  If they show favoritism to this other landowner, you could recruit assistance from the local media to shed light on that.


2.  The loan policy does not cover you and would not cover the lender in this case unless they were foreclosing.  ASAP open a claim with YOUR owner title insurance company.  Their legal department will look at the situation and make a determination whether to defend your title.  Key to this is to review your owner policy and look at the legal description - often on Schedule C.  Does it include the disputed area?  If it does, then they have insured that you own this land and you have standing to expect coverage.  If you do not see this disputed land in the legal description, there is likelihood that you won't be covered.  In either case, open the claim and let them review your case.


There may be state law which specifies how abandoned town roads move in ownership.  Be sure that your attorney has researched this angle because recitation of such a law, if it is in your favor, might help resolve the matter favorably for you.


Hope this helps.  Good luck!

Diane

Wednesday, June 27, 2012

sample of a HUD-1

Test HUD0001 We get many requests to this blog for a sample of a HUD-1.  I decided to post our "test" HUD.  It's not based on a real transaction.  We keep this one on hand for training and the figures you see may be from differing scenarios.  So, please don't try to make logical sense out of the numbers.  This is meant to help you visualize what the form looks like and also see the placement of items like the seller assist.  Hope you find it a useful tool.  ;)

Diane

Monday, June 25, 2012

a new letter from Steve Adkins in response to a WSJ article


To the Editor:
As a real-estate title examiner with decades of involvement in efforts to bring some transparency to the real-estate settlement and title insurance processes, I read with great interest the editorial "Consumer Bureau Brushback" [June 4], particularly the aside, "The consumer bureau now enforces Respa, thanks to Dodd-Frank" (after nearly 40 years of lobbying and lawyering, Respa, the 1974 Real Estate Settlement Procedures Act, could better be called the Real Estate Specialinterests Protection Act).
Barney Frank has a history with title insurance reform, and for homeowners it isn't a good one.  He singlehandedly extinguished the most promising attempt to date.

In January 2006, Rep. Michael Oxley, then-chairman of the House Financial Services Committee, directed that the Government Accountability Office investigate title insurance to determine where the homeowner's premium dollar alights.  In its preliminary report, the GAO related that it found that 80-85% of the premium is retained by settlement agencies, but it hadn't been able to follow the money past that.
The title industry asserts that most of the premium is used for extensive and exacting title examination and risk elimination.  On April 26, 2006, the president of the American Land Title Association swore before Mr. Oxley's committee that "premiums mainly pay for searches of public records...most of the premium goes toward identifying and eliminating the bulk of the risks the insurance is intended to cover."  But when the GAO's final report was issued in April 2007, it still hadn't been able to find where the premium dollar comes to rest.  State and federal regulators couldn't tell the GAO, and the title insurers couldn't confirm the ALTA's assertion (so much for the industry's claim that it is highly regulated).
By then, Mr. Frank had succeeded Mr. Oxley as chairman of Financial Services, and Poof! -- the reform effort disappeared.

Had Mr. Frank directed the GAO to resolve the matter, the GAO would have found that when a new home is purchased from a builder, most of the title premium takes a path to that builder, via an agency controlled by the builder.  In the case of a resale, the premium takes a path to the realtor, via an agency controlled by the realtor.  And often in the case of a refinance, there is a similar path to the mortgage lender.  The prominent title-insurance blogger Diane Cipa recently marveled at the ever changing terms applied to the various contrivances and mechanisms -- first, they were "controlled businesses"; then, "affiliated businesses"; then, "joint ventures"; and now, they are "affinity relationships." But whatever the term, the result is the same.  Entities that can direct the settlement to an agency that they control, pocket the title insurance premium.  Bless 'em in their legitimate lines of business, but when it comes to title insurance, builders, realtors, and mortgage lenders are the unholy trinity of profiteers.  And there's enough vigorish to make Sonny Corleone blush.

While the Consumer Financial Protection Bureau now has oversight of Respa, Respa's present configuration was formulated by David H. Stevens, as Federal Housing Administration commissioner and assistant HUD secretary in charge of housing.  Before his appointment by President Obama, Mr. Stevens was the CEO of the realtor Long & Foster, where his duties included management of its settlement and title insurance adjuncts.  In connection with that, he also headed the Real Estate Services Provider Council (RESPRO), a lobbying group for realtors, builders, and mortgage lenders, whose purpose is to convince politicians that the diversion of the title insurance premium to RESPRO's members is a good thing for the homeowner.  (Mr. Stevens was confirmed by the Senate in July 2009, with nary a complaint from any consumer advocate.  As FHA commissioner, he had many areas of concern other than title insurance, but still...  Stevens has since left his government position and presently heads the Mortgage Bankers Association.)

So with RESROB..er, RESPRO...guarding the chicken house, don't expect any meaningful reform of title insurance from Respa or the consumer bureau.  I suggest a much more direct route.  The Department of Justice should conduct forensic audits of the settlement operations of a few RESPRO members and their like -- I suggest Mr. Stevens' own Long & Foster as the representative realtor, and NVR, Inc., which has a policy of avoiding title liability by foisting special warranty deeds on its naive customers, as the representative builder -- and determine where the title insurance premium dollar alights.  The auditor will find that the premium doesn't go for extensive examination and risk elimination, as asserted by the industry.  Rather, the auditor will find that nearly all of the premium comes to rest in the pockets of the companies' executives and owners.  Respa, schmespa, it's a matter of simple fraud; one product (an examination-backed assurance that the homeowner's title will not be challenged) is represented, and a lesser product (a promise to defend, if the title should be challenged) is delivered.  Prosecute and fine accordingly -- Long & Foster has directed 100,000 settlementts a year, the amounts diverted run into real money.  Then, with Mr. Frank no longer in congress to protect them, the special-interest third-party interlopers in the title insurance business will be forced to take note.

Sincerely yours,
Steve Adkins
3502 Cobb Drive
Fairfax, VA 22030-2918

did the gas rights move with the deed?

Hello,

I follow your blog and appreciate you helping people on the web. I have a concern when it comes to my dads property and oil rights. MY grand parents left the property and gas rights to my dad back in 1981 in a will. The deed was never transferred or recorded until 2000. The estate attorney (whom i wont mention) copied and passed all legal descriptions and didn't transfer the gas rights to the property. They are still in the estates name in which my dad was the administer and transferred to my dad in a will. 

How can we fix this issue. we have 2 storage wells on the property and dominions wont send checks anymore in the estate name and need my dad to have a deed with gas rights. I was considering a correction deed? just to give gas rights, the family is all willing to sign off on this, its just really tough as i dont know where to go.?

I know a title search is pretty expensive and we dont have alot of money at this point. Any helpful info would be great.

Thanks.
H


Hi, H:

In PA if the gas rights are owned by the seller and not mentioned in a deed, they move with the property.  Our deeds convey everything the seller owns unless they expressly reserve something.  I would be surprised if it doesn't work in the same way where you live.  If that is the case, then it would just be a matter of changing the name on the gas lease to the new owner, your father.  Try contacting the gas folks and explaining this.  See if they will simply change the name.  If the person you are speaking with isn't sure, suggest they confer with their legal counsel.  If that doesn't work, then get an attorney who specializes in real estate to look at your deed and write a letter to the gas folks.  I don't think this will be hard to resolve so I don't think you should have to pay for large legal fees.  

Don't be too hard on the estate attorney as simply taking the legal descriptions from prior deeds is the norm.  ;)

Good luck.
Diane

Saturday, June 16, 2012

refinancing tips

Refinancing is what you do when you put a mortgage on a piece of real estate you already own. Mortgage lenders call it a refinance even if you own the real estate free and clear. Use this handy TCS refinance guide to understand the process and avoid common pitfalls. We at TCS have had lots of experience closing refinance transactions. We’d like to help you be an educated consumer.


1. ORDER A PAYOFF LETTER

If you have an existing mortgage, the very first step is to ask your mortgage lender for a payoff letter. All of the calculations you and your new lender figure will be based on how much you owe. Do NOT skip this step. There may be a small fee to get the letter, but it’s worth it.

Don’t just check your current principal balance, it’s not the same as a payoff. Why? Well, mortgage interest is paid in arrears. That means that your September payment actually paid the interest for August, so you are always one month behind in interest. When you payoff your mortgage, the lender will play catch up and add the remaining interest to bring you current. AVOID THE MOST COMMON REFINANCE PITFALL by getting a payoff letter up front.

2. THE HIDDEN AFFECT OF PROPERTY TAXES AND HOMEOWNERS INSURANCE

Timing and pre-planning a refinance will help you AVOID THE SECOND MOST COMMON REFINANCE PITFALL – getting caught in a cash crunch because your money is tied up in an escrow account at the time of closing.

If your existing mortgage lender has money set aside in an escrow account, look closely at the payoff letter to determine how they will handle these funds. Some mortgage lenders will give you an immediate credit for the escrow balance and this reduces the amount of the payoff. That’s great, but most lenders will simply mail you a refund check 2 to 3 weeks after the mortgage has been paid off. If it looks like you’ll be getting a refund check, it is very likely that you will have to bridge the gap and come up with cash at closing to set up your new escrow account for the new mortgage lender. Here’s a tip – most mortgage loan officers don’t really understand this scenario, so YOU really need to plan ahead yourself.

Timing again is the key to AVOIDING THE THIRD MOST COMMON REFINANCE PITFALL - a cash squeeze related to property taxes. If you are closing your refinance transaction at the same time the property taxes are due, you could get caught in a title guarantee “Catch 22”. Here’s how it works. Let’s say the county property tax is due at discount on March 31st. You are planning to close on March 20th. The tax collector is reporting the tax as unpaid. Your existing mortgage lender has debited your escrow account to pay for the tax and may or may not have actually mailed the check to the tax collector. Since the tax has NOT been officially paid, TCS has to collect the tax from you at closing to guarantee payment for your new mortgage lender. It’s a real “Catch 22” and the only way to avoid it is to plan the closing date around the payment of the tax. Closing would need to either take place before your existing lender debits your account OR closing should be delayed until the tax payment has been posted by the tax collector. This is often easier said than done because you may be up against a rate lock expiration with your new mortgage lender and can’t delay closing.

The good news is that in either case, when you have to ante up cash at closing to cover tax or insurance related payments, you will always eventually be made whole. Refunds are processed as the payments are made and posted. If you have the cash available to ride through the refund process, that’s okay, but if you don’t, this information will help you to plan to avoid this kind of a last minute snag.

3. THINK ABOUT WHEN YOUR NEW MORTGAGE PAYMENTS WILL START.

Refinancing often gives you a one or two month break from having to pay a mortgage payment. For instance, let’s say you are closing on February 5th and haven’t yet made a mortgage payment for February. Well, your existing mortgage will be paid off before the end of a typical 15 day grace period and it’s likely that your new mortgage payments won’t start until April 1st. Make a note to discuss this with your new lender and keep any possible cash flow benefit in mind just in case you need to come up with unexpected cash to close due to tax or insurance related payments.

4. WHAT IS THE PURPOSE OF THE REFINANCE?

Your new mortgage lender will want to know. Are you just reducing the rate/term or do you actually need to pull cash equity out of the property? Each mortgage loan program has specific guidelines relating to the length of time you have owned the property, how much cash you can pull out, etc. Be prepared to estimate the value of your property and discuss why you want to refinance. This will help your new mortgage lender find a program that’s right for you. An appraisal ordered by the new mortgage lender will ultimately set the current market value, but you have to consider possible options should the value come in lower or higher than expected, later on you and your lender can adjust the loan amount accordingly.

BOTTOM LINE – DO SOME HOMEWORK TO AVOID EXTRA STRESS, THEN REAP THE BENEFITS OF REFINANCING. WE AT TCS ARE HERE TO HELP YOU DO JUST THAT.

replace a lost owner policy with a duplicate original


Hi Diane,

I saw your blog and hope you might be able to answer this question.  I bought my home 7 1/2 years ago and title work
was done at that time.  By who I can't remember and I inadvertently destroyed the original policy while getting rid of old paperwork.
I did contact the closing attorney but his office might not have those records.  Is there a way to obtain a copy of the original policy?
It seems even though there was clear title when I bought it, now in selling there are judgements from the previous owners.
Any help would be deeply appreciated.

Sincerely,

A

Hi, A:  If the closing attorney was the one who issued the title insurance, you can request a duplicate original policy directly from the attorney.  If he is uncertain how to issue a duplicate, he should call the title company underwriter.  They all have a procedure for producing duplicate originals.  Mortgage lenders often make this request when their loan policies get lost in transit.

I would be really surprised if the attorney doesn't have any records from 7 1/2 years ago.  Everyone uses computers now and even if he destroyed the paper files, I can't imagine that there isn't something in his software.

Frankly, I've never encountered an attorney who didn't keep all their paper files. I call law offices all the time to ask questions about old files when we are trying to resolve title problems.   It's just a matter of giving them time to go find the file as it might be stored off site.  You might offer to pay for their effort.

Hope this helps. ;)

Diane


PS  You should also look for the HUD-1 Settlement Statement which should show that you paid for coverage and it should also identify which title insurance company was paid.  The attorney may have records of checks issued from the closing funds which could tell you who got the title insurance premium.

Finally, if you cannot establish proof that you have title insurance, you may want to hire a competent title insurance attorney to review those judgments.  I find often that sellers are asked to pay for liens that are expired or not valid.  Defend yourself before paying.  Delay closing until you have exhausted your defense.  If you close and pay the judgments expecting to recoup damages later there is a good chance of getting no help.

Thursday, June 14, 2012

Is the deed goofed up or what?


Hi Diane,

I saw your blog and thought you might be able to point me in the right direction. Here's my situation (located in PA):

About 10 years ago the previous owner agreed to transfer 1000 sqft of land to the neighbor. From my understanding, this should have been done by sub-dividing and then the neighbor re-joining the parcels. However, the land in question was too small to be sub-divided. Instead, a corrective deed was issued—basically an addendum to my deed—carving out a portion of my land and assigning ownership to the neighbor. 

Is that a legitimate use of a corrective deed? It doesn't seem right that my deed has an owner of record (me) with another owner of a sub-parcel specified within.

Some extra bits: SOMETHING was recorded at the county but it doesn't seem to have been done right. The transferred portion does not have a map# assigned to it and is not part of the neighbor's deed either.

My desire isn’t to increase the size of my property. However, this has been a sticking point for getting a proper survey and I’m concerned there could be liability if an accident happens on that land. Additionally, property taxes were never adjusted to take this change into account.

Does this sound like an improper deed modification to circumvent the subdivision minimum? Would a title company get involved in something like this?

Thanks

J

Hi, J

It's a bit hard to know what you mean by an addendum to your deed because it sounds like the deal with the neighbor pre-dated your deed. 

It is possible that subdivisions may not have been required in your county ten years ago [some counties have a casual way of dealing with subdivision] or perhaps the local authority considered this was an incidental boundary change.  In that case a subdivision may not have been required. So, let's say it was properly done but in an unusual way that just seems odd but your title agent may be able to explain the logic of it.  I would call them and request that they review your file and explain how they dealt with it when they did your title examination.

It is also possible that there is a mistake and that your title agent missed it.  If they cannot explain it to your satisfaction, consider making a claim against the policy.  That would move the file into review by a title company attorney who might be able to resolve a problem or at least make sense of it.

Good luck.  I hope this helps.

Diane

query: Why do I have to pay real estate taxes at closing even if I do not escrow?

That's a great question.

Even though you are not escrowing your taxes with your mortgage lender, your lender requires that you verify payment of the real estate taxes.

Your mortgage lender also requires a loan policy of title insurance without exception for real estate taxes.  The title insurer will check to see if there are any real estate taxes currently due and payable.  Currently due and payable means that a bill has been issued by the tax office.  Even if the bill says you are in the discount period, the taxes are still currently due and payable so the title insurer must collect these taxes from you and remit them to the tax authority in order to issue a clear loan policy to your lender.

This is why you have to pay real estate taxes at closing even if you do not escrow.  It sets the slate clean and from that point on your responsibility is to pay your taxes as they come due and provide proof of payment to the lender annually.  If you fail to pay your taxes, most mortgage lenders will revoke the waiver of escrow, step in and pay the taxes to protect their security interest.  They will then setup an escrow account for you and if you fail to fund it, start foreclosure.

I've been in this business for a darn long time and it is my observation that most consumers get into trouble without an escrow account.  This is why responsible lenders view the waiver of escrow as a privilege and they only grant it to consumers who have demonstrated an ability to handle it or have a large equity position.

Since we are on the subject of waiver of escrow, I think it's important to note that a failure to escrow taxes by the predator mortgage lenders who engaged in the subprime market was a primary cause of the property value bubble.  They setup consumers who were irresponsible with money - needed subprime lending - and left them with paying taxes on their own.  Do you think they didn't know consumers who have a hard time controlling their finances wouldn't pay their taxes?  Of course, they knew.  Once the consumers got tax sale notices they needed to refinance again to save the house and all the lender had to do was up the value of the property to cover a new mortgage and then set them up yet again for another failure with another escrow waiver.  This was a churning scheme with each transaction pulling in thousands of dollars for the subprime lenders and ballooning values to cover the new fees and all based primarily on a system of NOT escrowing property taxes.  It was hideous but I am rambling and I think I have already answered your question so I'll stop here.  ;)


Monday, June 11, 2012

What is gap coverage?


“Gap Coverage” is a title insurance term that may not be familiar to those outside the industry.
When a title commitment is issued, it contains a standard gap exception:
“Defects, liens, encumbrances, adverse claims or other matters, if any, created, first appearing in the public records or attaching subsequent to the effective date hereof but prior to the date the proposed insured acquires for value of record the estate or interest or mortgage thereon covered by this Commitment.”
In plain English, what this says is that title insurance will NOT cover stuff put on the public record between the time of our initial title search (the date of the Commitment) and the time we record the mortgage or deed. The period of time from title search to recordation is the “gap”.
This standard exception is placed in the Commitment to give the title agent an opportunity to plan for removing the exception prior to issuing a policy. THIS IS IMPORTANT, because this exception NEVER gets put into an actual title insurance policy. We ALWAYS remove it first. SOOOOOO, when a title agent removes the gap exception, they are in fact, COVERING the gap with title insurance. This means that the buyer or mortgage lender is covered for matters put in the public record after the title search and before recordation. This is WHY we usually disburse at the table and give the buyers the keys.
In Pennsylvania, land conveyance occurs when a deed is delivered to a buyer for consideration. So when we have the signed deed and the seller has their money, the sale has officially occurred. Recordation is NOT necessary to convey ownership. Recordation protects the buyer by providing public notice of their ownership. An unrecorded deed still conveys ownership. When a title agent commits to insure over the gap, the buyer and lender have the full guarantee of the title company and don’t have to be concerned about interim issues.
Lenders in the Pittsburgh metropolitan area have required title insurance for so long that gap coverage is fully understood in the surrounding counties. When we do business in counties where title insurance is a newer issue, we find attorneys advising lenders and clients (incorrectly) that recordation is necessary to disburse funds or release keys. It’s just due to a lack of experience with title insurance.
Now, you may be asking, “Why do you put the gap exception in the Commitment in the first place when you always end up removing it in the end?” Well, when we underwrite a title, we decide if the seller is likely to have issues pending during the gap. For example, if there are pending lawsuits or we have a seller in financial distress, we will NOT disburse until we go to the courthouse, do a bring down and the document is recorded. This situation is rare, but it does happen. If we have a “normal” seller, we ask the seller to sign our “Affidavit of Disbursement” which gives us recourse to the seller if we disburse and later find something is wrong when we go to record. The exception gives us the chance to make the choice. In either case, the buyer and lender are fully protected.

query: what is a post closing audit?

First let me say that "post closing" means AFTER closing.  A post closing audit is an audit of the documents or file and this audit takes place after the closing.  Audits are performed by mortgage lenders, title insurance personnel, and regulators who are checking to make certain that the closing was performed correctly.

There are routine audits and there are special purpose audits.  A routine audit would be performed on each file by clerical staff whose job it is to move the file to the next stage.  Mortgage lenders set up secondary market sales and mortgage servicing.  Title insurers process recorded documents, reconcile escrow funds, and issue policies.  At each of these stages personnel are reviewing the work performed and if errors are spotted they will bring the file to the attention of management for resolution.

Special purpose audits may be a random selection of files for quality control department review or the file may be selected for an investigative audit by regulators or title underwriters.  These special purpose audits are part of oversight functions setup by the government or the company to monitor quality of service, regulatory compliance, and to keep an eye out for fraud or theft.

Sunday, June 10, 2012

Demotech's report on defalcation aka escrow theft

Several years ago I went to Harrisburg and met with representatives of the insurance department.  There were a few things on the agenda.  High on my list was a warning about a potential tsunami of defalcations as the mortgage credit crisis, then just beginning, evolved.

I knew from my experience in continuing education classes and that full reconciliation of escrow and other important controls were being ignored by agencies.  It was obvious to me that things looked normal to the outside world only because so much money ran through the accounts. Deficits by theft or mismanagement were covered by the constant flow of new money.  Once the flow of funds slowed or stopped with the expected steep decline in business, we would see widespread defalcations.

This is a problem in the title insurance industry.  It's one more thing for real estate agents, lenders, and consumers to keep in mind when choosing to work with a title insurance agency.  With that in mind I tried to come up with some observations that could be made from the outside looking in to try to determine if you are working with a title agent who responsibly manages their escrow funds.  This is pretty hard because from the outside I think you can only observe a philosophy or structure controlling the collection and disbursement of funds.

So, you want to be working with a title agency who requires "good funds" coming into escrow.  That means they want a cashiers check or wire for all but nominal amounts.  You also want to be working with a title agency who verifies that they have all funds in hand before disbursing a transaction.  For instance, let's say a buyer's mortgage company hasn't yet funded the transaction and the parties are sitting at the closing table.  The pressure is high, they want to move, the real estate agent wants their commission.  All eyes are on the title agent.  Does the title agent hold their ground and say they cannot disburse until they have the lender's funds or do they take a chance and disburse?

The "easy" title agency, the one who takes a check that isn't "good funds" or goes ahead with a disbursement when they do not have funds in hand, is the title agency who also probably doesn't fully reconcile their escrow account.  They don't take the responsibility of guarding other people's money seriously.  They may even be living off of the escrow.  So be careful.

Here's the Demotech report.

Friday, June 08, 2012

I have a new web site under construction, if you want to take a peek.

Once it's done, our domain tcsclosing.com will point here.

This has been a fun project.  While I've been an active blogger since 2006, I've not been the designer of our main website.  I want you to know I took a 4 class technology boot camp before creating this new site.

Let me know how you like it.  It's got a mobile version and I'm just so excited.  We'll have to put the "code" on our cards now and feel so trendy.  LOL

Wednesday, June 06, 2012

lost policy and title agents are out of business...what to do...what to do?


Diane,

I came across you website in surfing the net trying to find info on obtaining an owners title policy that I cannot find. 

How do I get a copy of my policy ??  I have an endorsement page from Chicago Title but do not have the other parts of the policy(it is officially stamped and has pres. Signatures).  I am doing a re-fi right now and would like the re-issue credit. I have called Chicago title and they say there records do not go back that far to 1997.

Chicago title is telling me that the paper is just an endorsement and without the other papers they cannot send me a new policy. I told them that if I had the policy I would not be calling them.

The title company that performed the closing is out of business by mismanagement(Flagler Title)
I have two first pages of the hud not the second crucial page that may have listed the company.

I do have a survey from 2005 that lists Chicago Title as the underwriter and Olympia Title was the title company. I called Olympia and they cannot find any records. 

If no one has a record how can I protect my house against any title defects ? without purchasing a new policy ? I would think I would have to have a policy as I  re-financed in 2005. But the title in that one I think is the lenders . I did manage to track some down from that hud and called but those companies say no policy as well. Lender First Choice which is now out of business . They were pretty big.  I called the companies that were their major underwriters but no luck.

How do I know if I am getting the run around. Why would their records not go back that far especially since it is the reason they exist is to protect title . Some people never move or re-fi .



Any suggestions are welcome.

Thanks,

J

Hi, J:  This is one of the weaknesses in our system of title insurance.  They rely on the consumer to retain copies and that just doesn't make sense to me.  

You've got two issues here:
1.  getting evidence of owner coverage
2.  getting that reissue discount

You may want to contact the state department of insurance to find out what the requirements are to be eligible for the reissue rate. If you were in Pennsylvania, we would not need a copy of your policy to give you the discount.  We could base the eligibility on the date of your last transaction and even that will change on July 1. They may be able to use the information from your last refinance.

As for the owner policy, without at least a copy of the HUD showing evidence of payment of an owner policy premium, it's hard to say if Chicago would honor it.  On the other hand, you have an endorsement in hand.  Look very carefully at that endorsement.  It should give the policy number and insurance companies do keep track of the policy numbers.  When a title agent goes out of business they audit the policy numbers assigned to that agency and account for each one.  Someone has to have that record. If it doesn't have a policy number it may not be a valid endorsement and you're back to square one.

I think at that point the best you can do is file complaints with the Department of Insurance and perhaps the Attorney General.  Your insurance agent seems to have taken your money and not given you a policy.  They were authorized to do business by one of the big underwriters and if nothing can be done for you, perhaps you can help improve the regulations in your state for other consumers.  Good luck and thanks for reading.  ;)

Diane

living through a title insurance claim is no fun


hi came across your website, which I really enjoyed reading, I have a question maybe you can help me.
I purchased a property with a small house on it right after we closed some siblings of the previous owner started fighting about it, so my title insurance company hired a lawyer and this is been in court for over 3 years, 2 months ago we were granted the motion and we won the case, but today we got a call that they are appealing, which they have 6 months to prepare if they will go to the appeal or not, my question is as follow I am pretty much fed up, i need to renovate and put in a lot of money in the house, I know normally i should wait till everything is over and done with, but its just so long and i'm living like temporary cause i didn't want to put it any money just in case we lose,...
so now my question is, what are my rights? can I put in the money fix up the property now? and hold the title insurance responsible if something goes wrong, or do I have to put my life on hold for so many years?
thanks appreciate if you can help me with any answers,

S

Hi, S:  Wow, that's a frustrating case.  This is the unfortunate side of title insurance claims.  A title insurance claim process can really interfere with your use and enjoyment of a property, even when you win.

I can't give you any comfort about improving the property.  That's a risk assessment you have to make.  Your title insurance is limited to the amount of your coverage and if you improve the property beyond that amount, you won't be covered.  Keep in mind that the legal fees have accrued against that coverage.

I hope folks who read about your case realize all title insurance is not equal. The type of search and knowledge and motivations of the examiner that laid the foundation for the title insurance policy play a major role in the level of risk assumed by the consumer. It is entirely possible that in your case the examiner was highly competent and simply made an error.  It is also possible that there was an automated search or a title examiner operating under a conflict of interest. 

I wish you well and if it were me, I'd be interested to know if the title agency was owned by any interested party in your transaction.  If so, and if I felt like taking this to a different level, I'd try to find out if the examiner found the risk of sibling interest and chose to insure over it without discussing the risk with you.  The conflict faced by examiners working in closely affiliated businesses is huge and one we have a hard time getting regulators to grasp.  These examiners may be working for a company that is getting a large sum of money from the real estate transaction and if the examiner finds a problem that will cause the buyer to walk away, could cost them their job.  I'm not saying this is what happened in your case but it's the most likely reasoning that comes to my mind other than simple human error, which could just as easily been the case.

Thanks so much for reading and sharing your story.  I do hope it works out for you and you can relax and enjoy your home.

D

Friday, June 01, 2012

a comparison of the old versus new PA title insurance rates for a refinance

Closings on or after July 1, 2012 will be charged according to a new rate schedule which offers only two rate categories, SALE and NON-SALE.  For our example, today, I am using a $150,000 refinance.

Under the old system I would need to know when the last insurable transaction took place because our old rate categories are tiered based on a timeline.  For our example I am presuming that the last transaction was three years ago.  That would make our consumer eligible for the 80ML/Refinance rate.  At $150,000 the premium would be $798.30.

Under the new system there is no timeline, only a distinction between a sale or non-sale transaction.  The NON-SALE rate at $150,000 is $1002.50.

Today is June 1, 2012.  If a consumer is considering refinancing today - and interest rates are great BTW - they may have a shot at closing before July 1, 2012 and avoiding the $204.20 rate increase.

We have made a marketing decision here at The Closing Specialists and with the implementation of the new rate structure we are amending our fee structure to ELIMINATE THE SETTLEMENT FEE.  We've only been charging $150 for out of office closings anyway and that's a very competitive rate, however, we've decided to just make things easy.  The $150 is GONE.

To keep things simple, we are also eliminating our Choose and Save Program.   So all of our consumers, even those who do not give us a deposit up front will save the $150 and HAVE NO SETTLEMENT FEE.

We think that's a rocking good deal!

So, FYI, starting with closings July 1, 2012 we'll be charging the all-inclusive PA title rates which will include out of office and after hours closings in our market area.

We will still charge for optional additional insurance or services such as:


  • endorsements [as application with the typical being $150]
  • closing services letter $75
  • printing electronically delivered lender document packages $50
  • courier for lender doc return $10
  • document prep, if needed, $95 [for things such as deed or specific POA]
  • outgoing wire $25
  • incoming wire $5
If you have any questions, please shoot me an email.