title claim tip....

If you are selling your property and your buyer's title insurance agent says there is a pre-existing lien that you need to pay and they want you to just pay for it then file a title insurance claim later, DON'T DO IT. Sometimes the buyer's title insurance agent is wrong.

The first job of a title insurance company when faced with a possible lien is to determine if the lien is valid.  If the lien is valid and it's covered by your title insurance, then they will pay it for you.  If, however, the title insurance company determines that the lien is not valid, they will explain this to the buyer's title insurance agent and help you to proceed with your transaction and close.

If you simply agree to pay for the lien and expect to recover from your title insurance and it is determined that the lien was not valid, you won't recover your funds.

We most often see this in PA with municipal services.  There is a 3 year window for filing municipal liens for things like water and sewage service.  If the municipal authority fails to file a lien in that 3 year window, they can't attach the unpaid balance to the property.  Just because they ask for the money on a lien letter doesn't mean that it must be paid.  A simple discussion with their solicitor usually resolves the matter.

We have a pending claim in our office concerning PA inheritance taxes.  In this case an attorney/title insurance agent who was representing both buyer and seller in a transaction found what he thought was a valid lien, paid it from the seller proceeds and then told the seller [our insured] after closing to recover the funds under their policy.  The claim isn't formally resolved but from the moment it hit our office and we sent it to the claims department, at every level each person who reviews it, says it isn't a valid lien and they don't understand why the attorney paid it.  He could have held the funds in escrow while his sellers filed a claim.

So, don't let the money out of the door before talking with your title insurer.

Wow, a request for a kickback and another request to collude to defraud a lender all in the same week.

This post goes out to mortgage lenders with a shout out to not let your guard down.  Loan officers need training to understand what they can and cannot do.

This post also goes out to title insurance companies with a shout out to not let your guard down. Title agents need training to understand what they can and cannot do.

When  loan officer calls and wants special pricing for their transaction, we say no.  We don't even give ourselves special pricing when we do our own transactions.  We keep the slate clean.

When a loan officer tells real estate agents and the borrower that "they don't need to know" about an addendum, we help them understand that they are colluding to defraud the mortgage lender.

We have to stand our ground to support good practices and have a zero tolerance for RESPA violations and fraud.  Don't you agree?

our response to an attorney refusing to have his client sign the owner/seller affidavit

"This is a problem.  Despite Atty. redacted experience in successfully refusing to have a seller sign the Owner/Seller Affidavit, we must insist upon the seller signing the document.  It is a mandatory affidavit for title insurance.  Any attorney who issues a policy without having this affidavit is doing so in violation of their contractual relationship with the title insurance company.  We don't violate that contract.  That said, since this is a cash transaction, the buyer may, if she chooses, accept a broad exception to her coverage which would except risks covered by the affidavit - effectively gutting her policy. In my opinion the refusal to sign the Owner/Seller Affidavit is no less a concern than if the estate had refused to sign the Seller Disclosure or the PAR sales contract and the various related disclosures contained in the real estate brokerage file."

"The bottom line is that this transaction belongs to redacted and redacted.  I am prohibited by Atty. redacted from contacting Ms. redacted directly.  Otherwise, I would surely try to explain to her that the refusal to sign the Owner/Seller Affidavit is outside of the norm.  Section 16 of the PAR sales contract says "The Property will be conveyed with good and marketable title that is insurable by a reputable title insurance company at regular rates,......" Though Atty redacted argues otherwise, it is a fact that the affidavit is mandatory and any title insurance company who is aware that their authorized agent [attorney or not] is issuing a policy without having such an affidavit in hand, that title insurance company would refuse to issue such a policy."

Upon receipt of this explanation, the listing agent spoke with the seller and she agreed to sign the affidavit despite the recommendation from her attorney.

Do your closers carefully review the owner/seller affidavit when it is being signed?

This case, see attached link, which I found through the wonderful tool of Lexology - thank you Christopher Smarts, made me think about the importance of this affidavit review.

I wondered as I read the case whether Speisman read the affidavit and intentionally withheld the construction status from the title agent or did he do what many may do and that is to simply sign where indicated thus committing fraud without knowing he had done so.

I realize that from the title insurance company point of view, it doesn't really matter because he signed the affidavit and has a responsibility to read before signing. I do wonder, though, if the closer had looked him in the eyes and read the mechanics lien language, if the borrower would have told the closer about the construction. I think there is a good chance that he may have. It is hard to lie when someone is looking into your eyes and challenging you on a specific point.

We train our closers to look directly into the eyes of a consumer during certain points in the affidavit with the hope that doing so will make them reveal a problem if one exists.

In the case of Speisman, had he spilled the beans, the closing would have been cancelled and perhaps the loan officer might have been angry, but the title insurer would have been protected and in the long haul the borrower would have been protected from himself.

What do YOU think?

important case in Washington on title company responsibility for agents

The Washington Supreme Court sided with the state insurance regulators Thursday in a case involving a Kitsap County insurance agency, Land Title Co., that was a contracted agent for Chicago Title. The court said in a 6-to-2 decision that Chicago Title was liable for the illegal actions by its agent, which had given out inducements including Seattle Seahawks playoff tickets in its efforts to secure business referrals.

Insurance commissioner Mike Kreidler’s office says the illegal wining and dining of real estate agencies, builders and mortgage lenders was meant to steer title-insurance business to the firm.

The court’s ruling, authored by Justice Charles Wiggins, is here.  

Kreidler put out a news release on the ruling, calling it was a “big win for consumers."

“Chicago Title’s arguments were contrary to a century of insurance law,” Kreidler said in his news release. “In order to effectively regulate insurers and protect consumers, it’s important to hold insurers responsible for the actions of their agents.”

http://www.theolympian.com/2013/08/01/2652198/supreme-court-agrees-with-state.html

Read more here: http://www.theolympian.com/2013/08/01/2652198/supreme-court-agrees-with-state.html#storylink=cpy