insuring the full value of proposed construction

I always enjoy working with a consumer who is savvy, reads the stuff we send to them and asks lots of questions.  This week I had the pleasure of working with an attorney whose title insurance order for a new construction transaction is being processed by our office.

She carefully reviewed the title insurance commitment. She requested copies of the documents underlying the exceptions.  She considered enhanced coverage and decided against it.  She asked for amendments to some boilerplate exceptions and one specific exception and accepted our explanation of the coverage and its limitations.  We offered extra coverage at a price but she declined.

She wondered why we were only proposing to insure the lot value and not the entire construction package.  I explained that the owner coverage could only be issued for the value of the property as it exists at issuance and that there was a procedure for obtaining full coverage after construction and offered to look into that for her.  Surprisingly, though we do a fair amount of new construction title insurance, this is the first consumer who raised that issue.

I contacted our agency rep and asked for guidance.  We are fortunate to have an agency rep who is an attorney and who also is a regular teacher in our regional continuing education classes.  She, like JC and me, had heard for years in these various classes that full coverage was available but only after construction.

We were all pleasantly surprised when the answer was that we COULD issue an owner policy NOW for the full amount.  That made our consumer happy and also made us happy since we could base the premium on the higher coverage.

I thought about the logic and it makes sense to me that there isn't really any extra risk because claim processing, if any occurred, would ferret out the question of actual loss.

I'm posting this because I think it's a good example of how the industry is constantly evolving and this is one regional change I welcome.

consumers suffering in the wake of the crappy standards era

Roy, a truck driver, and Sheila, a former hotel housekeeping supervisor, knew their new loan from Wells Fargo would enable them to save $198.86 a month - a nice chunk to help with gas and groceries.

But what the Bowers never imagined was that their old loan, the one Wells Fargo told them was paid off, would resurrect itself, trashing their credit report, scotching their son's student loans and throwing the whole family into foreclosure. All, they say, even though they didn't miss a single mortgage payment.

Read more on Reuters.

As I read this article I was reminded of the Coalition Petition we mailed to the Federal Reserve back in 2007 in an effort to bring attention to the crappy standards and to stop TitleSmart, the final straw.

I did some digging and finally found the text of the petition.  I might write it differently today - especially in hindsight after everything collapsed - but I'll leave it to you to read how I felt back then.

dc

COALITION PETITION

“Lobbying organization agendas are driven by the interests of those who provide the funding. The more you give, the bigger your voice. Nothing wrong with it on its face, it’s only when they pretend to be something else that the public is mislead."

In the face of everything that's wrong in the real estate/mortgage/title industry today, people have been dancing around the issue of new representation. I don't really think it's a new trade association we need right now, though it's pretty clear ALTA is inadequate. No, we're facing a much broader menace and thus need to pull together those concerned from a broad spectrum.

Real estate drives our economy. The family home is its most precious investment and the perceived key to the American dream. We can't let greed filled folly, thievery, incompetence, and lack of foresight destroy the land record system or the integrity of the real estate transaction.

I believe the majority of real estate agents & brokers, mortgage lenders & brokers, title insurance agents & attorneys, consumers & their advocates, lawmakers & regulators are forthright, good doing, honest, hard working people who try to do the best for themselves and their customers. I believe that most people are afraid to speak their mind. I believe that most people trust that professionals and leaders will protect their interests.

We have crisis is the real estate industry. Our leaders have lost their way. NAR, MBA, ALTA, NAMB have forgotten the face of their fathers. Somewhere along the way integrity and concern for the common good got lost.

We need a coalition representing the full spectrum of industry participants and consumers with a mission, to protect the integrity of the real estate market for the greater, common good.

Technology is a powerful tool, for good or ill. Embrace it we must, but carefully and thoughtfully, and pursue a free competitive market where pricing and delivery of products and services are improved without sacrificing security, fidelity, and the underlying integrity of land records.

Fraud, lowering of standards in lending and title examination, conflicts of interest, the drive for volume, focus on referral networks, not caring who's handling all that money and people's lives, the desire for instant product - no matter what the consequences - revenue sharing - this seemingly uncontrollable greedy locomotive push push pushing without regard for the interests of the consumer, the "real" customer, without regard for the interests of the investors funding mortgage pools, without regard for anybody or anything except themselves.

NAR, MBA, ALTA, NAMB have become enablers and promoters of a new mob-like mode of controlling the real estate market. This has got to stop.

The TitleSmart product is it, the final straw. If title underwriters convince ignorant lenders and the buying public that the land record system is ready to move to automated title underwriting, a disaster will take place. I am not saying that someday, full automation might not be an option, just like surgery. Some day robots might be able to do it, but for now the technology is still in the hands of experienced human surgeons. We are not ready for full search and examination automation. Anybody who tells you we are is lying or ignorant. Automating title search and examination before the land records system has fully integrated technology and the system has matured to a point where reliability is tested and proven by outside experts over a period of time, is just plain foolhardy.

For the benefit of all, we need to get our arms around our industry and save it and the American public. I think it's time to organize and start lobbying our lawmakers and regulators ourselves.

Sign this petition as a start.  Let's send a message right to the top.  We're asking the Board of Governors of the Federal Reserve to consider the economic impact of the degradation of quality underwriting standards and controls in the title insurance industry and the impact automated search and examination products will have on the integrity of land records. 
  

"government sponsored enemies" ????

“These government-sponsored enemies in the case of Freddie Mac and Fannie Mae are a large reason our housing crisis has occurred,” said Romney, who stood on a podium in front of a home that once belonged to Chris and Bridgette Davis, who saw their home foreclosed on in June 2011, according to public records.

“I am running against a guy in this primary, who was out working for one of these guys, Freddie Mac,” said Romney, who then launched into a renewed attack on Gingrich being an “influence peddler.”

Source:  http://abcnews.go.com/blogs/politics/2012/01/in-mecca-of-foreclosed-homes-romney-links-gingrich-to-housing-crisis/

Romney needs to learn some history of the housing marketplace before he tosses out cheap political crap like that.  Freddie Mac and Fannie Mae, following in the footsteps of the FHA and VA programs with Ginnie Mae, served for decades in expanding responsible homeownership and eliminating the term disintermediation from the vocabulary of mortgage bankers.

By creating a marketplace with uniform documents and standards, these entities created a marketplace through which whole mortgage loans and later securitized pools of mortgages could move, thus making money available nationwide without interruption.

I am still stymied over the full scale Koolaid drinking abandonment of good lending standards first embraced by private mortgage banking then embraced by Freddie Mac and Fannie Mae but the abandonment of standards did not start with these entities.

It started - in my opinion - with ridiculous underwriting standards - now know as sub-prime lending - adopted by lenders moving paper privately.  A boom market which covered up the consequences of bad lending lead management in the mortgage banking business and related businesses - the security houses, for instance, to operate in a whole knew lending mindset, one focused on churning volume and not quality.  Fannie Mae and Freddie Mac should have stopped it but management there was subject to the same influence and caved.

While purists want government out of the mortgage market, let's step back and review how the market worked before these agencies were born and rather than bill them as enemies, let's have an intelligent discussion about disintermediation and whether the American public might not need a statesman who has an understanding of broad issues who might help them understand why such agencies were created and why we may need reform but not a hanging post. 

This is why I am very interested to know more about the nature of the consultation provided by Newt Gingrich.   I can see why a historical perspective is necessary when trying to help an agency like Freddie Mac fix what is wrong.


dc

on the Countrywide VIP program

Cummings also revealed an internal email at Countrywide from Brandt that alleges Mozilo's role in approving McKeon's loan.

"Per Angelo — 'take off 1 point, no garbage fees, approve the loan and make it a no doc,'" Brandt wrote to staff, according to Cummings' letter.

Read more on Housing Wire.

I have to say my gut reaction to this program and how it worked has always been that Angelo Mozilo wanted to keep lawmakers happy and that these were standard issue orders that may have been issued without the knowledge of lawmakers.  I'm no big fan of Mozilo or most politicians but my guess is that the politicos might have known they were being giving special service but not known they were getting a special deal.

I'm a small fry but I've had this happen to me.  Before I was in the title insurance business I was a mortgage banker.  I bought a house back in 88 and was surprised when I got to closing to find that the title insurance agent had waived their fees.  I objected and insisted that we pay the normal fees.  I'm sure you realize this was a RESPA violation.  My opinion of the title agent went down that day.  They had a hard time understanding my position as I believe this was normal procedure for them.  I had not asked for nor expected a special deal.

It's one thing to keep your eye on a VIP transaction to make sure it goes smoothly.  It's another thing altogether to give them a sweet deal that violates the law.

dc

query: error on the HUD-1 fraud

Hmmm....  This isn't real clear but since you mention fraud, first consider if you have suffered a loss as a result of the fraud.  If so, you may have a claim against your title insurer.

If your concern is making things right and perhaps just reporting a bad guy, do a certified letter to the title insurance company with copies to the state insurance regulator, the state attorney general and the FBI.  If the fraud was perpetrated by a mortgage lender representative you can also copy the state mortgage license regulator, perhaps the department of banking.  If the fraud was perpetrated by a real estate agent you can also copy the state real estate license regulator and perhaps the state real estate commission.

Fraud in a real estate transaction was a central part of the credit crisis which caused the collapse of the market. Regulators and law enforcement are taking it very seriously.

the important question is...

How could a title agent, even one who is an attorney, get away with this crap without being discovered by his underwriter in routine audits?  I think the underwriter ought to be held accountable for the negligence of not having kept a close eye on an agent.  Failed to record 3000 documents?  That didn't happen overnight.

Jonas, as an owner of two title companies, failed to record more than 3,000 mortgages and remit more than $1.5 million meant for title-insurance premiums and mortgage payoffs.


Read more in  StarTribune.

CFPB examines high risk lending

If a lender offers non-traditional or subprime loan products and also offers loans that have two or more risky characteristics, the examiners must determine whether the increased risks are taken into account as part of the underwriting policies. They must also examine whether any mitigating factors are required for approval and whether actual underwriting practices conform with policies.

According to the examiner guidelines, risky characteristics include: limited or no documentation of income, assets and/or employment; simultaneous second lien; negative amortization, option payment or interest-only features; introductory rate 200 basis points or more below fully-indexed rate; and balloon clauses.

Read more on Housing Wire.

Who is the lender named on the HUD-1 form?

First I think we need to recognize that the primary purpose of the HUD-1 is consumer disclosure.

Until yesterday, every HUD-1 I have ever produced disclosed the name and address of the mortgage lender named in the NOTE and MORTGAGE.  Simple.

Yesterday, we had a transaction with a retail lender who was working with a wholesaler who called themselves a warehouse lender but really acted like a wholesale lender but wanted to also act like the retail lender.  Does that make sense?

So, this wholesale lender whose name is not on the NOTE or MORTGAGE insisted that their name and address be shown on the HUD-1 and would not approve the HUD-1 unless we made that change.  They wanted their name on the HUD-1 because they were table-funding the loan.

I was very uncomfortable doing this because we were not really doing a proper HUD-1 preparation, however, the lender is responsible for RESPA compliance and so we made the change, however, we informed the lender that we would create a special disclosure for buyer and seller to sign which acknowledged this unusual circumstance and disclosed the name and address of the lender whose name appeared in the NOTE and MORTGAGE.

There were a number of other requests made by this goofy lender leaving me with the impression that our comrades out there in the title insurance business must be doing whatever these folks want without regard to proper procedure.  They thought we were nuts for even questioning their request.  

lingo for a non-borrower co-mortgagor

This is the language we add in mortgages when there is a vested owner who is not a borrower on the loan:

The co-mortgagor, _____, has an ownership interest in the real property described herein and has joined in this Security Instrument for the sole purpose of validating the lien.  Said co-mortgagor is NOT a Borrower on the Promissory Note referenced in this Instrument and his joinder in this Security Instrument shall not affect the terms of said Note.


We change it slightly when the interest is only marital.  Having this language in the mortgage is preferred to using a separate spousal waiver - at least in my view.  It's more easily connected to the mortgage and likely to be discovered in a foreclosure title search.

The co-mortgagor, _____, has a marital interest in the real property described herein and has joined in this Security Instrument for the sole purpose of validating the lien.  Said co-mortgagor is NOT a Borrower on the Promissory Note referenced in this Instrument and his joinder in this Security Instrument shall not affect the terms of said Note.

Does propane reimbursement count in the minimum investment seller assist calculations?

Diane,

We closed on our property December 23.  The agreed upon contract was $325,000 and seller concessions of $5,000.  At the closing table, we found out that due to the terms of our loan, we had to have 5% down into the purchase price which would decrease the seller concessions to approximately $2700. We were contacted by the seller's agent yesterday b/c she forgot to have the propane in the tank figured into closing, which would mean we owe an additional $1100.  It was in the contract that we would pay for the propane in the tank, but I didn't know if this additional amount would in any way affect the amount of closing costs they paid. We want to do what is right, but we don't want to be taken advantage of, and we want to make sure we ask all of our questions before agreeing to pay for the propane in the tank.

Thanks in advance,

Melanie

Hi, Melanie:  I always feel bad to hear that this news comes at the closing table but it's not rare.  These types of calculations by lender closing departments often happen within hours of the closing.  There is always the option of postponing closing while the contract is renegotiated.  Most people don't want to delay and go back through underwriting so they close and the seller gets more money than they bargained for.

On the propane, that's personal property which wouldn't be figured into the underwriting minimum closing investment.

As for what to do now, I will answer this from the perspective of a former mortgage underwriter.  Since the sales contract you presented to the mortgage lender was the basis for the loan approval,  I would ask the lender - in writing - if they care if you renegotiate the propane clause in a way the forgives you paying the seller for the gas.  They may or may not care but having an email or letter in your file will protect you if your file is selected for a quality control audit and someone thinks perhaps you tried post closing to get around their closing cost guideline using the gas.

Good luck and I wish you well in your new home. 

Diane

Is flood zone determination covered by title insurance?

query via email:

Hi, Diane.

I just bumped into your blog on http://titleinsurancetalk.blogspot.com/2007/10/query-how-to-file-claim.html
and would like to ask your opinion on a title insurance problem we are having. 

We have a situation with our property which bought 2 years ago. We are doing the backyard drainage landscape project this year. During the process of applying for permit with our town, it was discovered that our property is in a flood zone, thus imposed some limitations on what we could do on our backyard. The flood determination provided at closing time was wrong by stating the property is not in a flood zone. The mortgage company now also realized the mistake and is requesting us to buy flood insurance on our property.

My question is - with the scale of the matter, should we file claim directly with the title insurance company, or, should we have an attorney represent us to go after the title company?

Thanks a lot!
G


Hi, G:  I don't think this is a title insurance matter.  Unless your state is different than most, the title insurer doesn't check or insure the status of flood zones.  I would look at your sales agreement with an attorney.  The seller may have been obligated to inform you of the status.  You may also want to look at your HUD-1 Settlement Statement to see who you paid to perform the flood certification.  This is the company who made the error.  There may be an affiliation between the mortgage lender and the flood certification company.  If so, that might give your attorney an angle for negotiation with the lender.  So, your best course is to explore the obligations of the parties to your sales contract and those that provided flood related service as part of the mortgage application process.  Don't forget to use certified mail for all communication and don't be afraid to contact the Attorney General's office for help or the state banking regulator if you feel you are getting stone-walled.  Good luck!

Diane

on Southern Title

Southern Title voluntarily suspended the issuance of new title policies on Sept. 15. The SCC issued an order of suspension Sept. 19.

An impairment order was issued by the SCC on Nov. 4 because the company no longer met minimum capital and reserve requirements.

Virginia Commissioner of Insurance Jacqueline K. Cunningham has been appointed deputy receiver in an effort to rehabilitate the company.

Policyholders with questions about the receivership can call the SCC's Bureau of Insurance at (804) 371-1502.

Read more in Times Dispatch.

states file amicus brief on RESPA...GOOD!!!!

The attorneys general also argued that it would be senseless to assume Congress carved out an exception that would allow brokers and lenders to charge unearned fees as long as they did not share them with another party.

“[T]he harm to the consumer — and the abusiveness of the broker or lender’s practice — is the same regardless of whether an unearned fee is divided,” the attorneys general argued.

They told the Court that a straightforward application of Section 2607(b) is necessary to protect consumers and argued that unearned fees are by definition abusive.

Read more in RESPANews.

query: can you pay a title for title insurance and they don't provide one

Hmmmm...popular subject this weekend.  Yes, it is possible to pay a title insurance company for title insurance and then they fail to provide a policy.  It shouldn't happen but it does.

I received another query via email this weekend from a real estate agent representing a seller with a PA inheritance tax matter and a refusal from their title insurance company to deal with the matter.  Why?  They have no record of an owner policy.

The good news?  The seller has evidence that they paid for an owner policy.  These folks saved their HUD-1 Settlement Statement and it clearly shows, according to the real estate agent, that they paid a premium for owner coverage.  In PA, since we have simultaneous issue and the title company does acknowledge that they issued a loan policy, this should be a slam dunk when they see they HUD-1.

So, be a smart consumer and keep your eyes on documents and save them because you never know when you might need evidence.  ;)

query: when does a "repair credit" not go on the hud

If there is a repair credit from seller to buyer and there is a mortgage lender involved in the transaction the credit goes on the HUD-1, period, end of story.  Any other suggestion, even if it comes from a representative of the lender is collusion to defraud the lender.  What?  How could a lender representative collude to defraud itself?  Well, just test the representative.  Ask for written instructions telling you to place handle a repair credit OFF the HUD-1.  Bet your bottom dollar you won't get that in writing because the lender representative knows they would be in trouble with their employer by working outside of underwriting guidelines.  They want YOU to take the risk and will make you feel like a fool for not playing along.  Don't play that game.  It leads to jail and other bad stuff.

The easiest way to handle a repair credit is to ask the lender if it can be converted to a seller assist with closing costs.  This can be done so long as the seller isn't already giving a seller assist that is at the limit of the mortgage underwriting guidelines.  If that's the case then they'll just have to make that repair or forget it - no cash credit allowed.

Lender underwriting guidelines are real.  You have to trust that there is a reason that monies moving from seller to buyer are limited.   So, stay on HUD.  Off HUD is for bad guys and I'm sure you aren't wearing a black hat. ;)

query via email concerning a pending tax sale and a title insurance claim

Hello Diane,
My name is Gerald and I noticed your Blog re: Title Ins. said to email you with questions and  . . . .  ok here goes - 
100% DISABLED Person living on fixed - (lower income) 

1) My First time for a Title insurance claim - I have NO IDEA what to expect or ask for - ? My home is paid for but am facing Tax default / Tax Sale March 20, 2012. I paid 85,000 in 2005 for a cabin on one acre in So CAL. The assessor had me WAY overassessed (from 2004- 40,000 up to 125,000. in 2006 - isn't that illegal %? ) just got it down to 92 then 70 for last year and now33,000 for 2010 - all these changes just this year and now they insist it all be paid(with 18% interest!!) IMMEDIATELY or be FORCE-ABLY REMOVED by the County Sheriff! They are treating me like a squatter!? - I PAID CASH! My entire life savings invested here in this humble abode.

2) I have never received a formal title to the property because the description was wrong that was entered when it changed ownership, (due to clerical error?) and numerous attempts to get to the Escrow company [redacted] . . . . finds they went outta biz! . .. thus I placed a title insurance claim with First American recently. - it is supposedly in process - waiting for their investigation . . .. they say expect a month? - for what ? criminy 10 minutes of explanation and I can sleep again without having looky loos rooting thru my backyard hoping to buy the place for a sweet 9 grand. Is this an appropriate Title insurance claim? What kind of numbers should I expect them to pay - medical also?, Every Attorney I speak to loses it after the second paragraph.

I have always fully intended to take advantage of a State program for postponement, (it was a check box on the original sales offer form - replacement of disabled home) - but, as you might be aware - the taxes had to be paid up before the CA state deferrment program would letme apply . ..  now the state cancelled the program for Elderly and disabled prop tax deferment - http://www.sco.ca.gov/ardtax_prop_tax_postponement.html

so it was a catch 22 -  I do owe taxes but the amount is higher than I think it should be because of the incorrect info: (ie: Cabin w/o bath VS. 1 bed 3/4 bath still incorrectly listed) I don't feel rightabout paying another cent for taxes till I get a real title - ?  The County will not take the "title in lieu" - nor accept the recent postponement Legislation AB1090 that I was praying would save me.

The Tax Collector INSISTS on $9,143.00 on or before March 20, 2012 or they are throwing my disabled ass on the street - ! I don't have credit to borrow it and they won't take payments. HUD EDA FHA  no one can assist  - DisabiltyrightsCA.org tells me it's way out of their field. My health is now becoming critically endangered - multiple heart attacks.
- Any thoughts? Is there a way to expedite correcting this kind of Title Insurance Claim without going to court for several years?  I simply do not have the life left in me. AAARRRGGHHH!

-at wits end and losing my grip,
appreciatively yours,

Gerald

Happy Holidays

Hi, Gerald:  Wow.  Thanks for sending the email.  I don't really have a solution to offer you but I think I may be able to add clarity which may assist an attorney to better understand and perhaps offer more helpful advice, okay?

Let's talk about title insurance.  There are a couple of details in your described situation which cause me to believe you may not have a successful claim. Don't let that stop you from trying, and I would welcome comments from other title insurance professionals who may have a differing opinion.

The coverage for title insurance goes backwards from the date of the policy.  Claims are based on losses that happen because of things that took place before the policy was issued.  So, look at Schedule B in the owner policy.  This is where exceptions to coverage are listed.  I would be surprised if you do not see an exception for property taxes which are not yet due and payable. That means your title insurer would not even think about covering taxes that were billed after your purchase in 2005.  This would include tax bills, if any, issued retroactively for prior years.  Again, the key phrase is not yet due and payable.  We cannot be expected to discover and insure tax bills that don't yet exist when issuing coverage.

If, however, any of the outstanding taxes moving you to this tax sale were due and payable PRIOR to your purchase and the title insurance agency failed to find them and have them paid, those would be taxes typically covered in a title insurance claim.  The way to nail this part of your concern with an attorney is to look carefully at Schedule B in your owner policy. and compare exceptions for taxes with the original due dates for tax bills you have outstanding.

The other matter you raise that is an incorrect description.  The only detail you mention, though, is a difference in the dwelling - Cabin w/o bath VS. 1 bed 3/4 bath.  Go back to your title insurance policy and locate the legal description of the insured property.  This is usually on Schedule A but it may be on Schedule C.

I would be very surprised if the legal description in your policy includes any reference to the type of dwelling.  I say this because title insurance is about insuring land ownership.  The fact that a dwelling or some other structure sits on the land impacts value and therefore the amount of coverage but we don't insure what that dwelling is or its condition.  You establish the value by telling the title insurer what you agreed to pay for the property.  You bought an owner policy in the amount of $85,000.  Your ownership of the land described in the legal description is insured up to $85,000.  If the title insurance agent DID include a detailed description of the dwelling, then you may have a claim, but again, I would be surprised to see any reference to a structure in the description.  The way to nail this part of your concern with an attorney is to look carefully at Schedule A or C - find the legal description - and see if there is an affirmative statement of the type of dwelling.

I don't think the one month estimate of time for claim review with First American is unreasonable.  The onus is on the consumer to make a timely claim and to notify their title insurer as soon as they have a potential claim so that there is a chance of defending you successfully and mitigating damages.

I hope this clarity does help in your discussions with an attorney.  If your review indicates no hope for a successful claim, then that may clear the air for a discussion with an agency for the disabled to simply concentrate on helping you relocate or find some emergency loan assistance.

I wish you well.  

Diane

legislation moving on home warranties

H.R. 2446, RESPA Home Warranty Clarification Act of 2011, sponsored by Rep. Judy Biggert H.R. 2446 provides clarity to existing law that home warranties are not subject to the Real Estate Settlement Procedures Act (RESPA). The bill also requires that homeowners receive a specific written notice about the payment arrangement for any individual selling, advertising or performing a homeowner warranty inspection for the repair or replacement of home system components or appliances.


Read more in Insurance News.

query: what happens when the warranty forgotten on hud 1 statement

I'm guessing this is a home warranty, the type that real estate agents sell.  Though the home warranty benefits the buyer, it's the seller who usually pays for it as an inducement to help move the property.  The real estate agent may also receive a commission for selling the home warranty.

If the title/settlement company failed to put the invoice for the home warranty on the HUD-1 Settlement Statement, it's likely because they were unaware of the warranty purchase or did not receive an invoice on time.

In Pennsylvania, real estate agents typically add language to the sales contract indicating that the seller will pay for the warranty.  The problem is that title agents do not always receive entire copies of contracts and some do not look through the pages for additional contingencies.  If the invoice isn't presented prior to HUD-1 preparation and the parties fail to do a good pre-closing HUD-1 review, items like this can slip through.

So, what do you do post [after] closing?  If it was the case that the seller was to have paid for the home warranty, then contact the title/settlement company and the real estate agent pronto.  The real estate agent had a responsibility to get the invoice to the company preparing the HUD-1.  If they did, then the company preparing the HUD-1 had a responsibility to put that figure on the HUD-1.

The bottom line is that someone needs to contact the seller ASAP - before they spend all of the proceeds money.  If the seller is unwilling at this point to ante up, then whoever made the error, in my opinion - either the real estate or title/settlement agent - ought to pay for the warranty and pursue the seller for reimbursement.

If we made such an error, that's how we would handle it.  I do think, though, that this is a good reminder to EVERYONE to have their thinking caps on and engaged while reviewing the HUD-1.  Don't assume it is right and if you find an error before or during the closing and you fail to raise it, you may be out of luck later.

query: what happens when I get to settlement and the title company have wrong figures

I call this a STOP DROP and ROLL moment.  What better reason to make sure you get the HUD-1 to review prior to closing, eh?

Well, in all fairness, perhaps there was a change after the pre-closing review.  Unless you intend to live with the error, use your leverage by not closing until the figures are corrected.  Trust me.  After you close, your file will go on the back burner.  While you are at the closing table, everyone is motivated to do what it takes to close, so insist upon a fix or a clear explanation of why the figures on the HUD are okay.

There are some circumstances where we close with figures that are less than perfect and the parties decide it's in their best interest to close rather than await a fix.  For instance sometimes a lender will set up property tax reserves on the HUD in a way that doesn't jive with the actual due dates of the taxes.  It might take 24 hours to have this fixed. If the buyer has the family in the car and furniture in a moving van, they may choose to close and have the escrow account resolved after closing.

So, use your judgment but if you think there is a mistake, stand your ground for a resolution that suits you.  It's your transaction.

query: where the hell is my hud statement

Many search engine queries that arrive here on Title Insurance Talk are folks looking for their HUD-1 statements.  This one gave me a few chuckles.  Thanks. ;)

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.

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.

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.  ;)