unreleased mortgage and title insurance in action

"In one way or another, we believe that the title insurance companies will fix the problem," Davis said. "Title insurance is bought because it is conceivable that mistakes were made on the title search."

Nielsen said the title company that worked for William Ryan Homes on the sale was aware of the Maple Lawn mortgage, "but it (the title company) had the understanding that the mortgage would be released from those lots."

I read this story with interest and wondered why the attorney or title insurance agent didn't control the release.

Maybe they trusted someone to clear the title. I like to use the Ronald Reagan approach, "Trust, but verify."

So, if you heard us ask for a copy of the signed release and a letter from the lender approving the release for consideration and promising to record upon receipt, then you'll know that we DID trust but we didn't forget to VERIFY.

Consumers should choose quality title expertise.

Look for demonstrative knowledge when selecting a title insurer. Call and ask some questions. Ask if they are just doing current owner searches or will they perform a full search? Do they even understand the question?

query: difference between cashiers check and certified check

A cashiers check aka teller check is issued by the teller at the bank. It's not your personal check. The bank will type one of THEIR checks and the teller will sign it. You will be noted as the remitter.

A certified check is YOUR check which has been stamped certified by the teller. The teller freezes these funds in your account. The check can't bounce.

Both types of checks can be forged. It's easier to forge a certified check so many title agents will no longer take certified checks.

Many title underwriters require a wire for this reason. If we continue to see claims due to forged cashiers and certified checks, look for a switch to ALL WIRE funding at some point in the future.

living in each other's houses?

I just met with neighbors to sign their lots/houses to each other......the one neighbor purchased their lot and then built a new home on their lot in 1961.  The other neighbor bought their lot and home in 2015 (since 1960, the property has been transferred 4 times).

The legal descriptions/lots showed that the homeowner in 1960 and 1961 built their homes on the wrong lots!!!

Thank goodness each current owner understood the circumstances and cooperated with each other to transfer the correct lots to each other.  Problem solved.

I just ask myself...why wasn't this caught sooner?  

hey...give your lender a break!!!

Your lender gave you the money in exchange for your promise to repay it with interest.  Don't get mad when they get grumpy when you want them to modify terms without cause, okay?

I closed a transaction last week and the sellers were just fuming over their mortgage lender.  First the mortgage payoff letter included $1200 in interest.  What crooks!  I calmly explained that since the February mortgage payment hadn't yet been paid, the lender was collecting the interest owed for the month of January.

In case you didn't know, mortgage interest is paid in arrears.  That means you are always paying for the previous month so when you pay off a mortgage, you will always be playing catch up with the interest.  It's normal and should be expected.

Okay, so they weren't happy about that but they did understand.  Then they started really expressing anger that their mortgage lender wouldn't allow them to freeze their payments.  I couldn't quite understand what that meant.  Turns out that they thought it was completely acceptable to stop making mortgage payments once they decided to sell the property.

What?

Yes, when they decided to sell, they called their mortgage lender and asked for a freeze in the payment process.  Of course the lender said no.

Mind you there is no financial distress here, no subprime crapola, no default pending,  just a simple unrealistic expectation that their mortgage lender would go along with this plan.

The property being conveyed was an investment property with a positive cash flow.  I just couldn't get any clarity on why they thought their mortgage lender should take a vacation in the promise of repayment other than the news of mortgage modifications out there in the media.

I'll probably not see this kind of pretzel logic again...

Irish Blessing

May the road rise to meet you
May the wind be always at your back
May the sun shine warm upon your face
and rains fall soft upon your fields
and until we meet again
may God hold you in the hollow of his hand

query: difference between effective date and issued date on the title commitment

The title searcher (abstractor) will note a cover date on the title search.  This is the date through which the courthouse records are up to date in their system.  The abstractor can not go further in time than the records allow.  The cover date would be the effective date of the title commitment.  The date of issuance would be the date the commitment is issued by the agent.

For example, I may be examining a title search (abstract) today, March 11th, with a cover date of March 3rd. My effective date of the title commitment is March 3rd even though I am issuing the commitment today.

query: who is responsible for sending out the title insurance policy to the buyer

The issuing title agent, attorney or title underwriter is responsible for sending policies to the lender and the buyer. You should have a copy of the title insurance commitment in your hands before you close. Whoever issued the commitment, will issue the policy. Sixty days is a reasonable period to wait after closing without getting worried. After sixty days, make inquiries.

Some attorneys and title agents have bad habits. Some never issue policies. What crooks!

BTW - If you are trying to determine whether the title insurer you are working with is a good guy or a bad guy, ask about the title commitment and when you will receive a copy. The answer to that question is very revealing. It will separate the knowledgeable and dependable from those who are neither.

Owner's Policy questions

Questions about an Owner's Policy?

An owner title insurance policy will protect the homebuyer from many of the risks, but not all. Let me explain...

Owner title insurance does not cover the condition of the structure. A smart homebuyer will take the time to hire professional inspectors and look at their reports before the closing. Keep in mind the age of the house and be realistic about your expectations. Every good home inspector will point out all the flaws they find. You, the homebuyer, will need to decide which ones are really important and then negotiate with the seller for repair.

A consumer should also buy a current up to date survey, making sure the surveyor actually does field work and research. The drawing should accurately show the location of easements, rights of way, and improvements/structures. It’s not safe to rely on the seller’s knowledge of lot line locations. They may be mistaken. Owner title insurance typically does not cover the location of structures or lot lines. So if you close without a survey and find out later that the garage is actually on your neighbor’s property or that lovely area for a garden is not yours, you’re on your own. You’ll either go to court or take your lumps.

I am amazed when a transaction falls apart because the buyer insisted that the seller make the house perfect. Unless you are buying a brand new home, try to keep your expectations realistic. It probably took a long time to find the right house in the right neighborhood at the right price. Don't blow the deal seeking perfection. A willing buyer negotiating with a willing seller will usually find the right balance and resolve their concerns.

Here's some language we use at closing to make sure both buyer and seller have reached an understanding:

"The undersigned buyer(s) and seller(s) agree that all terms and conditions of the sales agreement have been satisfied or waived.

The undersigned buyer(s) confirms that they have had an opportunity to inspect the premises to their satisfaction and that they have personally reviewed and accepted any inspection reports issued by contractors performing tests on their behalf including but not limited to septic dye test, termite/pest inspection, home inspection, etc.

For purposes of holding the real estate agents, real estate companies, Lender, its successors and assigns, and The Closing Specialists® harmless, buyer(s) agrees to accept property in "as is" condition. Representations and warranties from the seller are still being relied upon by the buyer(s) and are not hereby waived.

Buyer(s) and seller(s) further agree to hold harmless all/any real estate agents, real estate companies, Lender, its successors and/or assigns, and The Closing Specialists® from further liabilities and/or remedies related to the physical condition of the premises."

I know it's boring stuff, but signing this document at closing is a sort of "speak now or forever hold your peace" moment. We really do not want you to close until you are satisfied.

Do your homework before you go to the closing table. Order your survey and inspections as soon as the agreement is accepted. Review any concerns directly with the surveyor or inspector. Negotiate repairs, if necessary. Do a final walk thru right before closing to make sure the condition of the house is broom clean and as agreed. Then close knowing you have done as much as possible to protect your interests and enjoy your new home!

Seller should shop around for fees too!

query: does the seller get overcharged on settlement costs

Yes, indeed they do. Sellers, like buyers, should shop for settlement service providers or at the very least make certain that the settlement agent being hired by the buyer isn't overcharging on the seller side.

We see this in the Pittsburgh metro market all the time. A buyer hires a settlement agent. The settlement agent charges the seller a settlement fee. Why? Does the seller have to pay? No, not unless they bargained for the service.

Seller should ask around and find out what is customary in their market and also whether there are options to reduce their settlement costs.

Off to a new start

Diane (Cipa) Anderson retired June 30, 2016, and I have just recently taken over the "Title Insurance Talk" blog.

"(s)he leaves big shoes to fill, but they're pointed in the right direction."        Ed West

I was nervous at first, since blogging is new to me, but that nervousness has turned into determination and I will give it my best shot.

So welcome to the next chapter...

You should shop for your title insurance agent as you would any other consumer services, by comparing:

1. Costs
2. Convenience – when and where will you close?
3. Service & expertise – how long will it take to process and how long have they been in business?

How do you do a cost comparison?
Any reputable title insurance agent will provide a quote in writing.
The difference in cost may be negligible or significant but you won’t know unless you check it out!

Who should you call for quotes?
Start by asking friends and family for the name of someone they used. Surely you know someone who recently purchased or refinanced a home. Ask your real estate agent or mortgage lender for a recommendation. Check the yellow pages or do an on-line search. We have a title insurance rate calculator on our website, that fee will only be for the Loan and/or Owner's Policy.

To get comparable quotes, you’ll need a short fact sheet and give these essential facts to each company. Remember you need to compare apples to apples to make an intelligent decision.

Here’s a list of questions to ask before getting quotes. Write your answers down and make sure each title insurance agent you speak with considers this set of facts, as they will affect the actual costs in a title transaction:

Is this a purchase or refinance transaction?
If you are refinancing, when did you last mortgage the property?
What is the purchase price?
What is the mortgage amount?
Are you closing a second mortgage at the same time?
In what county is the property located?
In what specific municipality is the property located?

The following list includes typical title related charges. Use it as a guide as you speak with title insurance agents:

Title insurance premium
Title search
Endorsements
Closing Protection letter
Notary fees
Wire fees
Courier fees
Settlement fee
Document preparation fee
Attorney fee
Tax certification/lien letters
Recording fees
Deed transfer taxes/local
Deed transfer taxes/state
Other?

I suggest you verbally discuss the quote then ask each title insurance agent to send you a quote by fax or e-mail.

Make sure the quote is in writing.
Make sure the quote is itemized.
Make sure the quote includes all fees relevant to the title portion of the transaction.

Pennsylvania is a regulated state but there are unregulated fees that will affect your cost. Unless you drill down and get a full quote you can’t really compare.

What I find most interesting when comparing costs are the tax certifications and lien letters. Federal and state laws and regulations clearly prohibit padding the costs of tax certifications and lien letters. We are only permitted to collect reimbursement for out of pocket expenses. You’d be surprised how many closing statements I have seen with lien letters padded an extra $10, $20, or even $50. It’s a carefully hidden income stream for less than honest title insurance agents and attorneys. Be on the lookout for it.

Remember that actual costs may change if the facts of your case change. So keep that in mind and be sure to compare apples to apples when shopping.

Why I am leaving this business....

t r i d

Hi, Folks:  You haven't seen a post from me in some time and I have been pedaling as fast as I can dealing with the monster called TRID.

The disclosure is terrific but the collaboration process is more than I am willing to live with. I don't need that kind of stress.

Since my last post, I have sold my interest in the title insurance agency to Becky Sherry.  Becky will be taking over this blog soon.

I want to say thanks for reading.  Title Insurance Talk has been a labor of love.  Take care.  Live long and prosper.  ;)

Diane

taxes are the topic this week

In one case, the seller told the buyer that the property had a homeowner exclusion which allowed for a discounted rate.  Turns out that wasn't true.  Homeowner exclusions are generally processed once a year by the tax assessor.  Miss the cycle and you pay more tax.  This buyer can apply for the exclusion but got stuck paying for the extra tax for at least this year.


In the other case, a buyer of a condo in a converted building just received a bill from the tax assessor for a catch up period back to the conversion.  This assessment change was pending at the time of the sale but it's not determined if anyone knew who could have informed the buyer.

In both cases, the buyers were careful when they closed.  It's hard to say if either case is worth pursuing the seller or filing a claim against title insurance.  It doesn't cost anything to try a claim, however, title insurance does not cover tax bills that are not yet due and payable. A case would have to be made that the title agents had evidence in hand before closing that these taxes were incorrect or incomplete information.

I wish these homeowners much luck and am posting their situations just to keep you all informed about things that can and do happen.

TRID.....

I love the Closing Disclosure forms.  I have to say it.

What is killing me is the collaboration process.  It's like a bomb went off in the industry and we are working with systems and procedures cobbled together in the aftermath of the explosion.

I continue to hope that there will be a normalcy soon.

[HAHA Just noticed I said that "bomb" comment in a previous post.  Just goes to show THAT'S EXACTLY HOW IT FEELS!]

TRID - the beast moves on....

Well, it's November 23rd and I'm getting to like TRID.  I think when everyone gets the hang of it, we'll all be happy.

just a note to say TRID implementation was like exploding a bomb in the middle of the real estate market....

Everyone just needs to take a breath because ALL transactions are on the slo mo trail, even cash.

We have software issues and every lender we are working with also has software issues.

the trouble with TRID!!!!

Is that it was wholly unnecessary.

Yikes....first TRID closing scheduled

So, how are ya? Feeling like the title world is about to change?  Yea. I hear ya.  Me, too.

Okay, so we have a bunch of TRID transactions in process.  We like to use colors in our office so TRID transactions are in green file folders.  Everything else is in our usual blue.

FYI - We use these colors because the are CALMING colors and every title insurance office needs as many calming influences as we can get, right?

Well, one of these little greenies made its way to "clear to close" status today and here's what happened.

The loan officer said the consumer's expectations were to close on November 6th.  I checked with the lender's closing department and they have a straight "need 10 days notice to schedule" plan in place for TRID closings.  I don't disagree.  I think that's smart so I called everyone and explained the reality of TRID and they said okay to the new date.  PHEW!  Step one okay.

I'll report back as we move through the process.

Keep calm and carry on!

TRID black hole...interesting article

According to the CHLA’s letter, the TRID rules stipulate that a that a lender deliver the Loan Estimate to the borrower within 3 days after receipt of a loan application and at least 7 days before consummation, which is defined as when the loan documents are signed.

The CHLA warns that after the Loan Estimate is delivered to a borrower, a change in in circumstances like the borrower needing to push the closing date could place lenders between a rock and a hard place.

http://www.housingwire.com/articles/34817-community-lenders-warn-cfpb-on-trid-black-hole

follow the link to an article worth reading if you are a lender or title insurer

It is this holding that resulted in most of the substantial increase in the disgorgement amount ordered by the Director. The ALJ had held that the RESPA violations occurred at the time of the closing of the underlying loans, and thus limited disgorgement to those loans that had closed after July 21, 2008 (three years prior to the CFPB’s gaining its authority to bring administrative enforcement actions). Director Cordray instead included all payments made by the mortgage insurers to Atrium after July 21, 2008, regardless of when the underlying loans closed. This substantially expanded the number of payments subject to disgorgement.

http://www.jdsupra.com/legalnews/cfpb-issues-final-decision-in-in-re-phh-54552/

3 day rule

earnest money aka hand money

When making an offer to purchase real estate, the buyer is typically asked to put up a good faith deposit.  This deposit is referred to as earnest money or hand money.  It means you are serious about the offer and willing to lose this money if you back out of the transaction.

Sales contracts often have contingencies that may allow for a return of the hand money.  For instance, if the sales contract has a contingency for a property inspection and the inspector finds a problem that the seller had not previously disclosed to the buyer, this would be a circumstance in which the hand money would be returned to the buyer if the sale fell through due to the discovery.

The amount of hand money is negotiable and could be determined by local custom.  In some areas you might get away with $500 but in others may be expected to put down $5000.

So for the readers who are buying, expect to have a hand money deposit and if you back out of a sales contract without a legitimate contingency failure, expect to lose the hand money.

For readers who are selling real estate and for Realtors who may be reading this, here are some pitfalls to avoid.

First, get the hand money up front.  I firmly believe that the offer to the seller should be with a copy of the hand money check in hand.  I don't like the idea of giving a buyer several days to come up with the money.  The seller is being asked to make a decision of price and to take their property off the market and if there is no hand money, even for a few days, the buyer has nothing to lose by changing their mind and walking away from the deal.  I suggest that sellers ask for a copy of the hand money check.

Second, make sure the real estate office deposits the check and is not holding it.  You have to move the money into the escrow account to protect it and to have control.  If the check hasn't been cashed then the buyer again has nothing to lose by walking away and stopping payment on the check.

What happens if the hand money check bounces?  When you have a bounced hand money check, you have a big red flag that the buyer may not be truthful.  Yes, it could have been a fluke and just a simple mistake but it also could mean you will have problems with the closing.  If the hand money check bounces, even if you do get a good replacement check, Realtors should tell the seller and the title agent or attorney so those parties can be cautious.

Why might they want to be cautious?  Well, what if the seller allows the buyer early access to the property for repairs, improvements, etc. then in the end the buyer can't get the mortgage or doesn't actually have the money to complete the transaction?

We've had two recent transactions involving fraud.  It turns out that BOTH had bounced hand money checks and in both cases, the buyers provided replacement checks so the Realtors did not tell anyone about the bounce.  One case was terrible as it involved the buyer presenting a counterfeit cashier check for a cash closing. He's incarcerated pending trial.  The other case was stopped before it closed because we got a bad vibe and started asking questions. That's how we learned about the bounced check.  With that info we suggested to parties that they be very careful and so that lead to the discovery that the letter from the bank that had been presented in the cash transaction was a fraud.

The earnest money aka hand money deposit is a meaningful part of the transaction and its importance cannot be overlooked.  It is the first test of the willingness and ability of the buyer to perform under the terms of the sales contract.  Be a savvy buyer, seller, and Realtor.  Make sure that everyone is serious about that first deposit. It lays the foundation for the transaction.

Be a savvy consumer. Pay attention at closing.

The company was given $3100 at our closing last June and neglected to pay the School Real Estate Taxes that said money was put in escrow to pay. When we received an invoice showing it was unpaid, the school district had added penalties and fees. We contacted Diane at The Closing Specialists and were told that it was our fault and that we had to pay the fees and penalties. Unacceptable. She then said she would remit the $3100 when she felt like it rather than when it was due. Bad business.

Hi, Sherry: As we discussed yesterday, the escrow agreement you and your husband signed at closing clearly stated in bold that you were responsible for getting a tax bill to our office. The statement we received yesterday was the first statement we received. The amount owing was higher than the escrow balance. The escrow agreement also said that you were responsible for any amounts owed beyond the amount held in escrow. Upon receipt of your statement while talking with you on the phone, you were clearly upset and told me you would not pay the difference. I said we might either send the full $3100 to the tax authority or might hold it and wait for you to send us the difference. 

After having a couple of minutes to think about the best solution to your problem, we cut a check in the amount of $3100 and mailed it to the tax authority. I then sent an email to the email address we had on record, I believe it was your husband's email and let him know we mailed the check and suggested that you send the remaining balance to the tax authority to avoid the filing of a lien against your property. 

All actions performed by The Closing Specialists in this regard are according to the terms of the escrow agreement. We understand after having received your email later in the day that you are in the title business operating as an abstractor. This puts you in an unusual position as a consumer. Unlike most consumers you are professionally familiar with the tax collection process in PA and also, as an abstractor trained to read documents carefully with close attention to detail. Every document related to a real estate closing is important. We do understand that there are many documents that will be signed at the time, however, that doesn't mean that the terms of the documents can be ignored. Thank you for taking the time to post this on Facebook. I'll include it in a discussion on our blog, Title Insurance Talk. It's always good to remind consumers to pay attention. Every party in a transaction has their part to play. 

Best wishes. Diane Cipa

Did the condo come with parking spaces or not?

Diane,

We bought a condo unit that has had two indoor parking spaces since this building went condo in 1985. This unit was a REO foreclosure by the VA and was subsequently listed for sale by a local agent. The MLS listing showed the two spaces clearly identified. After our cash offer was accepted and we got the various forms to review and sign, we noticed that there was no mention of the parking spaces and we and our agent questioned the selling agent, and the title company that the seller has selected to handle the closing, several times about the lack of this inclusion. They kept assuring us that there was no problem. We went to closing prepared to refuse to close unless it was resolved.

> The closing attorney went to great pains to tell us that everything was above board and that detailing the specific parking spaces was not done anymore on the deed as they could be bought and sold outside of the unit itself. He said as long as the deed had the statement “including limited common elements” then we were protected. So reluctantly we went through with the closing, signing the various pages that required signatures. He then made copies, assembled the various documents with the signature pages and gave us the whole package in a folder. He had a copy of the deed from the previous foreclosed owner that he also gave us. I know the proper thing to do was to just walk away from it until things were resolved but relied on his objective statements that it was done properly. A number of warning flags should have caused me to be suspicious, especially when he did not go over every document in detail before having us sign it. Evidently, he felt that the subject had been already discussed in detail so there was no need to go over the deed.

Once we got away from there and I reviewed the deed, I saw that there was no mention of “including limited common elements” at all. I saw a number of items of concern on the deed. The preparing attorneys stated that they did no title search nor made any representation about the accuracy of the legal description, as well as the legal description omissions. I determined to do my own title search and went to the Alexandria VA courthouse and tracked each deed for this unit. Every deed back to the original condominium document assigning indoor parking spaces to specific units had the appropriate comment  “…, including limited common element parking spaces 96 and 97, established by Condominium Instruments…” in the legal description, except one. To my surprise, and which had been omitted from discussion at the closing, there was another deed between the deed of the foreclosed owner and mine, which I should have known if I had thought about it. When the VA foreclosed there was a Trustee’s Deed prepared that made no mention of the “including limited common elements”. I can only assume that the attorneys that prepared the deed that we got at closing used the Trustee’s Deed from which to copy the legal description.

Now if I can find this with a little looking at the courthouse then anyone doing a title search before issuing owners title insurance would have easily seen the difference and taken corrective action, or so it seems to me. There is no indication that a title search was made, or if it was done, was done incorrectly.

I relayed this problem to the management office of the condo assn. and they sent me a strongly worded letter stating that since I cannot prove ownership of the two spaces, I am prohibited from using them and they will keep watch that I don’t disregard their letter. I have copies of the previous deeds, the letter from the condo, the title insurance, the HUD-1, and am going to write a letter to the titling companies, the VA, the selling agent, and anyone else that might have an interest in this situation.

That is my story, do you have any concerns that I should be aware of, or strategy to follow?

D

Hi, D.  First,please be aware that I am not an attorney and am not offering legal advice. To be certain you are covering all bases, I would suggest hiring an attorney to straighten out this mess.

That said, the first thing I would do is to look at the title insurance policy if you have received it. It may take up to 60 days after closing to get the policy.  If you don't yet have the policy, look at the title insurance commitment.  You should have received this prior to closing so you would have a chance to review what property was to be insured and what the exceptions are.  If you did not receive a title insurance commitment prior to closing, report this to your state insurance department.

If you have either the policy or commitment in hand look for the page that describes the property.  It might be called Schedule C.  The legal description should identify the condo unit and typically would also make note of common elements included with the unit.  If you see common elements listed there then the title insurance company has insured that whatever is described there is part of what you own.

I would also get a copy of the Declaration of Condominium.  Look to see how your unit is described in the Declaration.  There may be a specific reference to the common elements assigned to your unit.

Don't get hung up yet on the condo association comments because in my experience very few condo managers or officers actually have read or understand the condo documents.  You need to read them yourself and either on your own or with the help of an attorney get them to understand what common elements go with your unit.

Don't get hung up on what deeds say.  If the Declaration says that each unit gets two parking spaces, then you get them even if it's not in your deed. Every deed does not have to specify all information that is already on record at the courthouse.  For instance, if you buy a house in a plan, the plan says there are roads. Your deed doesn't have to describe the roads, they are already described on the plan document.  As long as the deed describes the correct unit and the correct condominium, then whatever the Declaration says you get, you get.

Now, it is entirely possible that the REO people who marketed the property had incorrect information about parking spaces.  If that is the case, when you look at the Declaration, you will find that you don't get parking.  Perhaps it is sold separately.  In that case, your attorney will help you sort out who did what wrong and how it can be fixed.

The key to everything is reading the Declaration document - including any revisions or amendments.

Good luck and I would like you to report back to let me know if the parking was in the Declaration.  I'm kinda curious!

Diane

Hello and happy spring!

Just wanted to let you know I'm still living.  ;)

I have a post ruminating about an incident with a counterfeit cashier check. Will get that one up as the story matures.

In the meantime I've been answering lots of questions by email.  Keep em coming!