Saturday, August 30, 2008

query: subdivision contractor claims

The only party who can file a claim against title insurance policy is an insured party - either lender or owner. If a subdivision contractor hasn't been paid, the contractor should seek legal advise and consider options such as filing a mechanics lien. Most mortgage lenders require a stipulation against liens before the start of construction and mechanics lien laws can be quite complicated. Competent legal advice is the best place to start.

moving title from one entity to another......

Read this article. There are lots of issues to consider, one of them is the impact of the transfer on your title insurance. Don't make assumptions. Contact your title company and nail the issue in writing when you transfer. It's a loose end, often forgotten.

Thursday, August 28, 2008

query: right of first refusal versus quit claim deed

The right of first refusal is typically reserved by a seller who wishes to exercise some control over future ownership of the property. In order for clear title to pass the property must be offered to the party who retained the right of first refusal before conveying title to someone else.

We usually obtain a letter from the party waiving the right of first refusal and record the letter as an exhibit with the deed. There is not requirement to record the letter. You can simply hold it in your file, however, should a dispute arise at some later date, and the letter is lost, well....

Anyway, you could use a quit claim deed to permanently extinguish a right of first refusal, however, I don't see that a quit claim would be needed for a simple waiver.

Your attorney or title agent can work out the details based upon local custom and law.

Wednesday, August 27, 2008

query: how long is a title commitment good for

I'm not sure if it's the same all over, but in PA a title insurance commitment is good for six months.

Sunday, August 24, 2008

Did you know that income tax liens attach to "after acquired" property?

Yes, that's right. So unless you can pay cash for a piece of real estate, expect to have a problem getting a mortgage.

I am examining title today for the purchase of a property that went through foreclosure. I saw FTL on the cover notes and at first glance assumed it was a Federal Tax Lien against the former owner. Too bad, it's not. It's filed against the buyer and there is also a PA state income tax lien. Hope they can pay cash for the house - probably not - because this deal is dead. The income tax liens take priority over the mortgage and so even if the lender chose to grant credit approval, they wouldn't accept third position in title.

Looks like the $272 I've advanced for lien letters and abstract plus our time and effort will not result in a closing. We'll bill for services rendered and call it a day. That's a shame.

Saturday, August 23, 2008

query: the difference between a title insurance commitment and a title abstract

The title abstract is a report containing raw data and abstractor notes based upon a search of the public records. This report is part of a thorough title examination. The title insurer will also review data from other sources and then issue a title insurance commitment.

The title insurance commitment is an offer to insure the title subject to certain conditions and exceptions.

query: if you're about to close on a home and you find out the seller has gone through bankruptcy

Anytime you here the word bankruptcy in a real estate transaction consider it a "stop, drop and roll" moment. Don't put off getting to the real status of the transaction. Never assume anything.

The first thing I would do is talk with my title insurer to make certain that they are aware of the bankruptcy. A good title examiner will check the Pacer system, however, there is always the chance that the seller might file for bankruptcy after the Pacer system has been queried. In our business we tie up this loophole by having the seller sign an affidavit at closing indicating that they have not filed, however, this isn't news you want to hear at closing. The wrong answer to that question will stop the closing dead in its tracks.

Now you don't want the seller to lie and you don't want to ignore bankruptcy because if the court hasn't approved the sale of the real estate, the judge can undo your closing and that's a serious situation.

If the bankruptcy is over and discharged before you buy the home, no problem. If it's still pending then make absolutely certain that the title agent has that knowledge and is dealing with the issue and getting court approval before you close.

Friday, August 22, 2008

the affiliated title agency took the deal - almost without insurance

In PA title agents aren't permitted to perform services without the issuance of title insurance. This case was interesting because the lender - a local bank doesn't require title insurance. When we get an order from them - which is rare - we always call before processing to confirm that the buyer has requested our services and that they are purchasing title insurance.

What I found most fascinating is not so much the cancellation but that the real estate agent and her affiliated title agency - a large regional operation - pulled the deal at first by saying the buyer was NOT getting title insurance. I called the real estate agent and raised the subject of our licensing authority and after a pregnant pause, she switched gears and said they were issuing title insurance but they were switching the transaction anyway. I then received a call from the president of their title agency - who should know better, he's been in the biz for a long time - who wanted me to NOT bill for services rendered so their theft of services would be all that more smooth. Well, you know he didn't put it that way but that's what he was driving at. Anyway, in support of title agents everywhere who need the words with which to defend your work product. Here's the letter I sent to the consumer today:

RE: title cancellation

Dear Mr. redacted:

I have received your note in response to our invoice, which says:

“I do not know what this bill is for, at no time did I request your services, sign for your services or receive anything that/from looked like you performed any services on my behalf.”

I do not wish to incur any additional unnecessary costs and so I am not sending the entirety of our file with this letter, but be advised that our work product and raw supportive data are substantial and will be entered as evidence should we be forced to take the matter to the district justice.

These are the facts:

  • June 5, 2008 You entered into a sales agreement to purchase real estate and agreed to pay for title search and cancellation, if any. [See 6-D-4 and 19-B]
  • July 1, 2008 On the strength of the sales agreement and direction from you, redacted Bank sent a letter to our office ordering title service on your behalf. [I personally called the bank and spoke with redacted before processing the order. As the bank does not require title insurance, I wanted to confirm that you were purchasing title insurance so that we would comply with our license authority. She confirmed that you instructed the bank to send the title order to our office and that you wanted title insurance.]
  • July 2, 2008 We processed the title order and mailed a letter to your home notifying you of the order in process. This letter was not returned by the post office and so therefore can be presumed to have arrived.
  • July 7, 2008 The bank continued to process the order with our office and faxed the sales agreement for our file.
  • July 8, 2008 Your real estate agent called our office to say you were not going to use our services and that you were not purchasing title insurance. She asked that we cancel the order. We attempted to cancel the title work, however, it was too late, the abstract was complete and the report was en route to our office via mail. I called your agent to let her know and in the course of the conversation she switched gears and then told me that you were buying title insurance and that she was directing the title order to her affiliated business. I then received a call from the president of their agency and in the course of that conversation informed him that the work had already been done and that we would be invoicing for cancellation.
  • ·July 9, 2008 We sent an invoice to your home.
  • ·July 14, 2008 Before retiring the file, I decided to mail you a copy of the title commitment so you would have a copy of the work product for your file.

We paid out of pocket $155.00 to cover the cost of abstract and lien certificates advanced to process your file before receiving the notice of cancellation. Recovery of those expenses and payment for services rendered in connection with your title order are the basis for the invoice. I am writing this letter with an extensive explanation because I know how much effort is involved in taking the case to the district justice and I hope to avoid that step. It only adds cost to your bottom line and makes no sense. I do hope this clarifies the issues for you and I hope we don’t end up in court; however, I am prepared to take that step should you ignore our demand for payment.

Should you have a question or concern, please feel free to contact me.


Diane Cipa

General Manager

CC: redacted, Vice President Retail Lending

Thursday, August 21, 2008

this may not seem like alot of money but what this tells me

is how this attorney thinks............and I think his title underwriter should pay attention. Pay attention to the facts. The attorney received evidence that the letter on which he was relying was incorrect and he chose to ignore it.

Read this e-mail I've just shot over to my underwriter:

Closing a purchase transaction today at 4pm - issuing both loan and owner policies premium based on $160,000.
At issue is inheritance tax owing for the estate of redacted who died testate in 1992. Mr. redacted had a 1/3 interest in our property which is situate in Somerset County. His estate was filed in Allegheny County at No. redacted of 1992.
On October 21, 1994 the attorney for the estate, redacted of Reed, Smith, Shaw & McClay delivered a letter to redacted, then counsel at Chicago Title, which said:
This firm has acted as counsel to the Estate of redacted. This letter will confirm to you that all taxes, including Pennsylvania inheritance tax, owed by the estate have been paid in respect of the interests owned by the decedent and his estate in the properties known as redacted.
The letter was copied to redacted, attorney and agent for Chicago. On the basis of this letter, Mr. redacted was granted authority by redacted to issue insurance without exception for the inheritance tax.
On October 24, 1994 Atty. redacted filed estate information in Somerset at No. redacted-1994 including an inheritance tax return and evidence of payment of tax. My abstractor and I have examined the return and the 1/3 interest was not reported. There is no real estate or joint property reported at all, so we have raised the inheritance tax as an exception.
Mr. redacted insists that the letter from Reed Smith is sufficient evidence of payment and absolute authority to insure. I disagree, especially since the facts show that the letter is incorrect. Mr. redacted has no further evidence that the tax was paid.
At our request we received a copy of an owner policy which was issued to a prior owner. Our current seller does not have title insurance. May we accept indemnification or do you think Chicago will issue indemnification based upon a prior owner policy?
I also agreed to take indemnification directly from Mr. redacted but he refuses to issue it.
I have a call into Reed Smith to see if they have any further information which would help or perhaps they will issue a letter of guarantee.
Mr. redacted is taking the position that his client will not close with an escrow of $1500 - which I think is reasonable while they pursue an amended return. Instead he wants to take the transaction and insure it himself through Chicago.
I hate this crap. ;) Anyway, do you want me to insure over it?

Diane Cipa
General Manager
204 West Main Street, Ligonier, PA 15658
888-680-5177 X104
724-238-7830 FAX

Tuesday, August 19, 2008

SUBPRIME....this is fascinating

Subprime was voted the word of the year by the American Dialect Society in recognition of the mortgage scandal and crisis that has for months enveloped housing and real estate around the country. But that umbrella term, describing cheap — often suspiciously cheap — mortgages, encompasses a whole glossary of often-colorful expressions that could be described as sub subprime. Read more....

Saturday, August 16, 2008

query: seller does not have car title

Yea, I know. I'm not in the car business, BUT, as a title agent I do have to work with and around mobile home titles and let's face it, a mobile home title IS a vehicle title. So, with that in mind let me say this - loudly and clearly....


Okay, glad I got that one off my chest. LOL

Listen up, if the seller does not have the original - not a copy - mobile home title in their possession, you need lots of time to resolve your situation. It's not gonna happen quickly and so you don't want to be two days before closing and have your title agent ask you for the mobile home title and you say HUH? What title? This is especially serious when the buyer is getting a mortgage because the mortgage lender won't close without controlling the destiny of the mobile home title.

These are the most common situations:
  1. Seller borrowed money using the mobile home as collateral, so just like a car loan, the lender has the original title in their file. They will not give it to anyone until they have been paid in full. This is especially tough if the new mortgage lender wants the title surrendered before you close. [I know that sounds hideously impossible because it is.]
  2. Seller lost the mobile home title. In this case, the seller must apply to the state department of motor vehicles for a duplicate title.
  3. Seller never got a mobile home title when they purchased the home. This one is tough. In PA, you can give the department of motor vehicles as much history as possible and wait while they research the title. If they can locate the records, they will issue a duplicate of the existing title -which is in the name of whoever sold it to your seller. You seller then has to go find those people and get them to transfer the title to the seller so the seller can transfer the title to the new buyer. Got it? Hope you can find the previous owner and they are nice.
  4. The property has gone through foreclosure and the lender just never thought about the mobile home title. The foreclosure attorney can go back to the judge and ask for a court order cancelling the mobile home title. This court order is just as good as evidence that the title was surrendered.
Speaking of title surrender, in most mortgage transactions, that's the ultimate goal of the mortgage lender. They want you to produce evidence of surrender. Most people do not have it and so then you must find the mobile home title SO you can then surrender it.

Here's some advice for everybody. If you have in your possession evidence that a mobile home was surrendered, record it as an exhibit with the deed. Get it on record, PLEASE, because you know that piece of paper will fall into someone's black hole and then the entire process will have to be repeated in the next transfer.

There's alot more we could chat about on the subject of mobile home titles, but if I can get just that one message out there - please start working on it as soon as you can. Any fix will take time and time makes people nervous and time is rate risk and, well you know, time is just one thing most folks aren't prepared for.

Take care, be diligent and have patience. ;)

Thursday, August 14, 2008

this has been the week of crazy titles

I think I mentioned in a previous post the issue of a title agency not understanding that a prior mortgage was divested in foreclosure, a fact which was confirmed by attorneys for our title underwriter who rejected the request for indemnification.

The poor buyer who hired the title company is caught in a trust quagmire. His title agent still insists the title is no good and he doesn't know who to trust, our company or the other. I said, well, we'll back up our word with the title policy. I further pointed out that the mortgage holder had taken no action against our insured seller and that is evidence that they understand that they are divested. Yoi......

I have another title issue on my desk. We transferred ownership of a church parsonage last year. A local bank called me yesterday asking why we hadn't gotten a release on their mortgage. I checked the file and saw that our abstractor had reported NO mortgages against our parcel. The bank faxed over the mortgage and I agree, our parcel is on it. I have a call into our abstractor to recheck the record and get back to me on the oversight. Maybe it was mis-indexed or maybe he just made a mistake. Humans do but this abstractor is good and is rarely wrong.

In the meantime, I called the church contact and found a board member who was clueless. They hadn't told us about the mortgage because they did not know the bank used the parsonage as part of the collateral when they built their new church.

So, I have a call into the lender to find out if the parsonage was included in the appraisal. If not, seems a simple release will do. If yes, the bank and the church will have to work out getting our parcel released.

All in a good title day's work..... ;)

Saturday, August 09, 2008

PA transfer tax - new rules for relo & assignment of interest transactions

I just received a memorandum from one of our title underwriters. It’s important info if you are involved in purchase transactions in PA with an assignment of interest or contract. The PA Dept. of Revenue issued an amended rule on transfer tax regulations last December. The effect of that change is just now being fully digested - probably because someone was audited post closing. Yes, our Dept. of Revenue routinely audits transfer tax remittances. We process a few every year.

First, let me say that title insurance does not cover transfer tax so mistakes aren’t a claim issue. I think mortgage originators and title agents all agree, however, that we want happy consumers and that means we want parties to avoid unpleasant post closing audits with payment demands. This is really a big deal because transfer taxes are typically split in PA and post closing, who wants to try to get money from the seller?

Secondly, transfer tax in PA is high. The state charges 1% of the sale price as do most municipalities. Some, like the City of Pittsburgh charge more. In the Burgh, the tax is 3%. So if you have a $200,000 transfer in the City of Pittsburgh, total transfer tax is $8,000.

Now, back to the memo. Let me quote it directly:

“The application of these changes affects transactions where:

  1. a relocation company, as the original contract purchaser, assigns its rights to an ultimate purchase but never acquires record title to the property;
  2. an individual contract purchaser who assigns his or her rights to an entity, whether or not that entity is owned in whole or in part by the individual.”

So, even though there is only ONE deed being recorded, the Department’s position is that TWO taxable transfers have taken place.

Pass the word, because I expect this to be a hot audit stream and those caught - whether they knowingly avoided the tax or not, will have to pay.

Title agents don’t give tax advice but we have a duty to assist consumers and make certain they pay the appropriate tax or if they choose NOT to, that they understand they do so at their own risk.

buyer caught up in a bankruptcy/short sale squeeze

We've been working for a homebuyer since June trying to close a purchase.

He thought he did everything right BUT you can't account for "out to lunch" sellers or their "not so helpful" bankruptcy attorney. [I'm being really kind with those quotes cause these folk have made lots of grief for everyone. More appropriately I might have said, "out of touch with reality - perhaps in a drug induced haze and don't give a darn" and "not really that busy but push everything on my paralegal anyway who isn't an attorney and shouldn't be fully managing my caseload but I couldn't care less"]

Okay, our buyer knew the sellers were in trouble and facing foreclosure. The sellers had purportedly discussed a short sale with their lender and so the buyer made an offer and made his plans.

First of all, let's remember that anytime you hear the phrase "short sale", no one should make plans, okay? What everybody should do is dot all the i's and cross all the t's, keep copious notes, plan to have lots of patience, then wait. If the sellers are already in foreclosure your short sale offer will have priority in loss mitigation, however that doesn't mean it will fly or move fast. It simply means that from the mortgage lender's perspective, it's a more important transaction. Everyone else is a lower priority.

In this case, the sellers had NOT disclosed that they were in bankruptcy. We discovered this little helpful piece of information when we did our title examination. It's a Chapter 7 and not yet discharged, SO we ask the attorney to get a court order approving the sale.

Mr. Lazy Bum [being kind] Attorney won't lift a finger because he's been paid and doesn't care to assist anyone. We report this to the real estate agent and word gets back to Mr. LBA and he runs to embrace the broker who is a buddy and say it isn't so, this bankruptcy will discharge in less than 30 days so why force me to do this extra work. We talk with the trustee who says it will discharge in 60 days. Nobody wants to believe us and so they wait.

The 30 day mark passes and now we are believed but still Mr. LBA says not gonna help and sellers can barely hold a conversation so buyer decides to wait for 60 day mark. Rate lock will expire on the 60th day, but we'll make the effort and get everything ready.

In the interim, we have gotten preliminary approval for the short sale.

Yesterday was the 60th day. It didn't close though lots of effort and fancy dancing took place. I must say I was impressed by the patience of the buyer and his ability to jump in and team effort the hurdles we needed to work out.

The lender provided documents and funds. We had a last minute snag on the short sale final letter. The preliminary approval called for final okay on the final HUD and though we submitted it 24 hours in advance, the lender told us at the last minute that their attorney had to bless it and he was "out" and "it ain't gonna happen today" and as you know the rate lock was expiring so....

While we waited for the discharge to show up in Pacer - online access to bankruptcy data - we worked like mad dogs trying to find a friend and a solution. Trying to reach a supervisor in loss mitigation got me a rude hang up by some bloke who said "You have to talk with the attorney." Getting nowhere trying to work up the chain, I decided to go down from the top. I did alittle research on Google and found a contact - EVP and some other folks. Shot off the HUD and a polite e-mail hoping for a reasonable response and WE GOT IT! The EVP impressively cared and put me in touch with a senior officer in collections and interestingly as I was in e-mail chats with him, our buyer had him on the phone. We were both working any angle we could find and we both found the magic guy. He helped but the short sale was of course subject to a court order approving the sale or discharge of bankruptcy.

We kept checking Pacer - nothing. Our buyer had found a contact - the actual person who would type the discharge into the docket. [I'm telling you this buyer is resourceful and a pleasure to work with.] The trustee's office couldn't figure out why the discharge hadn't posted but they really couldn't directly help. Through the trustee, I was able to talk with the case manager. The case manager gave me bad news. Mr. LBA had filed an additional document after the sales agreement for the real estate which bumped the entire discharge process back another 23 days.

Mr. LBA - You stink.

Mr. LBA - You can't get off your lazy - whatever - to ask the court for approval for the sale.

Mr. LBA - You won't responsibly perform your duties to your clients, you lied to us, you lied to the Realtor and you can't manage the "100 files" I heard you yelling about in the background while your secretary tried to lie for you and say you were with clients.

Mr. LBA - We'll still close this transaction. You are causing hardship to people but I know you don't care.

Mr. LBA - Your demeanor and methods - as a former underwriter and someone who is trained in fraud prevention - smell like trouble to me. Someone ought to visit your office and take a peek at those books.

Anyway, this post turned into a novel - so sorry, but I do think discussing real cases is helpful.

As an aside, I should note that the buyer's new mortgage is VA. The house had the ole "doors to nowhere" problem, you know, sliding glass door in the wall but nothing on the outside of the house. That's a safety concern for the VA and so they require that you either put a porch out there or make the doors unusable.

Early in the transaction I happened to find out that the buyer was moving forward to put a deck up BEFORE closing. I said, look, you have no idea if this transaction will close. As a former VA underwriter, I suggested he ask if a simple railing/bar installed over the door would pass muster. He argued that he wanted to put up the deck and didn't want to spend the extra cash to put up a railing that he would be taking down later. I said suit yourself but putting up a deck is a bunch of money and what if somebody dies or what if the house burns down - you never know what might happen to prevent a closing. In risk management, you must always consider the worst case scenario before making decisions.

He did the railing. ;)

One more thing.

I love my job.

Tuesday, August 05, 2008

illegal and racist restrictions in title

It's rare to see these old cruel restrictions in title. Normally we see them in old old deeds, but I am examining title for land in Somerset County and the deed from 2006 still has this clause:

"The occupancy of the lot shall be restricted to Caucasians only."

It dates back to the subdivision in 1949, but why the attorney left it stand is beyond me. These idiotic restrictions are to be ignored so that consumers ignore them, too. Can you imagine people thinking they had a right to follow that kind of restriction?

Saturday, August 02, 2008

"national" title agent aka chop shop in my backyard

is a walking make work project. I'm sorry, that's unkind, let me rephrase.

The record title agent at a local, formerly "national" - server of sub-prime predators - now local and desperate and trying real hard to take local market share - is ignorant of the most simple title issues.

This company is what we traditional title agents call a chop shop. The company is run by someone with no expertise who purchases title commitments from an underwriter who examines title with as much automation as possible and any human review is done by vendor managed clerks in some remote location.

Last week I received a kinda pompous e-mail from this person demanding that I get a prior owner mortgage satisfied. I jumped right into the file because unsatisfied mortgages are not that unusual and I wanted to help get it squared away as quickly as possible.

I took at look at the file wondered what the heck they were talking about because the transaction had gone through foreclosure. It was a Fannie Mae sale. The mortgage lender in question was not the foreclosing lender, however, they had been given good service and everything was hunky dory.

I sent an e-mail response and kindly suggested that they pull the 3129 Affidavit and take another peek at it. The mortgage was divested in foreclosure.

He responded that he had the affidavit and that was insufficient.

I asked him to please contact his underwriting attorney.

He responded that his underwriter had said the unsatisfied mortgage "might be a problem" if the owner wanted to sell in the future.

I said that's ridiculous, but if he wanted, I would process a request for indemnification through our underwriter, however, I expected that the it would be rejected.

It was.

The entire process took a week, mainly because he couldn't produce his own title commitment, which is required for an indemnification request. He likely had to argue with the vendor managed clerk who probably didn't understand that you are supposed to issue title commitments listing your concerns and requirements in Schedule B 1. It always slays me when title agents have no idea what the title commitment is and don't even prepare it themselves. The entire agency program in Pennsylvania is based upon the idea that the value the agent does title examination and produces the commitment.

Now, the most important person in this transaction was the consumer who called me in frustration. I assured her that her title was fine and that we were doing everything we could to make that clear to the title agent handling her refinance. She said she wished her mortgage broker had sent the order directly to us and of course, I agreed. She was up against a rate lock deadline and this ignorant person with a title license was causing her grief for no good reason.

We really need to fix this system. Can we find some way to restore brains in the biz?

tie up the loose ends of a divorce, please!

Examined title for a purchase transaction and found that the vested owners were a now divorced couple who had never dealt with the separation of the real estate. Criminy.

What really kills me is that both husband and wife were represented by legal counsel AND the property had been processed through a relocation company who is represented by legal counsel.

Nobody, I mean NOBODY, gave a thought to taking care of transferring the interest of Mrs. Seller - now ex-Mrs. Seller.

You know, from the perspective of the buyer, thank heavens they selected a title agency with humans who examine title and have a clue.

So, she's in Chicago and not making this easy for anyone. Closing has been delayed each day while we wait for deeds - 3 deeds - wife to husband, husband to relo, relo to our proposed insured.

Now, you may wonder what might have happened if the buyer had not selected a title agency who caught the error OR what might have happened if the buyer had decided NOT to purchase title insurance. Remember, at least THREE attorneys totally missed what to me is a real easy issue to spot.

Ex-Mrs. Seller might have figured out at some point that she hadn't conveyed her interest and made some demands for payment. The marital settlement agreement did not specifically state that she was giving up her equity. It simply said the husband would refinance as soon as possible to relieve her obligations on the mortgage.

Even if ex-Mrs. Seller made no claims, eventually someone would notice the cloud on title, maybe when the new owner wanted to sell or refinance. Clouds on title really muck up the best made plans to refinance or sell. Can you imagine how hard it might be to find her at some future date? If the new owners had skipped title insurance, they'd be on their own. Even with title insurance, the fix might take time and headaches.

It's a hard concept to embrace but most of what you buy when you purchase title insurance is the preventative expert examination. The policy itself is a safety net. So, PLEASE, select your title insurance agent carefully.

I'm back!!!

Thanks, Google.