Wednesday, August 31, 2011


Having managed lots of folks over my career I respect that individuals think and learn differently, that we aren't automotons and need some degree of personal discretion in our work.  I also know that mandatory procedures are necessary to maintain quality of service and product and, of course, meet contractual and legal requirements.  This is a constant managerial task - finding balance in the workplace with just enough procedural framework within which capable individuals perform their tasks.

As managers we always start with the right individual in the right position, presumably with enough training or experience to meet expectations.  Through trial and error, we learn where and how to implement or improve the procedures.

One of the important procedures we created is the "setting of the table" for closings. A TCS closer is expected to ask for the following at the start of a purchase closing - valid photo ID, good funds and the original deed.  Missing any one of these critical components would cause a closing failure so there is no sense starting until you know you have them in hand.  The "setting of the table" procedure has at least given parties more time to cure a deficiency and have a successful closing.  If someone forgot to pick up the deed from an attorney's office, they can run out and do the job while the others proceed and get the closing started.   If a consumer was confused or forgot to bring funds in the form of a cashiers check, they can run to the bank while the closer explains the HUD-1 to the sellers.  Whatever, the important point is that the procedure is a good one - a tool for avoiding or resolving problems.  It doesn't make anyone's job harder, it simply creates a framework around which a closer can perform.  Everyone does their closing a bit differently.   Closings take on the personality of the closer, but still, the closer works within a simple procedural framework.

I'm chatting about procedures this morning because yesterday I had a holy moly moment while reviewing a 2004 transaction.

A local attorney called to say he had discovered two items in a title we had processed and wondered if I could help him.  First, his sellers - our insured buyers - had informed him that they had a mortgage to payoff but he could not find the document on record.  Also, he had found an unsatisfied mortgage dated 1988.

At first I thought what most title insurance agents would think - maybe there was a indexing error with the mortgage and satisfaction - something that couldn't have been discovered prior to the issuance of the policy.  I said I'd check the file and call back.

Upon review I found - much to my horror - that both items SHOULD have been discovered by my staff prior to closing the transaction.

Let's talk about the unsatisfied 1988 mortgage first.  Back in 2004 when we processed this title order, we ordered a 60 year search.  We always place the order with a written request.  The title order clearly indicated a 60 year search. The abstractor must have misunderstood and did a current owner search.  Okay, they made an error.  We're all human, however, this error ought to have been discovered by our title agent who performed the examination and created the title insurance commitment.  An important PROCEDURE was skipped.  During title examination, the title agent MUST review the title chain and confirm that the search meets our requirements for that transaction.  If the agent had looked at the chain he would have noticed that search only went back to 1996.  No wonder the unsatisfied mortgage went undiscovered.

Now for the mortgage the attorney could not find in the index.  I looked aghast at the document in our scanned file and immediately knew what had happened.  Our buyer was a limited partnership.  It was a commercial loan transaction.  Unlike a residential mortgage loan, when a commercial lender closes, they typically bring the documents to the closing table and explain them directly to the borrower.  PROCEDURE would call for a pre-closing review of the mortgage document by our professional staff.  This procedure had been skipped on this transaction.  No one noticed that the commercial lender had mistakenly prepped his documents entirely in the name of the individuals who were guaranteeing the loan and had failed to include the vested entity as a mortgagor.

Thankfully the matters are being resolved with the payoff and indemnification with follow up for a satisfaction.

I'm posting this for you as a training opportunity as it was for my staff yesterday.  We live and work in a business that requires constant vigilance.  No matter how busy we are, we must take a zen attitude and focus on the file in front of us, respecting our procedures as they are the tools that help us avoid the holy moly moments and keep our consumers safe.

Holy moly.

Tuesday, August 30, 2011

all is right with the world, the mortgage banking world, that is

WAH?  That's right and do you know how I can tell?  Everyone is complaining about underwriters.  That's a sign of normalcy and that's what has been missing for over a decade.

Ah, the sweet sound of prudence.

Thursday, August 25, 2011

New York takes aims at steering by real estate broker to affiliated title agencies

A law aiming to prevent improper quid pro quos for title insurance agents just got a new set of sharp teeth -- causing a furor in the already embattled industry. 

In late May, the Office of the General Counsel of the state's Insurance Department issued an opinion about whether it's legal for a residential brokerage to place lawyers on "recommended" lists, which are distributed to homebuyers, in exchange for those lawyers referring clients to the brokerage's title insurance affiliate. 

Read more on The Real Deal.

Wednesday, August 24, 2011

Fitch on ORI

The affirmation of ORI's ratings reflects operating performance of its core property/casualty (P/C) as well as title insurance operations that remain in line with Fitch's expectations and similar rated peers. The Negative Outlook reflects the continued uncertainty of mortgage market exposure on ORI's operations.

Read more on Market News.

Wednesday, August 17, 2011

query: how do you correct a HUD-1 post closing

So long as you have the consent of the mortgage lender, if there is one, and all parties, you simply create a new version of the HUD-1.  I like to put a bold easily found notation on the top of the first page that says something like:

REVISED August 16, 2011 to correct the blah blah.

You could also say that the earlier version of the HUD-1 is null and void.  Have folks initial this statement on the first page to document consent and acknowledge they understand there is only ONE HUD-1 form.

The very important part about correcting a HUD-1 post closing is that you must make certain the correction matches with the actual flow of money.  The HUD-1 form is an official record of the movement of the money and it must be accurate.

Monday, August 15, 2011

complying with privacy rules when managing a request for post closing data

This happens infrequently but enough that it warrants a post.  I received a request from a consulting company who is performing a post closing audit.  In this case they are performing the audit for a private mortgage insurance company.

Presented as evidence of the authority to make the request is the typical quality control authorization signed by most borrowers at closing.  By signing the form the borrower grants permission to the lender to reverify application data.  It specifies that the lender may present the form to any party named in the loan application.

The consulting company making the request for private data is not the lender.  My title agency is not a party named in the loan application.  The form presented no basis under which I might release this private information and so the request was denied.

It's not that we don't want to be helpful.  We do.  If the proper document had been presented I would have provided a pdf response tout suite.  I do have the information this individual seeks.  It is sensitive and very private - the type of information the consumer may even be surprised to know I have in my file.  Even so, I am a guardian and take that job seriously.

Thursday, August 11, 2011

query: should sheriff sign a HUD-1 for sheriff sales

I have never heard of a HUD-1 form being used by a sheriff.  I wouldn't expect to see documents that you would normally see in a real estate transaction.  This isn't a typical consumer transaction.  Read everything carefully and unless you have some experience with sheriff sales, I'd seek the advice of a competent real estate attorney.

query: if I pay off my mortgage early is title insurance refundable

No.   The loan policy protected the lien position for the mortgage lender.  It was a one time non-refundable premium.

Tuesday, August 09, 2011

RESPRO continues fight for fair treatment

Just the RESPA News headline is enough to make me chuckle.

query: what is a fully executed HUD-1

Thank you for the query.  This one really points to the regular use of industry lingo that is unfamiliar to most consumers.  We toss around phrases like this and just expect that people know what the heck we are talking about, eh?  ;)

HUD-1 refers to a form created by the federal government under the Real Estate Settlement Procedures Act, RESPA.  The form is used in most real estate related closings as a balance sheet for the movement of the money.  It's an official receipt and record of money part of the transaction.  Some old fashioned attorneys might want to use a different home-brewed form if they are closing a transaction that isn't subject to RESPA rules.  I suggest you ask them to use a HUD-1 instead because it's uniform and if you ever have to produce your settlement statement as evidence, the HUD-1 will be recognized.  People might not believe you had a closing if you can't produce a HUD-1 to prove it.

There are three versions of the HUD-1 in general use.  The old [pre-2010] style two page HUD-1 is often used for cash transactions and commercial mortgage transactions.  The current [RESPA 2010] three page HUD-1 is used for most residential mortgage transactions.  There is a HUD-1a form used for home equity loans.

Fully executed means signed by everyone.  In a purchase transaction, everyone means, the buyers, sellers and settlement agent.  In a refinance transaction, everyone means the borrowers and the settlement agent.

Saturday, August 06, 2011

parallel worlds of real estate sales, mortgage lending, and title insurance

Most homebuyers - as consumers - must navigate procedures, language, documents and all sorts of mumbo jumbo created by these three industries just to buy a house.  What's horrendously confusing is that all three industries serving the consumer in the same transaction are not cross trained.  They operate in seemingly separate but parallel worlds with very little understanding of core documents and procedures with which consumers are expected to perform.  Take for example the big three documents that represent the work product of each group:


How many people in the business of real estate sales, mortgage lending or title insurance have read all three documents from start to finish and could explain each clause to a consumer?  If you are in the business and haven't read the documents and thought about a consumer's perspective, please do so.  It may seem boring but if you don't read and understand these very important documents how can you expect your consumer to do so?

Two articles on the CFPB caught my attention this week...

and since neither permit comments on their sites, I'll comment here.

The first is an article on Housing Wire.  Here's a blurb:

"Elizabeth believes in markets and in capitalism, but lying, cheating and stealing are not capitalist virtues. Honesty and trust are necessary conditions for a functioning market, and Elizabeth understands that," Fried told HousingWire. "It's obvious. Those who made fortunes lying, cheating and stealing and by dealing in the merchandise the dishonest generated resented having their game shut down. Securitizing and selling fraudulently procured mortgages is just sophisticated fencing."

I only had to listen to Ms. Warren's answer to Charlie Rose concerning TARP to get that she wasn't a progressive big government gal.  I like everything I've read about her and consider it a complete shame that politicians treated her like a pariah.  I hope she successfully runs for the Senate.  In my opinion, she's of the rare breed of statesmen that we so need at the helm of government.

The other article I find interesting is in Reason.  Here's a blurb:

If you were to put the CFPB proposed ruling and a credit card agreement side by side and removed the titles at the top, it would be hard to differentiate between them. The CFPB wants the average consumer to be able to read forms they receive from banks, but not proposed CFPB rulings and regulations. That's not exactly transparent or fair and is a little ironic. 

I agree and this has been on my mind since I read the interim rule published recently by CFPB.  I'm pretty good at reading regulations.  I may not be perfect in my initial interpretations but I can slug my way through and after consulting with others who have done the same, grasp with a fairly solid understanding what to do and how to do it.  When I read the interim rule, I longed for the more simplistic language HUD had embraced in their last major RESPA overhaul.  HUD staff, in my opinion, made a valiant attempt to use language that would be easy to understand.  Even so, folks still have misunderstandings, but at least the starting point was fairly clear.  I have to say that reading the CFPB interim rule made me tired and I'm not sure how many times I would have had to read it to gain clarity but it shouldn't be that hard.  There are ways to say what you've got to say without making it so darn tough.  CFPB needs to lead the financial industry by example.  I have high hopes for CFPB and hope they are open to this type of constructive criticism.  ;)

Friday, August 05, 2011

query by email: title agent pays off wrong mortgage

Hi, Diane,

How are you?  I was looking for help on the web and your blog came out.  I know you said that you are not an attorney but you have more knowledge on the title insurance more that I do.  Thus, can you please hear me out and provide me with your opinion?

I refi my house back to April of this year.  The title company a mistake on the pay off of my mortgage.  Instead paying off house A, the title company paid off the house B.  The title agent agree he made a mistake on paying to wrong account.  We have two houses, each one has one mortgage.  After the refi, we have two houses, one with no lien and one with two mortgages.  Initially, the title agent wanted me to refi the house with no mortgage and put the money back to the back to fix the problem.  However, this house only have 7 more years to go on the loan and we are paying principle mostly on this loan as you can see.  The title agent could not give me a refi rate and condition to fit me requirements.

Then he told me that my new bank that is second liens on my house is going to "work it out internally".  It's been 5 weeks and I haven't hear from bank or the title agent.  I found out that I can file a title insurance claim.  Is this true?  I never received the copy of my policy.  How do I go from here?

Thank you very much for your time and hope to hear from you......


Hi, Vickie:

The title insurance company agent made an error and has an obligation to rectify it at no expense to you.

I suggest that you send a letter to your mortgage lender - the most recent refinance lender.  Point out the error.  The mortgage lender has a loan policy which insures that they have a first lien on the insured property.  They can make the claim.  Send this letter CERTIFIED mail and copy the title insurance agent, the state insurance department and Consumer Financial Protection Bureau.  This will get the attention of everyone and move a resolution forward.

Good luck and thanks for reading the blog!

Diane Cipa

RESPRO doesn't like Dodd-Frank...does this surprise you?

In response to the Federal Reserve Board’s rules to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act’s “ability to repay” standards, the Real Estate Services Providers Council Inc. (RESPRO) submitted comments to the Fed warning the agency that its rules will harm affiliated business arrangements (AfBAs).

“Unless federal regulators act now, the Dodd-Frank Wall Street Reform Act will increase mortgage credit costs by causing affiliated businesses to withdraw from title and mortgage markets in many low-income and low-middle income marketplaces,” said RESPRO Executive Director Sue Johnson, who submitted the comment letter on July 22 on behalf of the organization.

Gee, isn't that a form of redlining?

Is Old Republic's mortgage insurance business in run off mode?

"Absent approval to underwrite new production through the separately capitalized subsidiary, it is most likely that the flagship insurance carrier's existing book of business would be placed into run off operating mode. In this circumstance, the Company's interest would be to manage the business within constraints of this segment's current capital base of $445.1 and thereby limit a possible future economic loss from run off operations to this amount. The capital base of $445.1 accounts for approximately $1.74 (11%) of Old Republic's book value per share of $15.56 as of mid-year 2011."  2nd Quarter ORI Report.

Given the news that broke recently concerning GSE cutoffs, I was concerned.  I'm an Old Republic agent and I don't like the brand which I so respect being tarnished.  Placing the mortgage guaranty business in run off mode is the logical step given market conditions but a failure to take that step and bruise the brand name with a GSE cutoff was disturbing.

I expressed my concern to my OR agency rep and she moved it up the chain.  This morning I received a call from regional management who assured me that the mortgage guaranty business is operating in run off mode.  I'm not sure how I missed that news but I was happy to hear it. ;)

Tuesday, August 02, 2011

Demotech withdraws rating of New Jersey Title Insurance Company

Read the press release.

Defalcations are the problem and will continue to be the problem in our industry until and unless we get serious with licensing standards and realize there is alot money moving through agencies with little or no oversight.