Friday, December 30, 2011

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

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,

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. 


Tuesday, December 27, 2011

Is flood zone determination covered by title insurance?

query via email:

Hi, Diane.

I just bumped into your blog on
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!

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!


Thursday, December 22, 2011

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.

Tuesday, December 20, 2011

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.

Monday, December 19, 2011

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.  ;)

Monday, December 12, 2011

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. ;)

Sunday, December 11, 2011

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 -
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  - 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,

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.  


Friday, December 09, 2011

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.

Wednesday, December 07, 2011

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.

Monday, December 05, 2011

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.

Saturday, December 03, 2011

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. ;)