Can an old title insurance policy help with a new adverse possession claim?

Diane,

 

I found your name on your website and I was wondering if you could help me with the case below:

 

1. My wife inherited a lake cabin on 2 lots from her parents who are both deceased.  They bought the lots 30 years ago.

2. We don't know for sure, but knowing her parents it is very likely that they purchased title insurance even though they paid cash for the 2 lots.

3. The lots were recently replatted (for reasons beyond our control) and as a result the lot lines shifted 50 ft to the north.

4. The neighbour to our north is claiming adverse possession of one of the lots and filed a law suit.

5. I need the title insurance to pay for legal fees to defend against this law suit.

6. We can't find the title insurance.

7. We called the title company and they say they don't have any way of finding it.

 

Questions:

 

1. Does title insurance pass on to heirs?

2. Does title insurance defend against adverse possession claims?

3. How else can I find the title insurance since there was no loan involved?

 

I appreciate any help you can provide.

David

Hi, David:

Without evidence that you have title insurance, you don't have any way of seeking their assistance even if they will work with the estate.

Title insurance only insures against things that occurred in the past, anyway, so it would be no help with a new claim of adverse possession.

Your best bet is to hire an attorney.  An attorney would be able to look at your state law to see if the possible claim of adverse possession ended with the death of the owner.  In some states the required period of time restarts each time the property changes ownership. It doesn't accumulate through owners. The attorney could also take a look at how the property lines changed and see if that was reasonable.

Best wishes.  Hope it works out for you.

Diane

ALTA reports business is good. Hey, we knew that, right? It's a big wheel turning. ;)

Washington, D.C., March 20, 2013 — The American Land Title Association (ALTA) reported title insurance premiums written during 2012 increased greatly when compared to the previous year.

According to ALTA’s preliminary 2012 Year-end and Fourth-Quarter Market Share Analysis, the title insurance industry generated $11.4 billion in title insurance premiums in 2012, up nearly 21 percent from 2011. During the fourth quarter of 2012, the industry reported $3.3 billion in title insurance premiums, up more than 30 percent from the fourth quarter of 2011.

The states generating the most title insurance premiums during 2012 were California ($1.7 billion, up 25 percent compared to 2011), Texas ($1.4 billion, up 24 percent), Florida ($893 million, up 24 percent), New York ($825 million, up 15 percent), and Pennsylvania ($505 million, up 23 percent).  Overall, 48 states and the District of Columbia reported increases in title insurance premiums written during 2012 when compared to 2011. States reporting the largest percent increase from 2011 to 2012 were Illinois (43 percent), North Dakota (42 percent), and Georgia (30 percent). 

During the fourth quarter of 2012, 49 states and D.C. reported increases in title insurance premium written compared to the fourth quarter of 2011. The states with the highest percent increase in title insurance premium volume compared to the fourth quarter of 2011 include Illinois (82 percent), Kansas(49 percent), Tennessee (48 percent), Delaware (47 percent) and Missouri (47 percent).  

In terms of market share, the Fidelity Family of title insurance underwriters captured 34 percent of the market in 2012, the First American Family garnered 26 percent, the Old Republic Family recorded 14 percent, and the Stewart Family had 13 percent. Meanwhile, independent companies comprised 13 percent of the market in 2012.

Market share data is preliminary as year-end totals have been estimated for three companies. ALTA expects to release its first-quarter 2013 Market Share Analysis around June 1. 

What does E & R mean?

I'd like to find out what E&R means with regard to a title search and title insurance.  The documents I received at closing supporting the title insurance use this abbreviation numerous times.  Thanks..........A


Hi, A:

I'm thinking they must mean exceptions and reservations.  I strongly advise that you ask for details about WHAT exceptions and reservations they are referring to.  Here's what these words mean in title insurance:

RESERVATIONS are rights retained/reserved by a seller.  For instance a seller may reserve the right to use a well.  A seller may reserve the oil and gas rights.  A seller may reserve a life estate.  To simply refer to reservations without identifying the nature of the reservation doesn't tell you anything.

EXCEPTIONS is an even more general terms which refers to any right you are not getting.  The entire Schedule B2 of our title insurance commitment and Schedule B of your title policy is full of exceptions.  These can include anything such as rights of way, easements, restrictions on the land, etc.

Hope this helps. You have a right to obtain copies of documents that contain the language of any reservations or exceptions.  Ask your title agent to send you a pdf of any document found in the search that identifies an exception or reservation.  This is the only way to understand the limits of the ownership you will enjoy.

Diane

When you refinance, why do you have to pay for title insurance and closing services all over again?

I just had a chat with one of our pending refinance consumers.  He wanted to know why he was paying for title insurance again.  I explained that his owner policy wasn't being rewritten but the loan policy was.

He asked, well doesn't the loan policy just tell the lender that he is the legal owner of the property?  I said, no, the loan policy tells the mortgage lender that their mortgage is in first position.  What we do, then when we examine title for a refinance is to confirm ownership and then check for intervening liens and unfiled liens.

He wondered if that wasn't just a 20 minute visit to the courthouse.  I said know that it also involved checking with sources outside of the courthouse, including municipal authorities.

For folks who are not in this business, it appears that we don't do much in a refinance transaction but the reality is that we have to do almost all of the work we did in the purchase transaction.  We still have to set up the file, order title and lien letters, examine title, create the title commitment and policy, create the HUD-1, perform and coordinate the closing which normally takes place in the consumer's home.  Then, of course, we do the post closing work of remittances and document storage.  That takes resources and several people - all of whom must be paid.

Think of it like a roof.  The first person, the builder, created the roof.  When a new roof is needed some years later, the next person doesn't have to redo everything but they do replace almost everything and so you have to pay for materials and labor even though there is already a roof structure on the house.

In Pennsylvania, since we have filed title insurance rates, there are special discounts for consumers in a refinance. For this consumer's case, the title services would have been about $1800 is we were charging the basic rate.  With the refinance discount, the title services will only be around $1300. I pointed out that the lender had given a conservative quote on the Good Faith Estimate of $1800 and so our fees were already worked into the refinance game plan.

The explanation did seem to help our refinance consumer and I hope it has also helped you.  ;)

query: what happens if mortgage is not subordinated

Let's talk about mortgage lien priority. Mortgages tend to fall into two categories - primary and subordinate. The most common form of subordinate mortgage is the home equity loan. Most consumers have the home equity loan or HELOC as a second mortgage recorded after their main mortgage. The main mortgage is in first position. First position gives the main mortgage lender lien priority in the event of a foreclosure. First position gets paid first.

So, let's say you have two mortgages, your main mortgage and a HELOC. You decide to refinance your main mortgage but you like your HELOC and don't want to pay it off and satisfy it. The problem is that your HELOC will move up to first position when you payoff your main mortgage and that would put your NEW main mortgage in second position. THAT won't make your main mortgage lender very happy at all, so they will require that your HELOC lender agree to subordinate their position, allowing your new main mortgage lender to basically skip in front of them in line.

This subordination is done with a legal document signed by the HELOC lender. The subordination document is usually recorded when you record the new main - first - mortgage.

As a consumer, you sort of have to keep an eye on the refinance process if you intend to leave a HELOC or any subordinate mortgage in place. It might take time to get the subordination approved and so you should contact your HELOC lender and get the process started. Don't rely on the title agent to do this because they might not know you intend to keep the loan until late in the transaction. That's the other thing - make sure YOU tell the title agent that you intend to have a subordination and also make sure you have told your new main mortgage lender.

What happens if the transaction closes and no one did a subordination? The title agent - who likely insured first position for your new main lender - will have to fix it. They'll have to go to the other lender and ask for the subordination. This can still be done post closing but it's risky because the lender might not agree. If the lender doesn't agree, then the new main lender who wants first position may have a claim against the loan title insurance policy.

Claims are based on losses but the lack of lien priority may impact the saleability of the mortgage paper and though the lender hasn't suffered a loss in a foreclosure, you still have the question of whether or not the title agent followed the lender's written instructions. The title insurer will work all of this out with the mortgage lender.

As the consumer, your obligation is to cooperate, as needed, to assist in the resolution of getting the subordination. Why? Well, your new main mortgage was likely subject to the subordination and you have to satisfy that condition even if it is post closing.

nice try, CentRealTech

EL DORADO HILLS, CA, October 08, 2008 /24-7PressRelease/ -- CentRealTech Inc. announced today that they have released an Industry White Paper which presents a compelling case for the implementation of a Web based, automation solution for the labor intensive Title Production Process used by most title companies today. The title industry is going through one of the toughest times in its history with the direct impact of the housing slump, the subprime mortgage collapse and the regulatory/consumer group pressures to reduce premiums. Read more...

What a bunch of hooey. Real people buying real property want a real title examination behind their title insurance. That's what real people think they are buying when they pay for title work in a real estate closing.

Automation is crappy product with no thought and just because you can do it cheaply is not a good reason to do it at all.

The best thing the title underwriters can do - hopefully having learned from all of the claims they are processing right now - is to restore traditional human title examination and start educating the troops.

query: title company sued for not following lenders instructions

The Closing Services Letter aka Closing Protecton Letter, commonly refered to as CPL - when issued - gives lenders additional title insurance protection over and including adherence to the lender's written instructions.

Note that I put the word written in bold.

If you are a mortgage lender and you want to create any kind of a legal obligation for following your instructions, first, put them in writing, including any amendments, even last minute changes.  Also, make sure you have a CSL or CPL in place.

If you are a title insurer, agent or company employee, make certain that you get any and all lender instructions in writing, even the last minute stuff.  E-mails and/or fax can suffice.  Make absolutely certain that you are reading  the instructions and if there is anything in there that you CAN'T or WON'T do, request an amendment BEFORE you close.

one of those days when I regret ever having done business with First American

I have a transaction we closed and insured through First American using their "Fast Web" title abstract program. This was before I realized what a piece of crap search product it was. This transaction closed in 2005. I had bought into the idea that FATIC would back the abstract and relieve me of the abstract liability. Gee what a deal.

I am now advised that the lot number in my deed and the prior deed is purportedly incorrect. FATIC only provides a current deed with the search and so I called their Quakertown office to get the chain data and perhaps copies of prior documents. They were kind enough to take the call right away and were able to look at the archive immediately. That was impressive, BUT their file as a naked as my file is. They have no chain back beyond the last deed.

UNFREAKINGBELIEVABLE.

They charged me $135 for a full search and they did a stupid-ass current owner which probably cost them $10.

So, I have two choices. I can pass off my customer to FATIC's claim office and say FATIC - YOU figure it out; OR

I can pay an abstractor to research the title -at my own expense - and try to figure out what reality is and how to fix it.

You know me by now. What do YOU think I'm gonna do?

That's right. I'm gonna pay - out of my pocket - to have the title searched back to find the problem and fix it IF it is a reasonably easy fix. If it's a fix that involves a quiet title action, I'll pass it on to FATIC to pay that bill and handle it. I'm hoping - for the sake of my customer - that it's something I can work out.

NOW HEAR THIS ALL YOU FOLKS WHO SAY TITLE INSURANCE ISN'T WORTH IT. Any fix that I do myself is done because the consumer bought owner coverage. If I fix this without turning it into FATIC it will NEVER show up as a claim. GOT THAT?

The work done by traditional title insurance agents in claim avoidance is what you pay for when you buy title insurance.

query: I cannot find my title insurance policy.

Unfortunately, that may be a problem.  Hopefully, you have your HUD-1 Settlement Statement.  The HUD-1 will identify the settlement agent/title agent on the first page in the top section.  Start by contacting the title agent.  They are the ones who issue the policy in most instances.

If the title agency is no longer in business or not helpful, look on page two of the HUD-1 in the 1100 section.  You should see the name of a title insurance company near the title insurance premium.  If the HUD-1 was prepared properly, that is the title underwriter.  The title underwriter is a huge company and they will have an almost impossible time finding your policy BUT having a HUD-1 in hand showing that you paid a premium for a policy is evidence of insurance.

If the title agent is out of business, there's a good chance they never sent a title policy to you anyway, so having the HUD-1 as proof of payment is important.  If you also have a copy of your title insurance commitment, you've got an open and shut case and the title underwriter can't ignore you.

Consumers, are you seeing the picture, here?  YOU, unfortunately, must be a careful shopper for title insurance services.  I know, that stinks, but it is reality.  I run a great title insurance agency in a business full of shoddy characters.  It didn't used to be that way but title insurance failed at the same time the mortgage business failed.  They allowed thieves and creeps and ignorant slobs into our business with very little oversight.  The system is still flushing out the bad so be careful.

Always get your title insurance commitment BEFORE you close and review it carefully.  Make sure you understand what is and what is not covered.  Put it in a safe place.

Always get your HUD-1 - fully signed by everyone - at closing.  Put it in a safe place.

Always follow-up after closing - give it 60 days or so - to make certain you get your owner policy.  Check to make certain the exceptions are the same as those in the commitment - nothing added that was not expected.  Put it in a safe place.

Got it?

they don't own the land.....didn't buy title insurance...tsk tsk tsk

How do you know your home and the land it sits on belongs to you? One Oklahoma couple was shocked when they tried to sell their home and found they didn't own the land it's built on.

Dennis and Teresa Fine raised three children in their home near Peggs. After 27 years, when they tried to sell their one and only home, they found out the land it's on belongs to the state.

"It was definitely a shock," Dennis says. "We've lived here for nearly 27 years and bought it from the U.S. government. So, I didn't think there would be a problem with the title."

Their modest home has three bedrooms and two baths and sits on just over an acre of land. They have re-financed the home several times and are the third family to own it. They can't understand how the land ownership problem wasn't discovered before.

"Not until this time, not until we tried to sell it."

Read more...

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.

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.

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

THE CLOSING SPECIALISTS
204 West Main Street, Ligonier, PA 15658

888-680-5177 X104
724-238-7830 FAX

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....

IF YOU ARE INVOLVED IN THE TRANSFER OF REAL ESTATE ON WHICH THERE SITS A MOBILE HOME OR DOUBLE-WIDE OR MANUFACTURED HOME - WHATEVER YOU WANT TO CALL IT, DO EVERYBODY A FAVOR AND FIND THE TITLE ASAP.

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. ;)

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..... ;)

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.

"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.

OK...gotcha...query: what if title company didn't close a line on your property

I'm presuming you mean an open end line of credit, right?

When a title insurer is paying off an open end mortgage which is a line of credit, they should request that the mortgage lender freeze the line. With evidence of a frozen line, the payoff letter is reliable. If the mortgage lender refuses to freeze the line, even with a written request of the borrower, the payoff is kinda risky. We handle it by re-checking the payoff verbally before remitting.

In either case, we always write or type directly on the payoff letter "Please close and satisfy." and have the mortgagor/borrower sign it. Some mortgage lenders will provide a statement of that sort on their payoff letter and place for the mortgagor/borrower signature.

The title insurer has a duty to be careful in their examination of title and look at the mortgage document to see if it is open end and then follow the steps I have just outlined. Why? Well, if the line isn't closed and the underlying mortgage satisfied, the interest of the insured buyer or lender is at risk.

Notice I said buyer or lender and I also said insured. A title insurer is performing this function to protect those they insure.

If you are the mortgagor/borrower under the line of credit that stayed open, well it's unlikely that the title insurer has liability because you have personal knowledge of your line of credit and you have an obligation to make certain it is closed and you also have an obligation to not use it again.

If you are the purchaser of property and you find that a line of credit for a prior owner is still open and unsatisfied, contact your title insurer. If you have an owner policy, they have a duty to protect you and rectify the situation.

Hope that helps.

We have a consumer in process who is applying for a mortgage.....

.....for an investment property. It has come to our attention that he intends to demolish the structure. He lives next door and really just wants the land to expand his yard.

This is a classic case of mortgage fraud though I'm not certain that the consumer fully appreciates that that is what he is doing.

The issue arose when we attempted to get results of a mandatory municipal sewage test. The letter from the municipality said that they were waiving the test and capping the sewer access because the building is to be demolished. HUH?

We contacted the lender and asked if it was a loan for vacant ground. No. It's for investment property. We talk with the consumer who says he intends to demolish the building after he pays off the mortgage. Hmmmm.....

Our job as title agents is to make certain that these two parties both have full knowledge of intentions and have agreed to proceed with the transaction. We have pointed out to the borrower that the mortgage documents includes an agreement to preserve and maintain the collateral. That means that he cannot demolish the building while he has the mortgage in place. It also means that he must preserve and maintain the building. He says he agrees and understands, however, he doesn't want to have the sewer system tested. He wants it capped.

We are asking the lender underwriter to specifically address this issue and advise whether or not we may proceed without the sewer testing.

This is not a title insurance issue but it falls under our fiduciary duties. Title insurers are the eyes and ears of the mortgage lender in a closing. We must protect their interest and if we suspect fraud, we have a duty to speak up.