Fort Ligonier Days and Las Vegas

[An accusation filed with the state Department of Corporations, which issues finance licenses, says that in April and May, Sadek obtained markers worth $1.02 million for gambling at the Wynn Las Vegas and Bellagio casinos based on funds from his company, Platinum Coast Escrow.]

I read this account of an escrow agent out of control and it took me back to the day - a few years ago when Sue Dougherty's checks started bouncing.....

It was the Friday of Fort Ligonier Days, the second weekend in October, and I had allowed most of the staff the day off. Gina had offered to work because she lived in town and didn't have to worry about parking. We both manned the phones and hoped for a quiet day.

It was pretty quiet so around 4 o'clock I thanked Gina and let her take off to join her friends. That's when I got the phone call.

A panic stricken mortgage broker in Indiana County called to say the title agent she normally used had tapped the escrow account, gone to Las Vegas and all of the checks were bouncing. The mortgage broker had a transaction that HAD to close that weekend for some reason or other and she wanted desperately to know if we could do it........

I remember loads of phone calls back and forth with Nancy, the escrow office manager, trying to get the abstract and lien letters and then frantic calls to the mortgage lender to see if we could switch the file. It was an hour during which I really tried to help these folks because nothing galls me more than a thief in my business and I feel for consumers who suffer in their hands.

Two members of my staff were intimately involved with Sue. JC used to work for her. MW was a loan originator who referred title work. Everybody loved Sue and no one wanted to believe she was a thief.

JC worked there long enough to see that something just wasn't right. He left the position without another lined up just to get out. He started working for our office roughly three months before Sue's house of cards fell down.

MW came to work for us several months later. She recalls sitting in Sue's office demanding money for her borrowers and sellers and telling them she wasn't going to leave until she got it.

Sue blamed everybody but herself. She insisted it was the fault of her employees or her business partner. Most people believed her, but her employees knew the truth. JC knew the truth.

I notice in the article about Sadek and Platinum Escrow that a former employee had tried to speak out and was fired.

[A wrongful termination lawsuit filed against Sadek in 2006 also accused him of using $1 million in escrow funds for gambling markers at the Bellagio. In a May 2 interview, Sadek denied using escrow funds, saying that "the check was a mistake and never cashed and never written out of the company."]

Sue's in jail now and she owes close to a million to Stewart Title. She harmed many people but I think there are still people who want to believe it wasn't her fault. I would not be surprised if she tried to open another title agency when she gets out. Maybe she'll go to another state that has lousy licensing laws.

You know, there are states that don't pay attention to whose watching all of that money. That's a crime of sorts in my book as I believe states have an obligation to protect the public and the sooner states embrace the idea that the business of title insurance and real estate conveyance is one demanding a high level of trust, the less we'll hear about crooks like Sue and Sadek.

query: is it legal to charge the borrower for an appraisal if the loan doesn't close

Yes.

The appraiser did the work and so the appraiser must be paid. The work was done on behalf of the borrower and so it makes sense that the borrower should pay for the appraisal even if the transaction does not close.

Prudent appraisers are asking for payment at the door before they even start the appraisal.

It's the appraiser's job to place a value on the property and it's entirely possible that the appraisal report will cause the deal to fall apart. The appraiser must still be paid.

query: TIRBOP referral fees

Referral fees are not covered in the TIRBOP guidelines. The issue is dealt with in our anti-gift/kickback law concerning the business of insurance referrals in Pennsylvania. I can't find the link at the moment but it's somewhere on Title Insurance Talk or Radical Title Talk.

query: lawyer didn't provide title commitment

Was the lawyer reviewing the title commitment on your behalf or was the lawyer the title agent issuing the title commitment?

If the lawyer was hired by you to review the work of the title agent, the lawyer might have thought his own review on your behalf was sufficient. A lawyer acting on your behalf is your fiduciary, hired to protect you. I would have preferred that the lawyer share a copy with you so you understood the property rights before you closed, but you hired the lawyer and the two of you should review your expectations of the agreed work relationship.

If the lawyer was the actual title agent issuing the title commitment, he had a duty to release a copy of the title commitment to you prior to closing. If the lawyer was the title agent AND your legal representative, he was performing under a conflict of interest. A lawyer can't or shouldn't serve more than one master. In this case the lawyer would be representing the title company and your interest would be secondary. This is a common problem. Doug Miller, a lawyer who blogs, discussed thid very issue. Here's a link.

in an odd turn of events

I understand the PLTA instructors in Pittsburgh last Monday informed the class that TIRBOP regulations require the imposition of a title commitment cancellation fee.

I am overjoyed.

I also understand that the instructors raised the issue that giving free title commitments to lenders in exchange for referrals is a likely RESPA violation.

Thank you, PLTA instructors, for having the guts to have this truth discussed openly and for the benefit of your membership.

Are you the kind of person who votes with dollars?

Do you try to buy Made in the USA products?

If this is a major concern for you, ask questions about your title insurance provider.

For instance, First American Title Insurance Corporation has an outsourcing philosophy that promotes the use of offshore employees even for things as simple as YOUR title search.

Isn't it weird that their list of global resources has India as part of the United States?

Global Resources

To best serve your needs, First American offers business process outsourcing from our operations in the following locations:

• United States – Santa Ana, California; Dallas, Texas; San Antonio, Texas; Denver, Colorado; Rochester, New York; Austin Texas. India – Bangalore, Mangalore, Hyderabad
• Canada – Toronto
• United Kingdom – Leeds, London, Bromley
• Australia – Sidney, Melbourne
• New Zealand – Adelaide
• Philippines - Manila

Funny, that name, First American.........maybe they should consider changing the brand from our symbolic eagle to.....I don't know. Do you have a good idea for a company who keeps closing offices "here" and replacing them with offices "there"...hmmmm...........?

loan servicers calling borrowers who are not late

We are hearing reports from all over the country that mortgage loan servicers are calling borrowers who are not late.

Most notes allow for a due date of the first of the month and a 15 day grace period. Some mortgage loan servicers - mostly subprime lenders in trouble - are calling borrowers on the first or second day of the month to check on the payment. The persons making the calls infer that there is a problem and this is causing some distress and worry.

My advice? Check the terms of your note. If you have a grace period and your payment arrives within the grace period, don't worry.

These folks are in trouble and trying to get as much cash into their doors as quickly as possible.

It's their problem, not yours.

query: does PA require title insurance

No, the Commonwealth does not require title insurance. PA does regulate and license title insurers.

RESPRO data is a rotten potato in the GAO stew

"The GAO's cite of the RESPRO study is causing immeasurable damage to our industry and real estate consumers. Little could the GAO have known that this one small cite in the GAO Report would be embraced as the GAO's stamp of approval of One Stop Shopping across the Nation.

Here's the GAO study. See footnote 25 on page 35: http://www.gao.gov/new.items/d07401.pdf

The State of Washington is only the latest to fall prey to the GAO's reliance on the RESPRO study for the propositions that One Stop Shopping benefit consumers and don't cost more. Every state that has recently investigated ABA's has cited the GAO report for the same conclusions.

I ask you to please write Patrick Ward at the GAO ( Wardp@gao.gov ) to encourage him to make a very public retraction of the GAO's reliance upon the RESPRO study because of the tainted data. If you know anyone else that can help, it is my belief that this small request, if complied with, could change everything.

We want one thing from Mr. Ward as there is only one thing he can give us. We want a retraction of any cites and reliance upon the RESPRO study. We want him to publicly state that it was an error to rely on that study as it was based upon an unreliable source of evidence. That the following statements in the GAO are hereby retracted... And we want him to get this information into the hands of the regulators and legislators who are now heavily relying upon the GAP study. Please only focus on that issue.

Please do not use this forum to discuss the problems with One Stop Shopping. The GAO only provides reports to Congress and they are not concerned and can do nothing about the actual issues. Their report is in error and that's what needs to be addressed."

by Doug Miller

query: is title insurance mandatory in New Jersey?

I am not aware of any state that requires title insurance. Iowa is the only state run program I can think of and even they, I believe, don't rquire coverage.

The purchaser of real estate decides what level of protection they want to rely upon. If after having purchased property they find a lien or other problem and they don't have title insurance coverage, they must rely upon the seller to honor the warranties given in the deed.

Most sellers don't understand the warranties or refuse to honor them and so the purchaser must hire an attorney and attempt a legal settlement.

overcharges in Somerset PA, competition, and fiduciary duties

A local bank recently opened its own title agency. The ABA is an agent of Chicago Title.

I have an opportunity to review a settlement statement and I see that both buyer and seller paid attorneys $150 each for document preparation and other services. I see that the buyer paid notary fees of $20 and that both parties paid combined courier fees of $35.50.

Lastly, I see a mortgage payoff on the seller side of an institutional mortgage that, based upon the figures alone, seems highly likely to have been originated within the last 10 years. With that info in mind, I checked the title insurance premium and see that the buyer was charged a basic rate rather than the reissue rate for which he clearly would have been eligible.

The basic rate is $958.75 and the reissue rate would have been $862.88.

I can tell from the structure of the fees on the settlement statement that the bank owned title agency is operating under the agency program and not the approved attorney program and that means that TIRBOP rates apply including required discounts.

If these consumers had used our Choose & Save Program, the seller would have saved $165.50 and the buyer would have saved $265.87.

Isn't that amazing?

so much truth flowing on Calculated Risk

Read the whole piece here. My favoriate blurb follows:

In fact, I have some sympathy with the view that mortgage lenders "perform a valuable social service through their loans." That's why, when they stop doing that and become predators, equity strippers, and bubble-blowers instead of valuable social service providers, I like seeing BK judges slap them around. Everybody talks a lot about moral hazard, and the reality is that you're a lot less likely to put a borrower with a weak credit history, whose income you did not verify and whose debt ratios are absurd, into a 100% financed home purchase loan on terms that are "affordable" only for a year or two, if you face having that loan restructured in Chapter 13. If you are aware that your mortgage loan can be crammed down, I'm here to tell you that you will certainly not "forget" to model negative HPA in your ratings models, and will probably pay more than a few seconds' attention to your appraisals. You might even decide that, if a loan does get into trouble, you're better off working it out yourself, via forbearance or modification or short sale, rather than hanging tough and letting the BK judge tell you what you'll accept. That would be a major bummer, right?

I say YEA BABY!

FDIC Chairman Sheila Bair stands up and rocks!

"Keep it at the starter rate. Convert it into a fixed rate. Make it permanent. And get on with it," Federal Deposit Insurance Corp. Chairman Sheila Bair said in prepared remarks at an investor's conference.; and

Bair proposed that servicers convert only those ARMs that haven't reset yet and only for borrowers who are current in their payments and occupy their homes. Loans taken out by speculators who don't live in the homes they bought would not qualify for the automatic conversion.

have a great weekend....

SPEAK TO US, PLEASE.

As the title agent in a real property transaction, we are charged with disbursing net proceeds to the seller. We send each seller a pre-closing questionnaire while we are processing the title order. As part of that routine inquiry we give the seller three choices for their proceeds:

1. our TCS escrow check
2. cashiers check
3. wire

We charge a banking related service fee of $25 for the cashiers check or wire. This fee is waived if the buyer uses our Choose & Save program.

We had two odd happenings this week related to seller proceeds which I would like to share. In each case, if the seller had discussed their needs with us ahead of time, we could have helped them avoid the trouble.

I'll start with the simple happening first. We had a seller request a cashiers check which we provided. The seller intended to use the funds to purchase another piece of real estate. The seller made the mistake of depositing the check in his bank account rather than simply holding the check and endorsing it over to the attorney or title agent handling his purchase. His problem is that his bank has a hold on the money and he can't access it. Since the cashiers check has already been deposited, we can't help him. He has to wait it out. If he had discussed his plans and needs with either our office or his bank, he likely would not be in this pinch.

A cashiers check is good funds but your bank decides how and when you have access to those funds.

Our second happening is more interesting. Our sellers were a husband and wife. There was nothing eventful at all about their transaction other than the request for a cashiers check. As usual, no big deal, we had the check ready for them at the table. It was joint ownership and so the check was issued in both of their names.

Here's what we didn't know:

• We didn't know the husband was about to file divorce.
• We didn't know that the wife was leaving that day with her boyfriend to travel across country and that they had no money and were planning to CASH the proceeds check.
• We didn't know that the husband was under house arrest.
• We didn't know that the husband had agreed that the wife should receive all of the proceeds.
• We didn't know that neither of the sellers had bank accounts.

Whew!

So, here's what happened:

Immediately after closing, the Realtor - knowing the full situation - walks the couple across the street to the bank. The Realtor had already made arrangements with the bank manager to open an account for the sellers, cash the check giving her $1000 and deposit the balance of the proceeds into the new account. The plan was that the funds would be wired to the wife when she got settled on the west coast. Got that?

OK, so these guys are in a real hurry because it's been almost an hour since Mr. Seller left the house - remember he's under house arrest - and he wants to get home before the police arrive.

They present their ID and the bank manager starts to open an account then WHAMMY! she is stopped in her tracks. She CAN'T open an account because Mrs. Seller is "red flagged" in the system. Mr. Seller quickly endorses the back of the check, leaves and goes home.

Mrs. Seller decides to drive to OUR bank - the bank who issued the cashiers check - and see if THEY will cash the check. Our bank will be very happy to cash the check provided she opens an account which she CAN'T because she's "red flagged" - soooooooooo, we get the first of several screaming calls that we have to help her, etc.

We explain that we can't change banking rules, etc., we suggest she open an account. It this point you must understand that we did NOT understand that she really COULDN'T open an account. The impression we had was that she did not WANT to open an account because she was afraid that they would confiscate some of the proceeds. Frankly, I'm thinking two things - babe - you're on your own; and I want to take another close look at that file!

Anyway, she makes it out to the west coast and can't open an account out there because the check has been endorsed by her husband who is still back HERE under house arrest. So I suggest she send the check back to me and we'll figure something out.

We'll get her husband to sign a release and I'll wire the funds.

YOI - DOUBLE YOI!

query: does foreclosure wipe out a non-borrowing spouse's interest in property

Yes. I would hope, however, that you would have an attorney review the matter before the property goes to the sheriff's sale.

It is entirely possible that the lender did not account for the interest of the non-borrowing spouse and might have created a non-valid mortgage lien. If that were the case, the lender might have a claim against their loan policy as they may not be able to foreclose.

the TOOTs keep coming!

"Hi Diane, I just wanted to thank you in helping with the closing paper work and working with me thru the issues it entailed. Last evening at closing, with Michel, was one of the most professional transactions I've ever been a party of. It was exceptional. The Closing Specialists saved me money and made a big transition for me painless. Thank you all. Please forward this to any supervisors so that they may see how pleased I was with all of your services. Thank you." JF

Thank YOU, JF, for taking the time to comment. Diane Hostetler is one of our THREE Dianes.

DH is a meticulous coordinator and Michel Wright is a first class on-staff closer. I am truly privileged to work with them both.

Soldiers and angels...that's what it takes.

FHA sued over charity gift program

Two big gift funds providers are suing the FHA according to Reuters. Here's the blurb:

"On Monday, HUD announced that it would ban some third-party funders from helping prospective borrowers meet a required downpayment test. Since HUD announced its plans, two of the largest such funders, AmeriDream Inc of Maryland and Nehemiah Corp of Sacramento, California have sued the federal agency saying the new rule is capricious."

The feedback I've heard from FHA lenders is that they think the program is great and they hope HUD will be forced to keep it available.

query: title insurance in a cash deal

You better believe it! Whose got the most to lose if there's a title problem? YOU, you alone, so why the heck wouldn't you cover those hard earned dollars with a one time premium for title insurance?

I'm always thunderstruck when a cash buyer skips title insurance because nobody is forcing him to buy it.

Mortgage lenders force borrowers to buy loan policies because they KNOW it's the smart and prudent thing to do.

Yes, I know, there's a bunch of stupid lenders out there in the news, but trust me, the smart ones require title insurance.

query: how to fight title insurance exclusions - assumed suffered or agreed

Deal with exclusions before you buy the insurance. Exceptions to title insurance coverage are set forth in the title insurance commitment.

Conscientious consumers will read the commitment, including the jacket, and ask questions until they are satisfied and understand.

Conscientious title insurers will provide a copy of the title commitment with pertinent attachments to the purchaser automatically and without delay.

Conscientious consumers will DEMAND a copy of the title commitment before closing so they CAN deal with exceptions before buying title insurance.

Conscientious consumers will FIRE creepy title insurers who refuse or cannot produce a title commitment and answer questions about coverage prior to closing.

So, if unfortunately you are stuck with exclusions or exceptions that make you unhappy, think back to whether or not you were given an opportunity to review the title commitment before you closed.

Even if you were pushing for a fast closing and got the commitment at the table, you still had the chance to postpone. [Some folks push for a fast track closing without considering potential damage to themselves.]

If you had NO opportunity to consider these exclusions/exceptions before you purchased the title insurance, I think you should have a chat with the title company and if necessary hire an attorney to have that chat for you.

If you were given an opportunity to review the commitment and didn't or didn't ask questions, shame on you.

As a post script I have to say I'm not sure if I caught the right drift with your query, so if I'm off target, try again. ;)

query: what does a title company really do

That's kinda like asking what does a hospital really do. They do lots of stuff related to illness.

A title company does lots of stuff related to the ownership and finance of real property.

query: TIRBOP waiver of spousal rights

Never heard of it and frankly if you are planning to validate a lien you had better do it on the instrument itself. Anything less does not a valid lien make.

query: insurable access

Good point and one most people don't really consider. Read the title insurance policy - including the jacket - very carefully. Insured access may or may not be insured vehicular access.

Unless vehicular access is specified, the insured access may be minimal aka by foot.

Title examiners look for access to and from a public roadway. If the insured land abuts a public roadway, that's access. How do we know if the public roadway is down a fifty foot cliff from the house and your real driveway goes over the land of a neighbor? We don't and that's another very good reason to purchase a survey.

A surveyor will draw that driveway and identify ownership of the land beneath. Once your title insurer reviews the survey, the title policy will accurately deal with rights of way for access, as needed.

TOOT! TOOT!

Tooting the TCS horn - just gotta share this nice customer comment:

"Excellent service. The Closing Specialists have provided the best customer service that I have ever received from any business regardless of field of expertise!"

Wow! Thank you. We appreciate you taking the time to tell us because we try so very hard to please.

Your friends at TCS

;)

conflicts of interest and attorneys

Doug Miller, an attorney, hit the target on his blog. Here are a couple of blurbs:

"The problem with fiduciaries in controlled business relationships isn't limited to just Realtors. It includes attorneys as well. If an attorney represents a client in a residential real estate closing and then also issues the title insurance and performs the closing, that attorney has just created an insurmountable conflict of interest. Most ethics opinions require attorneys not to use their law practice to steer clients into another business. For example, it would be unethical for me to have both a real estate brokerage and a law practice and refer people from one to the other. "; and

"Attorneys, as fiduciaries, may not "sell" their clients anything, they must act with due diligence, avoid conflicts of interest, must not have secret profits, must not engage in self dealing, they have a duty of full accounting and on and on... The duties of a fiduciary are immense. Sometimes I wonder why real estate agents want to fall into this category... "

Nicely said, Doug.