perfect title versus insurable title

We've chatted before about automation in title searching and I think you know that I tried the First American Eagle Search/Fast Web system for awhile and decided I don't like that kind of search.  I'm a hands on kinda examiner.  I want a full search and all the raw data to review for myself.  Anyway....

Recently I recieved a call from an insured owner who we closed while using the automated search product.  He was trying to sell his property and the buyer's title agent had found a life estate.  I checked our file and we hadn't dealt with the matter because it wasn't disclosed in the automated search product.  Nevertheless, I told him I knew First Am would indemnify his buyer's title insurer so he didn't have anything to worry about.

I contacted the title agent, got a copy of the title commitment and faxed a request to First Am for indemnification.  The attorney from First Am called me with a question or two, grumbled about whether or not to issue the indemnification, why I don't know, but conceded to doing so.

As a follow up, I had a copy of the deed in question pulled and reviewed and I checked the Social Security Death Index and found that the party vested with the life estate had died in 1997.  That meant that any potential inheritance tax risk had nine years remaining.  I also considered the facts and came to the conclusion that the life estate was probably the only asset of the deceased.  No estate had been filed and so the risk as I considered it was minimal and so the issuance of indeminity, giving insurance to the buyer, would be customary, reasonable and a good solution.

Then I got word that the buyer's attorney wasn't happy with indeminity.  I chatted with the title agent who said they, the title company, would accept indemnification but the buyer and the buyer's attorney wanted the problem fixed.

I called the insured owner and asked if he had an attorney because in my mind, his attorney needed to advocate on his behalf based upon the terms of the sales agreement.  Our insured owner asked about filing a claim with the title company.  I said that he could file a claim , however, he hadn't suffered a loss related to the life estate.   His problem was one of marketable title.  I called his attorney.  Never got a call back.  I called the buyer's attorney and discussed the concept of "perfect" title versus marketable title and insurable title.

Consider if you will, perfect health versus insurable health.  If you want to buy life insurance, the insurance underwriter will examine your lifestyle, current state of health, etc. and make a determination whether or not to issue the policy.  They will NOT expect you to have perfect health, rather they are assessing the level of risk and determining if they wish to insure.  Get it?

Title insurance underwriting is the same.  We don't find perfection in title.  We don't expect it.  We look for insurable title and that's what marketability is based upon.

I explained to the attorney that, while the insured buyer is welcome to file a claim, it is unlikely that the title company will pay inheritance tax when no lien has been filed by the Department of Revenue.  Insuring against the potential lien is customary and reasonable.  He agreed, said he would explain that to his buyer and asked me to shoot him an e-mail with that explanation and that I did.

I heard nothing further from the title agent, the buyer's attorney and never heard from the insured owner's attorney so I presumed case closed.  Then the other day I received a mysterious hard to understand voice mail which when I listened carefully, I'm pretty sure it was our insured owner.  He said the deal fell thru and I owed him $55,000 and his attorney would be contacting me.

I'll report back if I ever hear from these folks again, but I'm posting this for a few reasons.  First, realize that perfection in title is an unreasonable expectation and so attorneys and buyers must embrace the concept of marketable and insurable title.  Second, attorneys representing consumers must communicate with all parties and they have a duty to control their clients.  That means that the attorney for our insured owner should have been actively engaged in the resolution and advocating on behalf of his client based upon the terms of the agreement of sale which called for marketable title, not perfect title.  Further, if they wished to pursue a resolution from the title company beyond the offered indemnification, they could and should have done so.

I have a feeling that somewhere, earlier in the transaction, when the title was reviewed, someone blew the life estate issue WAY out of proportion and created an insurmountable fear in the buyer.  Title agents and attorney need always to remember that consumers rely upon us to help them grasp the realities of real property.

I know this post is getting really long and I don't like to write or even READ long posts but here's another case just to drive this point home.  We just closed a purchase transaction of vacant land, several acres, in a rural setting.  The buyer freaked out because we reported that mineral rights had been reserved by a prior owner.  He wanted absolute insurance that surface operations would not take place on the land.  The deal almost fell thru until we got him to understand that unless he purchased property in a highly and closely developed area, this risk was present in virtually all parcels of land.  A core risk you take purchasing large parcels in our market is that someone may own the mineral rights and they may use them.  Commercial developers will pay for the necessary mineral rights searches and surveys, however, residential purchasers rarely do.  This buyer, once he grasped that reality, he decided to accept the risk.  We have this conversation over and over with out of town mortgage lenders who freak out over mineral rights.

So, to stop this beating of the issue, let's just remember that title to real property is not expected to be perfect, just insurable, which means reasonable risk.

using a power of attorney to convey

If you intend to sell real estate using a Power of Attorney, here are a few tips:

1. Provide a legble copy to the buyer's title agent or attorney for review prior to closing.
2. Be prepared to give the ORIGINAL power of attorney up at closing so it can be recorded prior to the deed.  If you wish, you may record the document yourself, however, you must do so well in advance of the closing so that the recordation can be verified.
3. Make certain that the document is acknowledged in front of a notary, that it specifically gives the power to convey real estate and that it meets the statutes of the state in which it was created.  It pays to have the document prepared by a competent attorney.

roller coaster ride over...Fidelity purchase approved

Dec 19 (Reuters) - Fidelity National Financial Inc (FNF.N: Quote, Profile, Research, Stock Buzz) said it received approval under the Hart Scott Rodino Act for the purchase of two underwriting units from bankrupt title insurer, LandAmerica Financial Group Inc (LFGRQ.PK: Quote, Profile, Research, Stock Buzz). Read more...

money is on sale...time to buy or refi!!!

Check out our title premium calculator for Pennsylvania rates. Use our Choose and Save program and you'll get the most affordable title insurance and settlement service available in Pennsylvania.

We are determined to give consumers the best in service and value. Here's our service area map. If you are buying or refinancing in our market, we'd sure like to give you a quote.  Don't just follow the lead of your mortgage lender or real estate agent.  If they aren't leading you to our Choose and Save program, you're not getting the best deal in Pennsylvania.  YOU have a choice. It's YOUR money.

When you choose The Closing Specialists, you get an expert title search and examination performed by experience human beings.  Does that sound like a hilarious and ridiculous pitch?      Got news for you.  There are lots of title agencies out there who have little or no experience and they order their searches by computer and let someone else do the thinking for them.  Lots of that work is outsourced to foreign countries.  Can you believe that?  It's true.

We only use experienced abstractors who work in the county where the real estate is located. We do our own title examination and we use only on-staff closers.  Our staff is experienced and we consider YOU, the consumer, our customer.  YOU pay for our services, not the mortgage lender or the real estate agent.  It's YOUR transaction.  We focus on YOU.

WE STAY OPEN SO YOU CAN CLOSE.

query: HUD-1 signing requirements on Sheriff's sale

In my neck of the woods, the Sheriff does not sign a HUD-1.  Most purchases at Sheriff's sale are for cash so there is no HUD-1.  

If the buyers are getting a mortgage, there will be a HUD-1 prepared, however all costs will be on the buyer side.  The buyer needs to discuss this with their lender up front so the lender has had an opportunity to think through the issues.  

When we do this kind of closing, the lender pre-funds the loan, we meet the buyers at the courthouse, sign the mortgage docs, then walk over to the Sheriff's office to exchange the proceeds check for the deed.  That's it.

had an interesting call today from a lady who didn't know where else to turn....

She was the executrix of an estate and had sold real estate in 2005 to a buyer who used a now closed title agent.  Follow?

Anyway, I recognized the name of the agency as one of the regional multi-ABA machines.  You know the kind - one address - and fifteen million so-called title agencies under one roof?

So, she has to file a revised inheritance tax return for reasons unrelated to the real estate transaction and she is wondering how she can find out how much inheritance tax this now defunct title agency paid to the state.  Luckily, she had in hand a copy of the HUD-1 which showed an escrow.

It's always interesting to me that folks allow money to go into escrow and never follow-up.  Yes, large sums are abandoned, especially inheritance tax escrows.

Anyway, I suggested that the title agency might have remitted the entire sum to the PA Dept. of Revenue if she had not resolved the escrow and that she might check with the Department.  If they had not received payment, she might check with the title company which we were able to identify from the HUD-1 as First American.  I gave her the phone number of the Pittsburgh First American office just in case.

Lastly and again, just in case, I gave her the toll-free hotline for the PA Dept. of Insurance....just in case.

query: has title insurance ever paid off on an easement dispute

Easements are one of the most common exceptions to coverage - UNLESS - you see the words "together with" in the legal description. If you see "together with" or some other language citing the easement in the legal description in the policy, then the insurer has INSURED that you have rights to the easement. If the only reference to the easement is found in exceptions, it likely is not covered.

In the case of shared driveways, it really depends how they were set up. If I can see a clear legal right of use, I will insure the right. If not, the only mention of the driveway is as an exception.

In our area, the access to the land is insured from a public roadway. That access may or may not be on and over the shared driveway.

okay, title folks, what do YOU think about this one...

Earlier this year we insured a purchase of property in a REO transaction.  The county tax claim bureau sent a tax certificate to the Sheriff's office but the Sheriff forgot to pay the taxes out of the proceeds.  Our abstractor noticed this and discussed it with the Sheriff's folks and they said sorry but the lenderr who bought back the property at the sale took it subject to the delinquent taxes.

Our abstractor checked tax claim and reported taxes owing for years 2003 thru 2008.  The REO seller paid the taxes at closing and we insured.

Last month our insured buyer got a notice from tax claim that 2002 taxes are still due and will move to a tax sale later in the year.

Our abstractor goes back to see what happened.  You need to know that the structure on our insured real estate is a doublewide.  Turns out that this doublewide was on a rented lot in 2002 and was assessed with its own parcel number in 2002.  

Tax claim says the old parcel number for the DW was merged into the parcel for our insured land when the trailer was moved.  We checked.  There is no notation of a merger.  There is nothing an abstractor could have been expected to find to tell them this.  It was an entirely different tax parcel number on different land.  It could have been a different DW.  There's really no way to know.

What do you think?   Any thoughts?

Right now the matter is in the hands of our underwriter's claim department but I am curious to hear your comments.

I think we share the same goal but I have a differing view on the new RESPA rule.

ClosingCorp says:

Under the Good Faith Estimate provision of the new rule, a mortgage lender can "guarantee" to its customers that the price of its designated vendors' settlement services will not increase by more than 10 percent at closing. If, however, borrowers elect to shop for their own real estate closing service providers, they have no such protection. "It should be no surprise that a borrower, when faced with this choice, will decline to shop for settlement service providers and be relegated to use those vendors preselected by the lender," the company said in its comments on the rule filed last May. ClosingCorp urged that HUD provide consumers who prefer to shop for their own real estate settlement services with clear information as to what services they can shop for; explain that they may find lower rates or more acceptable providers on their own; and even refer consumers to online or other resources that will assist them in comparing vendors and prices, or even initiating a transaction. Alternatively, HUD could provide these links and references on a newly-created consumer assistance page on its own Web site.

I agree that consumers should be encouraged to shop but I think the folks at ClosingCorp are missing the value the 10% tolerance brings to the GFE. Loan originators have had very little motivation to get their settlement service quotes right. These new tolerances at least pull the quotes into some sort of reality when the loan originator is making a referral.

Remember, that just giving a quote doesn't obligate the consumer to use that company BUT having this price quote in hand will give consumers reliable figures with which to go out and comparison shop. Isn't that great? It's a major step forward in consumer centric disclosures.

Loan originators who would prefer not to make a referral, don't have to give an accurate quote, they just tell consumers to go find someone to do the job.

Either way, the consumer has more information and more power than they did under the old rules.

THANK YOU HUD!

news alert on LandAm

On Monday, November 24, 2008, the Nebraska Department of Insurance filed petitions for rehabilitation for Commonwealth and Lawyers Title under the Nebraska Insurance Code. Hearings on the petitions are set for later today.

The Company expects that rehabilitation orders will be entered quickly and that the rehabilitations will function as a temporary administrative step to assist the transition of Lawyers Title's and Commonwealth's businesses to the family of companies owned by Fidelity National Financial, Inc. ("FNF"). Lawyers Title and Commonwealth will continue to operate and serve customers during the completion of the sale. Both underwriters are entirely solvent.

Under the Stock Purchase Agreement, Fidelity and Chicago Title will pay the Company $298 million in total for Commonwealth, Lawyers Title and United. The closing of the transactions under the Stock Purchase Agreement are subject to approvals by the Bankruptcy Court, the Nebraska Department of Insurance, and other state and federal regulatory agencies. The Company intends to work with FNF toward a closing as early as late December 2008 and will request expedited approval from the Bankruptcy Court.

Read more....

good general query via e-mail

Hi,

I read your blog about title insurance. It is very helpful.

I have 2 questions to ask:

1. I did not buy title insurance at the purchase. can I buy it now (later)?

2. My friend bought a house, and after closing he was noticed there was an unsettled mortgage made by previous owner against the house. The title company's search did not find and report the said mortgage. If my friend did have the title insurance, will the title company be held for the liabitiy?

Thank you in advance. Looking forward to your reply.

John

Both are great questions, John.

Yes, you can buy owner title insurance later if you did not buy it when you made the purchase. The title agent will need to re-examine title and then the premium should be based upon market value of the property. In PA, if you don't have a current appraisal, we would work out a market value using the tax assessment. Also, in PA our title rates are regulated. They may not be in your state, so be sure to shop around and get quotes in writing.

Unsettled or unsatisfied mortgages are one of the most common post-closing issues title insurance companies deal with. Your friend should call their title agent and also file a formal claim directly with the title underwriting company. That's the company whose name and logo are on the policy jacket.

executive management memorandum to agents on the LandAmerica status...

To our Agent Partners:

Many of our customers, particularly our customers involved in commercial transactions, have been contacting us with questions about the financial strength of LandAmerica's two major title insurance companies, Commonwealth Land Title Insurance Company and Lawyers Title Insurance Corporation.

It is important to remember that while an affiliate of these underwriters, LandAmerica 1031 Exchange Services Company, Inc. ("LES"), had problems liquidating guaranteed securities, our title insurance companies continue to do business and have adequate surplus and reserves to meet our customers' needs.

These problems do not affect our title insurance companies, as LandAmerica underwriters, Lawyers Title and Commonwealth, have over $300 million in combined statutory surplus. We have put together the attached spreadsheet, which was taken from publicly filed documents, to allow you to see for yourselves that the underwriters remain competitive with other major U. S. title companies.

We hope you will continue to place your title, closing and escrow orders with LandAmerica.

Our talented employees remain available to assist you and service your accounts. And our underwriters have the financial strength to back those orders. Plus, if we are liable for a claim, we can pay it. We have some of the industry's most stringent requirements for reserves in place to protect our policyholders. The LandAmerica underwriters' claims reserves are back by over $1.1 billion in cash and investments.

We appreciate your business, and we are working hard to earn your continued trust. Please call and we'll be happy to answer any questions you may have.

I am very happy to hear this.

The situation does not affect LandAmerica's title insurance subsidiaries, the company said. The assets of those "highly regulated companies" are "completely separate" from the 1031 exchange company, and are "more than sufficient" to meet obligations to policyholder and escrow customers.

Read more....

There is an eerie silence today, isn't there?

Is there hope? I have hope.

Here's what I think. I think the folks at the top of Fidelity, First Am, Old Rep, and Stewart ought to consider what the failure of a major underwriter means to THEM and then do something to stop it.

Insurance is all about trust and stability. If an industry shows vulnerability beyond the capabilities of the public's ability to comprehend, the industry is doomed.

Doomed.

Do we want more doom?

Doom da doom doom doom doom.


I don't but I can't do a darn thing about it.



I have hope that decision-makers at the highest levels in the big title insurance firms are thinking big picture and not just selfish survival.

Here's a good article on the LandAmerica situation.

READ IT HERE.

plans off

Fidelity National Financial Inc. has called off its plan to acquire troubled rival LandAmerica Financial Group Inc., the companies said Friday, a development that casts doubt on LandAmerica's long-term prospects.

Fidelity and LandAmerica both issued terse statements at 8 p.m. Eastern Time Friday saying Fidelity had exercised its right to back out of the deal during a due diligence period.

Read more...

NAMB ------- GET OVER IT

The National Association of Mortgage Brokers (NAMB) is up in arms over the recently updated Real Estate Settlement and Procedures Act (RESPA). The U.S. Department of Housing and Urban Development’s (HUD) revision to the Good Faith Estimate (GFE), a simplified three-paged document designed to help borrowers better understand the terms and conditions of their home loan, has the NAMB President Marc Savitt promising, “We are not going to stand for this,” wrote National Mortgage News.

When NAMB came into the mortgage wholesale seen, as I remember, they walked, talked and acted like hard money lenders. NAMB put their hard money arms out and while trying to go their membership, swallowed up the business of wholesale origination and took the framework of traditional and reputable mortgage brokers with them.

NAMB whether you encouraged bad practices or simply did nothing to stop them, I don't give a darn. All I can say is that you marched the business of mortgage brokerage to a cliff and played the horns till everyone fell off.

You are not needed here anymore. Go away. Mortgage lenders can try to re-build wholesale mortgage lending without anymore of your bright ideas. Consumers were not well served by your counsel or your membership. I hope you have no political pull with the new administration. I hope the Obama administration puts the interests of consumers first and your greedy needs last.

foreclosure rescue - PLEASE resist the temptation to pay for this kind of help.

Here's a blurb from The Daily Mortgage Fraud News:

In the following press release Illinois Attorney General Lisa Madigan today (11/18/200) announced that she has filed seven new lawsuits against so-called mortgage “rescue” companies and warned consumers about an alarming rise in these scams that prey on vulnerable homeowners on the verge of foreclosure. Madigan urged consumers to use caution when seeking help if they are at risk of losing their homes and to seek reputable sources for assistance.

“Consumers need to resist offers of a ‘rescue,’” Madigan said. “These scam artists prey on desperate homeowners who are struggling to save their homes. I urge consumers to avoid ‘rescue’ offers and, instead, reach out to trusted sources for help. My office assists homeowners attempting to avoid foreclosure. Anyone looking for help should call us immediately.”

I just came in contact with one of these scams this week. A reader of this blog contacted me to ask about an offer a "rescue" company had made to some people in foreclosure. These folks were being asked for $2000 up front, non-refundable, all for this company to try to save them but with no promises.

Wisely, our fellow reader recognized the signs of a scam and assisted these folks by encouraging them to call their lender directly. Guess what? They got a mortgage loan modification AND they didn't pay their desperately needed $2000 for the privilege.

GREAT JOB YOU ANGEL!!! I am so proud of you.

Here it is.

WASHINGTON - For the first time in more than 30 years, the U.S. Department of Housing and Urban Development today issued long-anticipated mortgage reforms that will help consumers to shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers. HUD will require, for the first time ever, that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table. Read more....

interesting, eh?

The Obama administration is likely to try to go well beyond the new Respa rules and look more comprehensively at disclosures lenders are required to make to borrowers, said Howard Glaser, a mortgage industry consultant who served as a senior HUD official in the Clinton administration. "This won't be viewed as sufficient to restore borrower confidence in the mortgage process," Mr. Glaser said. Read more...

On the FNF/LandAm merger...

FNF - of all the major title companies I have been watching - has done the best job of navigating rough financial seas and reorienting itself to a new way of doing business.  I have continued to be impressed with CyberHomes.

It's no secret that I don't like automated title examination and outsourcing but I am enough of a realist to know that much of the consuming marketplace wants these kinds of services, even if they don't understand them.

The folks I have worked at LandAm are title experts and hard working producers.  If they find a place in the new FNF structure, I'll be very happy for them, but sometimes being forced to find a new path can be a good thing, even if it's scary in the short run.  No matter what, I know these good people will land on their feet.

I'm also very happy that consumers insured through LandAm are safe and that management chose the right course by seeking a merger rather then crash land.

The Closing Specialists is an agent for both LandAm and Old Republic.  We're continuing to deliver policies to LandAm but are directing new commitments into Old Republic until we get clear notice on how the merger will impact our operations.

If anyone gets useful information, please share it with an e-mail or comment.  ;)

FNF buys LANDAM...thanks, Tim for heads up

Fidelity National Financial, Inc. and LandAmerica Financial Group, Inc. Announce the Signing of a Definitive Merger Agreement

Jacksonville, Fla. and Richmond, VA -- (November 7, 2008) -- Fidelity National Financial, Inc. (NYSE:FNF) and LandAmerica Financial Group, Inc. (NYSE:LFG) today announced the signing of a definitive merger agreement under which FNF will acquire LFG. Under the terms of the merger agreement, LFG shareholders will receive 0.993 shares of FNF common stock for each share of LFG common stock.

Thanks, Alicia.

She sent us this really nice note:

"It was the easiest part of the entire process. Everything was handled very efficiently & professionally. Big thanks & great job to both Michelle and John."

the case of the revised subdivision

This isn't a matter which has been resolved but I thought I'd mention it as an example of how things can get royally confused in a real estate title.  ;)

In early 1979 a developer got formal planning authority approval for and recorded a subdivision.  Later that year, the developer revised the subdivision.  I can't tell why.  I can't tell whether the developer submitted the revision for formal planning authority approval and was rejected.  All I can tell you is that the revised subdivision was not recorded.  

So, for reasons which remain clouded, the developer seems to have deeded some lots based upon the original recorded plan and at least one lot, if not more, based upon the unrecorded revised plan.

What makes this case especially irksome is that many - if not most - of the recorded documents in the two chains I reviewed reference the recorded plan, but also use the word revised.  I think it's just all screwed up.

Now my insured buyer has a neighbor who recognizes the lot lines described in the original approved plan.  My insured buyer wants to use the lot lines as revised.

It's a classic boundary line dispute and I post it just to show how a sloppy developer is causing grief even close to 20 years later.

Our insured buyer will find no relief in title insurance for this dispute.  In PA there is no boundary line dispute coverage in an owner policy.  We did recommend that he get a survey and he chose not to.  A survey may have raised the issue.  I have reason to believe that the neighbor did approach the buyer and raised the issue prior to closing so I do not think he went into the transaction without a heads up.  Also, the owner policy does not insure subdivision approval.

If the dispute ever goes to court, it will be interesting to see if the unrecorded revised plan has standing.

your choice as a consumer

If you decide to buy title insurance, and I strongly recommend that you do, select the provider carefully.

First, make certain that the title insurer is actully performing the title examination themselves and not farming it out to a computer or a vendor clerk will likely do a cursory review or no review.

It is important to realize that most of the premium you pay for title insurance is for the pre-insurance examination of title, the purpose of which is to find and eliminate reasonable risk of claims.

Why care about the risk of claim, if you are insured?  Well, the process of making a claim isn't pleasant and in the end you might end up with some money and not the home that you love.

Second, carefully review the work product of the title insurer before you close.  That means get the title commitment and read it.  Look carefully at the exceptions to coverage and understand what you are buying before you close.

If you are dealing with an expert title insurer, you'll get clear information.  If you are dealing with someone who got into the business cause they thought it was a gold mine and not a profession, you'll get wishy washy answers.  Use your intuition and select your provider very carefully.  The gold miners will skip all the work steps and issue an empty title policy void of examination and full of widely generalized exceptions that boot out most, if not all claims.

Be a careful shopper.