Why would an underwriter have strict credit standards for agents?

I thank reader, David, for his inquiry today concerning becoming a title agent and having some trouble because his credit history is not good.

I suggested that he consider a different profession.

Title insurance agents have access to and control loads of cash.  What is the primary attribute you as a consumer wish to see in a person who manages money?  How about trustworthiness?

What is a credit history but a report card on the trustworthiness of an individual?

Yes, we understand that people make mistakes and get into trouble and then later recover. The point I am driving at is that the standard for being the person who holds in their hands lots of money on behalf of others is and should be a higher standard than standards for other types of work.

Title underwriters and consumers should expect and demand excellent money management skills in their title insurance agents.

here's a few hmmms.... for ya ;)

hmmmm........ A lender requires a private road maintenance agreement.  Instead of hiring a competent attorney to draft a document, the buyer drafts his own and in the process creates a separate individual document for each person on the street to sign.  The whole project ended up costing close to $350 in recording fees when an attorney would likely have charged $150 for creating a document that might have costs $55 to record.  So, he paid WAY too much money and has a crappy, probably unusable agreement on record which will likely get lost in an indexing black hole.



hmmmmm......At two recent title insurance CE classes at least one attorney instructor recommended to attendees that they overlook the regulation in TIRBOP which compels a title insurer to accept as evidence an unsatisfied mortgage to establish a basis for discounted premiums.  What is it that these two attorneys do not understand about the word SHALL and do they really want to play footsie with class action suits and our new governor who has all eyes on title insurance?  I for one follow the rules and give the discounts.  When in doubt err on the side of the consumer.



hmmmmm.......Stand your ground sellers - most of the attorneys in the CE class yesterday said they pass on to sellers any cost which cannot be charged to the buyer.  Who compels a seller to pay the buyer's attorney anything?  No one.

Fannie Mae will no longer accept back a mortgage that was repurchased by a secondary market investor, government-sponsored enterprise or private institutional investor — even if the lender cured the defect in the loan.

Read more on Housing Wire.

query: what kind of experience leads to a job in mortgage underwriting

In my opinion, a good underwriter can be taught the mortgage rules IF they have the basic smarts and analytical talents.  It's not an entry level position and most often underwriters move up out of mortgage processing.  I have to say, however, that most of the underwriters I hired and trained when I was in mortgage banking did not.  Most were simply excellent performers in a related department.

I look for and test for the same qualities in my title insurance agency staff now.  I want a person who can read and comprehend instructions and guidelines, analyze and resolve problems, maintain quality of product and service, work efficiently and has a good attitude.

Any position in the mortgage or title insurance business requires long training at the side of an expert.  So my advice is to find a good underwriter under which to learn your craft and then demonstrate your abilities by doing an excellent job.  You will be noticed.  Once you have achieved credibility with management based upon your quality of work, let them know you'd like to move into underwriting.

In the meantime, read and study all available resources - there are lots of good web sites - to learn MORE than you are taught in your office.   You will be noticed.  ;)

A 'barn-find' Bugatti amounting to little more than a loose collection of bits has sold at auction for more than seven times its estimate.

Completely dismantled, incomplete and lacking its engine and body, the 1926 Bugatti Type 38 was expected to fetch only around £9,000 when it went under the hammer at a Bonhams sale in Australia.

Read more in the Daily Telegraph.

The firing prompted Mike Huckabee and Sarah Palin, among others, to call for NPR to be stripped of federal funding.

Ailes later semi-apologized for his comment in a letter to the Anti Defamation League.
"I was of course ad-libbing and should not have chosen that word, but I was angry at the time because of NPR's willingness to censor Juan Williams for not being liberal enough," he wrote, as TV Newser reports.

"I'm writing this just to let you know some background but also to apologize for using 'Nazi' when in my now considered opinion, 'nasty, inflexible bigot' would have worked better," he added.

Read more on CBSnews.

query: what if property taxes change after closing, does that impact prorations?

Hi Diane,

I didn't see on your blog where I could post my question, so hope you don't mind me writing to you.

I'm about to close (Nov 30) on a home for the first time, so I've been studying everything I can to try to be prepared at closing, and avoid any surprises, especially financial ones.  I'm wondering about the settlement of pre-payed property taxes.  The seller bought at the height of the market, so the current taxes are probably close to what they will be for me based on the recorded sale price.  If I have to reimburse the seller for three months of prop taxes at $700/month, but my property tax bill is only going to be $350/month for those same three months, does this get adjusted in the HUD-1?  Or do I lose out and should be thankful that my property taxes will be lower than the seller's were?

Thanks,

Dan

Hi, Dan:

Thanks for sending me the email and I'll post your question so it will be there to help others.

If what we are talking about is pre-paid taxes, meaning the taxes that the seller has already paid, then we're really just reimbursing the seller dollar for dollar for a lienable item that they paid beyond the date of their ownership of the real estate.  We call this proration and it will be listed on the first page of your HUD-1 settlement statement near the beginning, just after the sales price.

Most title agents will include in the papers you sign at closing, some sort of agreement that prorations will be based upon the best available figures at closing, meaning the current bills.  There may even be an exception in your title insurance commitment that refers to bills currently due and payable.  This is to avoid controversy in the event the tax assessment is altered after closing that creates an increase or decrease in the tax bills which is retroactive.

You should plan to reimburse the seller based upon the bills as they exist now unless you and the seller negotiate otherwise.

Does this help?  If I have misunderstood the question, just post a response on the blog or shoot me another email. Take care and may I applaud your careful research as a savvy buyer.  We need more consumers like you!   ;)

Diane

Thanks to new federal rules covering closing costs on mortgages, home buyers are experiencing a new type of surprise at closing.

Instead of being faced with higher-than-expected costs -- as homebuyers often were shocked to find prior to this year -- the amount needed to close on a mortgage loan is generally the same or lower than the original estimate, experts say.

That's because lenders and brokers, faced for the first time with new penalties if they lowball estimates of upfront mortgage costs, are giving borrowers more realistic cost estimates.

Read more in the Tribune Review.

the day title insurance and Marilyn Monroe met in a Google Alert

"suggests that she not only cooked, but cooked confidently and with flair": Scrawled on stationery with a letterhead from a title insurance company, ...

Read all about it in the NYT.

haven't had a taste of mortgage fraud for awhile.....

So, the exercise of yesterday afternoon was like time travel back to the days of sub-prime.


We received a frantic call from a listing real estate broker concerned that the HUD-1 did not accurately reflect the movement of the money.  Huh?

Turns out that after our closer left the table, the seller had confronted her and demanded that she pay him $800 to cover his loss.  He had been forced to pay $800 because the closing was delayed.  This real estate broker could not figure out what he was talking about and since he was too angry to be coherent, she left leaving hanging in the air his threat to complain to the real estate commission.

She had no idea what $800 fee he was referring to and pondered the HUD-1 for two days before calling the buyer's loan officer to see if he knew anything about it.  He did.  He gave her the complete story which I later heard from the buyer and seller when I called them yesterday.

There was a well issue which delayed the closing just enough to push it into the next month.  A buyer who had been planning on less than $100 to close now needed $800 because of interim interest.  Mind you, this was one of those cliff hanger HUD-1s.  Instructions and HUD approval all came the day of closing.  Here's what happened based on what I was able to piece together yesterday.

The buyer called the seller on his cell phone.  The seller, who was on his way to closing - it was a two hour drive - was faced with a threat from the buyer that the seller had caused the problem and he better pay up or the buyer was walking away from the deal.  The seller felt penned in and furious.  He could not reach the listing agent on the phone and so conferred with the selling agent and mortgage broker who both agreed that he should get a cashiers check payable to my office and give it to the buyer before closing.  The seller agreed to do this so he could move forward with his closing and expected to extract the money from his listing agent.

Now, let's pause for a moment in this story to discuss what honest real estate agents and mortgage brokers should do in this kind of a situation.  Professionals are trained.  Real estate agents, mortgage loan officers and brokers along with title insurance agents are trained to recognize and guard against illegal acts.  WHAT DOES A TRAINED PROFESSIONAL SAY
WHEN A CONSUMER - A LAYMAN WHO MAY NOT KNOW BETTER - SUGGESTS AN ILLEGAL ACT?   Let's all say it together........

NO.

Well, in this case, these two professionals, now known as scofflaws, said great idea and colluded to defraud the mortgage lender.  They knew better than to tell my office, so they hid the act.  When asked for funds at closing, the buyer pulled a cashiers check from his pocket.   The closer reviewed it, found nothing out of order.  Though the check did not show a remitter - not all do - the buyer's name was printed on the check by the bank in the memo line.  The seller had taken the extra step to make it look good.

Once the full set of facts were known to us, you can imagine how disappointed we were.  It's hard to find out that people with whom you have had a working relationship are liars.  As the listing real estate agent explained yesterday when she called our office, the only people at the closing table who did not know what was going on were our closer and her. 

We wrote a letter to the mortgage lender which was delivered by fax along with a copy of the check and HUD.  Original sent to the address on the HUD.  All parties in the transaction were copied including our title underwriter.

JC had chatted with the selling agent and mortgage broker before I spoke with the buyer and seller.  They both insisted that knew nothing about it.  I spoke with the seller and buyer and explained that what happened was mortgage fraud and illegal.  The buyer insisted it was his idea and that he had not discussed it with anyone.  The seller inferred that he had discussed it with either the selling agent or the mortgage broker, he couldn't remember.  These conversations took place before the listing agent filled in the blanks and we knew that both the selling agent and mortgage broker were involved.

The letter prompted a call from the lender who asked plainly why folks didn't just do a work out and revise the HUD?  That's exactly what the listing agent had asked.  If the buyer didn't have or didn't want to pay the money, she would have liked the opportunity to consider a reduction in the commission.  In this case, the mortgage broker made thousands of dollars.  He could have knocked down his fee a bit.  The seller had a two hour drive.  We could have worked all this out with the lender and got an approved HUD without skipping a beat.  But no, they had to go under the table and take the illegal route -pulling their consumers in with them.

The lender pulled the loan from their pipeline - it hadn't been pooled yet - and will get back to us on Monday with a suggested fix.  They said they will contact the mortgage broker.  It will likely be a modified HUD - showing basically the fix that SHOULD have taken place on the day of closing.  I don't know that anything else will happen.  We're waiting to see.

This is a good example of what was so common during the sub-prime fiasco.  I am truly surprised that there are still players in the business acting out retro-mortgage foolishness.

this still blows my mind....ROBO-GFEs...don't they get it yet?

"Several important new features in ClosingCorp’s SmartGFE service just went live in order to improve the GFE data process — including an automatic notification of changed circumstances"  source


ClosingCorp's SmartGFE is nothing more than a ROBO-GFE in my mind.  It's only a matter of time before the lack of human decision making is exposed yet again as a bad idea.  Culture of brainlessness..."we" can't seem to value human beings.

Well, that's an angle I hadn't consider. Hmmm.

"We are not an equity owner in any law firm," he said.

Read the article in Housing Wire.

"standing in the wind" and "the wall is red"

I've probably talked about these two techniques before but just in case, let me explain.

What we call "standing in the wind" is the purposeful listening  to another person venting while remaining calm.  Our natural instinct is to get riled and defensive. It's not that the wind is bad.  The wind is.

Real estate is a large transaction that touches some of the most important moments of life and humans express frustration, rage, fear, sadness and joy in different ways.  Sometimes something completely unexpected will cause a person to need to vent.  These moments are normal.

As noted at the top of Title Insurance Talk, we think of our office as an emergency room of life and that means our staff must be trained in bedside manner.  Remain calm and help.

The second technique, "the wall is red", is the ability of staying on target with an important point, quietly standing your ground, and saying the same thing over and over until the other party understands whatever it is that you need to communicate but they are having a hard time grasping.  The point is to not go off on tangents and to not get riled or frustrated.  We are humans with all the frailties we share, but we are the professional in the transaction and we need to keep our focus on the task and help others to move forward to a successful closing.

Mind you, we are not always successful because we, like you, are not perfect.  We use these techniques to remember to stay calm and move forward to accomplish our shared task.

Here's an example:

Insuring title for property owned by an out of state LLC, not registered as a foreign LLC in PA.  There is a mortgage with a local bank.  The seller was represented by an attorney.

We requested:

1. the operating agreement for the LLC along with any amendments
2. a statement of the nature of the business being conducted in PA so we could determine whether or not there was a corporate tax lien risk
3. authorization to obtain a payoff letter from the bank

We received a letter from the attorney stating that they had no operating agreement, since they were registered in another state, there was no corporate tax risk in PA, instructions to give him the proceeds check payable to the bank and he would secure a release.

We responded asking that he clarify who he was representing in the transaction - the LLC, the bank, or both.  We had reason to believe the LLC did have an operating agreement and would he confirm that with his client.  We respectfully disagreed with his position on PA corporate tax and asked that he provide a statement concerning the nature of the business being conducted in PA.   We also let him know that we needed to communicate directly with the bank and if the bank wanted us to give the attorney the proceeds check, they would need to give us those instructions in writing.

The response included an operating agreement with amendments, a statement that the LLC conducted no business in PA beyond the ownership of real estate and a signed release.

We had independently contacted the bank and received a letter signed by a VP stating that they wanted us to send the proceeds check directly to their office.

Fine, now we could move forward.  No, the attorney still wanted the check directed to him and produced a letter from the bank which instructed us to give the check to the attorney.  This new letter was signed for the VP by his secretary.  We said we would be happy to change the instructions but that the letter had to come from the VP, not by his secretary.  That new letter came a couple of days later, we validated it by calling the bank, and the transaction closed.

I thought the entire exchange was a bit odd.  My staff had remained calm and simply continued to reply and request what we needed over roughly a month.  We had dealt with this attorney in the past and not remembered such an unusual exchange.  Yesterday, the truth of the underlying tension was disclosed.  The attorney, who needed to vent sadness, shared with my staff that the previous manager of the LLC had recently killed himself and his wife in a murder/suicide.

We never know what might be causing another person in our transaction to be less than focused. I am proud of the folks in my office who gently worked their way to closing without getting riled.  They calmly repeated "the wall is red" until it was heard and understood and continued "standing in the wind" until the door to closing opened.

My heavens to Murgatroyd, we're busy.

Me thinks consumers have finally discovered that interest rates are LOW LOW LOW and those that aren't buying are refinancing. 

Oh, and BTW - lenders are lending!  ;)

I really do not understand this need to make transactions brainless. Do you?

The robo-signers that have blown a hole into the foreclosure process are evidence of this never ending quest for the holy grail of brainlessness.  WHY  WHY  WHY WHY is the mortgage and title insurance business so darned interested in getting rid of competent human beings?

I just got a call from a nice lady at Closing.com.  They call every so often to ask if my fees are accurate and I always say that our listing directs people to our web site and to call us to get an accurate quote.

This time she was insistent that they need accurate fees because lenders will use their automated system to populate GFE fields and that they need to guarantee the accuracy of the data.

WHAT?  WHY?

Why is it so bloody hard for a lender to have trained human beings who know how to complete a loan disclosure?

Why are title insurers who participate in this program ignoring the unique nature of real estate transactions and the definitions of title services.  Is everybody just overcharging consumers to cover all possible transaction fees or are they misleading consumers then giving them a gotcha in the end?

Consumers actually take their transactions seriously and expect to deal with humans who have trained brains in gear.

WHAT THE HELL IS WRONG WITH THIS INDUSTRY?

WHY DON'T YOU WANT TO PRACTICE A PROFESSION THAT REQUIRES THOUGHT?



My brain wants to burst when I have a conversation like that.  I just don't get it.

mortgage broker advertises interest rates tied to affiliated title insurance

A friend showed me the mortgage rate section of the Tribune Review last weekend and pointed to a mortgage company listing that had asterisks next to a few interest rates.  These asterisks pointed to a note that the rates were only available if the transaction was a purchase and the borrower used a particular title provider.

Clearly the mortgage broker sought to avoid Pennsylvania's discounted refinance title premiums as part of this package deal.  Only purchases transactions are eligible so there's enough cash in the pot to subsidize the rates.  The consumer appears to be getting a deal with the package.

What do you think about this offer?  Is it a problem under RESPA or PA lending or insurance law?

I've pondered on it and I'm really not sure.  It's very much like the deals offered to buyers in construction transactions.  You get the good price if you use the affiliate.  If you don't use the affiliate, you pay higher than market.  As far as I could tell these interest rates weren't especially low.

What's also interesting is that I did some checking around and found that the mortgage broker is an attorney who is operating the title services business through the law firm and not as a title agent.  He's working under the approved attorney program.  That means that TIRBOP rates do not apply.  So what's the deal with purchase versus refinance?  This fellow can charge whatever he wants when he wants to. 

Anyway, in the days of a more compliant and aware marketplace, this was oddly red flaggie.  ;)

Hey, readers. Hello!

Hope you like the new look of Title Insurance Talk.  This is the first visual overhaul since 2006.  I've been wanting to update the picture for some time but the right shot just hadn't surfaced, then my friend Marianne sent my this photo of us playing at the local farmer's market.  I LOVE that she caught my TCS minicooper in the shot, SOOOOO, here we are.  ;)

Marianne McAuliffe plays Native American flutes and we love making music together.  She picked up those fun peace glasses at the beach and I love them!

BTW  - Here's the new addition to the TCS fleet.  We retired one of the minicoopers and bought a KIA Soul.  I think the logo looks really nice against the red, don't you?  The Soul is a nice happy looking car and that's what we want.

PS  Here's Marianne's CD.

Fidelity scales up outsourcing to India

CHENNAI: Spotting an opportunity to cut its costs by around 30 per cent with increased productivity, US-based insurer Fidelity National Title Group Inc has decided to scale up its business process outsourcing (BPO) and software development activities in India.

The company had set up its captive BPO company Fidelity National Financial India in Bangalore three years back.

The $4.6 million revenue Fidelity National Financial India has around 800 employees searching and confirming property titles in the US for its insurance parent. 


Read more in Economic Times.

if you bought a foreclosed home and are concerned about recent news

“If a new homeowner’s title is challenged because of a faulty foreclosure, the title insurer may have an obligation to defend the challenge,” said Kurt Pfotenhauer, chief executive officer of ALTA. “However, it is unlikely that a court will take property from an innocent current homeowner and return it to a previous homeowner who failed to make payments on the loan subject to the foreclosure.”
Though laws may vary on a state by state basis, in general, the buyer of a property that has been through foreclosure has numerous defenses available to assure their continued ownership.

• The alleged deficiency in the foreclosure process may not be accurate.
• The alleged deficiency in the foreclosure process may not have harmed the previous owner.
• The foreclosure judgment is a final court order. It is likely too late for a technical objection to the foreclosure process to be raised by the previous owner.
• Because the new owner purchased in good faith, they may be protected under the law. 

Read more from ALTA here.

the junk junkies just never learn, do they?

I've been slowly watching the return of articles pushing automation in mortgage underwriting and mused that it wasn't taking very long for people to forget that the loss of competent human credit analysts is what started this whole mess.

This morning, this article popped up on Inman and I am simply amazed but I guess shouldn't be surprised that folks just don't get what credit underwriting is all about.

With so many people now saddled with poor credit, reestablishing "nonprime" lending is increasingly important to the future of homeownership, researchers at Harvard University's Joint Center for Housing Studies argue in a new report.

The hardest lesson I learned as a young underwriter is that some people are not willing or able to repay and that placing them in a house, even when the lender isn't a predator and the consumer fully understands the disclosures, is NOT helping them.   It only leads them to foreclosure.

Trust me.  Don't walk down this road again.

the dangerous dangling lot

You might not think of an extra lot as being dangerous but from a title insurance perspective, the extra lot causes all sorts of misunderstandings and potential for loss, especially when the lot is forgotten or not considered.

A recurring problem surfaces in foreclosure.  If a title agent only places a mortgage upon the lot on which the house sits but doesn't consider discussing the adjacent vacant lot with the mortgage lender, you have potential marketing issue if the lender forecloses.  Many of these adjacent vacant lots only have value as a yard extension for the house and often aren't good building lots.  So, when the REO department of the lender goes to sell the house and doesn't have title to the adjacent lot, how does that impact marketability?

We've run into this a few times and often the extra lot isn't discovered until we do our title work.  The new buyers then have to decide if they want to track down the vested owners, the folks who lost their house,  wait for the lot to go up for tax sale as it often does, or cancel the contract.

We have a new order in which the sister of a foreclosed upon borrower is buying the house and the adjacent lot.  She's buying one from the REO lender and the other from her sister.  Interestingly, the house with the lot is going for a really low price because the lender discovered that most of the house sits on the adjacent lot still owned by the sister and not the one on which the mortgage was placed.

question to settlement agents

Are you seeing a drop off in the number of transactions with home warranties being sold as part of a purchase transaction?  I am.

Interesting, huh? 

interesting observation on RESPA 2010

How the industry is faring with new RESPA forms After eight months of using the new Good Faith Estimate and HUD-1 Settlement Statement forms, mortgage lenders, closers and the legal community are at a calmer place with implementation than they were on Jan. 1. But is it a perfect system yet? Two attorneys say no, with one saying that his firm is performing half of the closings per month than his company conducted before the forms were implemented.

You need to subscribe to RESPAnews.com to read the article.  But from this blurb we see feedback from an attorney who says his firm has lost business since the RESPA implementation.

Well, I'm from the flip side of that comment.  Our office has seen an increase in business from various sources since RESPA 2010 was launched.  Why do I think that happened?  Well, we embraced the concept early.  Our staff was fully trained and prepared so that when lenders weren't sure, we were able to assist them.  We see RESPA 2010 as a positive step forward and that attitude makes all the difference.

We hear from our lender friends that some title agencies and attorneys do nothing but grumble and make their already stressful jobs harder.  So, cheer up my fellow title agents and attorneys.  A smile and a kind "we're in this together and we'll make it work" attitude is a good marketing strategy. ;)

query via email: Is it legal to have a simultaneous closing?

Hi Diane,

My question concerns methods of closing. Is it legal to have a simultaneous closing?

In other words on an A to B and B to C purchase where the bank is A, I am B, and an end buyer is C.

At closing is it legal for B and C to sign papers, with the funds from C put into escrow, and then A and B close using funds from escrow on first signing to fund that transaction?

I hear some Title companies will and many will not. I would like to know the legalities on the issue.

Thank you, R

Hi, R:

I am not an attorney and am unable to answer your question about legalities.  As a title insurance agent, I can help you understand why I may or may not handle a transaction like this.

I insure title in PA and so there may be issues in FL of which I am unaware.  In PA the Dept of Revenue considers, as do I, that these are clearly two transfers.  Even if there are not two deeds in PA, both transfers are subject to transfer taxes.

When a transaction like this is presented, a title agent will consider whether or not there is a potential for fraud.  We insure against fraud and we also do not want to collude to defraud another party.  A test, then, is whether all parties - A, B and C - are aware of the simultaneous close.

This is the case in relocation transactions. In those cases a relocation company has advanced funds to a homeowner and holds a signed deed in hand pending the sale of the property to a buyer.  The buyer deals with the relocation company but at closing there may be two deeds - one from the owner to relo, then another from relo to the buyer - or there may be just one deed from the owner to the buyer.  In both cases transfer taxes are paid twice.  Everyone is aware of the nature of the transaction.  There is no fraud and there is no harm.

As to the specific transaction you mention:

"In other words on an A to B and B to C purchase where the bank is A, I am B, and an end buyer is C.

At closing is it legal for B and C to sign papers, with the funds from C put into escrow, and then A and B close using funds from escrow on first signing to fund that transaction?"

A title insurance agent is in the business of insuring title.  If the closing vests title in B, then B is the consumer and the one being insured.  The fact that C gave B the money, has nothing to do with the title agent.  If you then expect the title agent to convey from B to C, that's a second transaction and though it may happen at the same table, it is really happening after the first closing.

Since this type of closing has so often been used as a vehicle for fraud, honest title agents are hyper-sensitive and for that reason would be likely to pass on taking the business unless they are absolutely comfortable that everything is above board and there are no shortcuts.

I hope that explanation helps and thanks for reading!  ;)

Diane

speaking of escrows

What do you think?  If an agent is no longer representing a particular underwriter, doesn't it make sense that the underwriter should take the escrows related to their policies?

I was thinking about that lately and it makes sense to me.