query: what does a non-borrowing spouse sign at closing

There are variables based on state laws and lender peculiarities. In PA, in a purchase transaction, you would not be required to sign anything unless the lender does not understand PA state law.

That changes if you intend to take an ownership interest in the property, whether you are a spouse or not. In cases in which a lender agrees to a non-borrowing co-owner, in PA, that person will be expected to sign the mortgage to create a valid lien.

So, if your name goes on the deed, expect to sign a mortgage at minimum. Most lenders will also have you sign the TIL disclosure (truth in lending).

If the transaction is a refinance and you are a non-borrowing spouse, expect to sign the mortgage and the right to cancel form.

Signing a mortgage is not the same as signing the note. You are not borrowing the money. You are simply allowing a lien on property in which you have an interest.

In PA spouses have potential marital rights. Lenders will want a lien position that is superior to those rights.

If you are a title agent, make sure you add language to the mortgage which clarifies the purpose of the signature of the non-borrowing party. I do this on the description rider.

two attorneys in Somerset County leave a homeowner out to dry

This story just amazes me. We are issuing title insurance on a property our seller purchased just a few years ago. We found THREE, count em, THREE life estates - unresolved. We did the research and found definite proof of the death for two and possible proof of death for the third. The big issue is the potential inheritance lien. In Pennsylvania inheritance tax is an unfiled lien which may be levied against real property of the deceased for just a little over 20 years. Title insurers must clear the matter before issuing a policy. Two of the deaths in this case took place less than 20 years ago.

We wondered whether our seller had purchased title insurance and found that they had so we contacted the attorney who had handled the purchase on their behalf. We found that the attorney hadn't issued the policy. He had obtained the title insurance for his clients through another attorney who was a title agent. We asked for a copy of the policy intending to request indemnification.

Guess what? Not only had they not issued an owner policy, the loan policy had exceptions for the life estates!!!! I couldn't believe it. The consumer trusted his attorney to look out for his interest. The consumer paid for title insurance and got none. The lender - a local bank - trusted the attorney to give them first lien position and didn't get it. I've got to wonder whose interest was served?

It's even more screwy because the cover letter faxed to us with the policy is addressed to the consumer and clearly states that it's their policy. It's not, of course. It does the consumer no good to have a loan policy. I wonder if the attorney even knows the difference.

We are escrowing funds pending resolution and payment of the inheritance taxes. What a shame that this consumer has to bear responsibility for something that should have been taken care of before they purchased the property. TWO attorneys, count em, TWO attorneys..........yoi.

A consumer rises up in righteous indignation against the mortgage and title industries.

This is so exciting and I don't know how I missed Paula's stuff until now!

Her web site is LenderLiabilityLaw. You've got to check it out along with her two blogs.

Paula, you rock!

Would you like a copy of your appraisal?

If you are in a mortgage transaction and would like a copy of the appraisal, just put your request in writing. Your mortgage lender is obligated by federal regulation and some state laws to provide a copy upon written request.

Don't take no for an answer. If the mortgage lender refused to comply with your written request, contact your state banking department for assistance.

You are entitled to this information.

gotta love this guy

Rudy

HAPPY BIRTHDAY, FHA!

This morning I mentioned the beginning of modern mortgage lending in a post about lender requirements, saying, "The art or science of organized mortgage lending has evolved through trial and error over many decades starting, really, since the Great Depression."

Imagine my surprise to see Robert Franco saying Happy Birthday to the FHA! Seems it all started June 27, 1934.

How about that? I absolutely had no idea that today was the day!

blog share

Title-opoly posted here to make sure you see it. Very important.

Think we need mortgage disclosure reform?

LOL......... of course, we do.


Just look at these files awaiting scanning in my office.

Granted, these files contain our title abstract and lien letters and file notes, but all other documents have been signed by the consumer - usually at the closing table.



The skinny files are cash transactions and include the very basic needed to convey real property.

The big fat files are mortgage files. Differences in the number of documents vary by program and lender. Amazing, huh?

OK, in case you didn't know, our federal government is trying to fix the problem. Have you seen the proposals submitted for consideration? If not, here are a few:

Federal Trade Commission

National Association of Mortgage Brokers

National Association of Independent Mortgage Bankers

Mortgage Bankers Association

Mortgage Bankers Association - HUD-1 proposal

National Association of Realtors

National Association of Realtors - 2


These links were provided by RESPAnews.com and they wrapped it up by saying...

"Clearly, there are a lot of issues in play on the mortgage disclosure reform front at this time, and it is unlikely that they will all be resolved soon. However, as RESPAnews was going to press with this story, the Senate Banking Committee was holding yet another hearing on ways to fix the problems of the mortgage industry, so we may yet see new recommendations surface from that."

If you have a favorite disclosure or some ideas of your own, why not shoot a letter off to your legislators or HUD. I'm certain they would appreciate consumer feedback.

I am very interested in your opinions, so please feel free to comment here. It would be a good conversation, don't you think?

query: missed tax lien - title company/seller responsibility

Well, the good news is that an insured buyer won't have to worry. If you have an owner title policy, the title insurance company will cover the lien, then decide if they want to pursue the seller.

Yes, the seller IS ultimately responsible and they SHOULD pay for it. If the matter goes to a court, I am certain they would be REQUIRED to pay for it. The title company will decide how much money is involved and how much trouble it will be to force the issue with the seller.

query: why does my lender require a clear title policy

Very good question because it gets right to the reasoning of most mortgage loan underwriting guidelines.

The art or science of organized mortgage lending has evolved through trial and error over many decades starting, really, since the Great Depression. The combined experience of generations of mortgage lenders has been encapsulated in the uniform underwriting guidelines of FHA, VA, FNMA [Fannie Mae], and FHLMC [Freddie Mac]. It's all based on the worst case scenario of foreclosure.

Foreclosure is a mortgage lender's ultimate solution. They don't want to go there and have underwriting guidelines in place to avoid foreclosure, but if the borrower absolutely defaults, the remedy is foreclosure.

Now, let's get back to your question, why does your lender require a clear title policy? Your lender might say it's because the guidelines say they have to have it, but the REAL reason, the "Buddha truth" behind the underwriting guidelines is that clear title = ownership = freedom to engage in real property conveyance.

Lenders have learned that title problems may interfere with their ability to foreclosure. What if the mortgage lien was placed on a property that was partially owned by an individual who had not signed the mortgage document? In that case, the mortgage lender doesn't have a perfected lien and may not be able to foreclose.

Here's another problem. Your mortgage lender wants first lien position. What if there is some other entity who is in first position, unknown to your lender? Well, whoever is in first position gets paid first - they have priority. THEY can foreclose and place your mortgage lender's interest in jeopardy.

Now, let's say the mortgage lender has completed foreclosure and now owns your land. What if they go to sell the property and find that the house is built 12 feet unto the neighbor's land? Maybe YOU bought the property without a survey and didn't ever know that, but the person who buys the property after foreclosure is a more savvy buyer. He gets a survey and finds the flaw. Well, now that the flaw is discovered, the lender must rectify the problem before they can sell. The loan title insurance policy typically has survey coverage which will cover damages the lender may suffer in this case.

The bottom line is that morgage lenders are the ultimate knowledgable purchaser of real estate. As an industry, their underwriting guidelines have been developed through many tens of thousands of transactions. Pay attention to those guidelines, they are the voice of experience. You'd be wise to follow their advice and require clear title yourself. You'd be wise to follow their lead and get a survey so you know what you are buying.

There is wisdom in traditional mortgage lending that got lost in the ridiculous idiocy of subprime lending and we all know where that's got us. Good old fashioned mortgage lending - safe & secure homeownership.

query: real estate final walk-thru property altered

I'll bet THAT was disappointing.

Thanks for the query because you raise a perfect case demonstrating why a final walk-thru prior to closing is so very important.

Buying a piece of real estate is like a marriage. It's really better to resolve issues before you say "I do." Do all your homework BEFORE you close.

Let's say you have the horrible experience of finding major alterations in a final walk-thru. Just imagine how much more horrible that situation would have been if you closed and THEN found major alterations. Once you close, you lose your leverage with the seller. If you find big problems in the final walk-thru, you can still negotiate resolution before the seller walks away with the proceeds.

So, let's talk about a final walk-thru. We need to put it into perspective. You must be realistic and bear in mind that the final walk-thru is not your time to do a home inspection. A home inspection is done early in the transaction, not at the last minute. If you neglected to have the home thoroughly vetted and at the last minute start lookly more closely than you have before, I just don't think that's fair. In my mind, the purpose of the final walk-thru is to make certain that the seller hasn't altered the house, hasn't removed any features or chattels that were to remain, and that the house hasn't suffered any damage since your last inspection.

If you find that the seller has made alterations or removed items that you expected would remain or the house has suffered some kind of damage, you must negotiate with the seller for resolution before you close. If the matter cannot be resolved prior to closing, you may opt to get a contractor's bid for repair or replacement and have the seller place funds in an escrow pending resolution.

Keep in mind the mortgage lender will want to have a say in any monetary negotiations between buyer and seller. Most mortgage loan guidelines prohibit cash credits from seller to buyer.

From a homebuyer's perspective, it's just so important to buy title insurance, buy a survey, buy a home inspection, and do a final walk-thru. Don't skip any step. Be careful. Work with reputable companies and be well.

query: broker and inspector collude to defraud buyer real estate

It's unfortunate but sometimes this kind of thing happens. A home inspector who misplaces allegiance with the Realtor rather than the REAL customer, the buyer.

Be careful who you choose, especially for a home inspection. I much prefer using a fully independent home inspector, even one the Realtors don't like.

The last time we purchased a house, my husband and I used a guy I call the "ninja" inspector. He comes dressed in black, He's real tough. He climbs up on the roof, looks into every nook and cranny and gives you the dope on everything, I mean everything! Realtors dread him and would NEVER recommend his services.

Now, when you use a tough inspector, I have to caution you to be REALISTIC. You are NOT buying a new home and you shouldn't expect perfection. Be happy that you are getting TRUTH and buying an inspection that let's you know what will need fixing.

Don't expect the seller to fix everything the inspector mentions. "Ninja" told us about ten things. We had the seller fix the septic tank and took care of the other things ourselves after closing.

Comparing that to our previous experience with a home inspector who dealt with agents regularly who gave us a big binder and very little useful information. He totally missed a broken pane of glass which I would have like corrected prior to close and he also missed numerous other issues which I wouldn't have asked the seller to deal with but bugged me that he missed them.

So, consumers are better served when they think for themselves and don't allow one person to control your whole transaction. That's too much power in one person's hands. Pick your own lender, pick your own title agent, and pick your own home inspector.

query: does lien holder attend closing

Not normally. Sometimes, especially when the mortgage was privately held, a lien holder will attend closing to sign the satisfaction form and pick up their payoff check.

If you are a lien holder and intend to make an appearance, I'd give the title agent a heads up.

Thanks but no thanks, says lender. Title stinks. HUH?

In 2004 Decision One lends $124000 to some folks under their subprime program.

Loan goes south.

Lender starts foreclosure.

Folks give lender deed in lieu of foreclosure.

Folks list property and sell it for $84000 and negotiate a short sale. Lender approves short sale netting $69000. HUH?

I get this file for title examination. There's an original unrecorded deed from lender back to folks. HUH?

File notes say lender looked at title and said no thanks, don't want to deal with it. HUH?

We find two judgments but otherwise title is ok. Might not be quite enough for short sale but it will be close. HUH?

Am I missing something?

HUH?

query: is homeowners insurance paid in arrears

No. Homeowners aka hazard insurance is paid in advance.

In a mortgage transaction, the lender will want you to pay the premium for the first year in advance. If you are escrowing for taxes and insurance, the lender will also set aside a small amount at closing towards the next year premium.

So, you'll pay the first year up front, small amount at closing, and 1/12 of the annual premium with each mortgage payment into escrow.

query: survey vs. title insurance

???! There is NO comparison, here. They are two different products. A prudent purchaser will buy both.

Owner title insurance in all states except Pennsylvania offers some coverage for matters that may be shown by a current up to date survey. So, in PA, it's really foolish to buy without a survey. In the other states, I would still want to see the location of the lot lines, structures and easements.

Without a current survey in hand, a REAL survey, you have no idea what you are actually buying. Why take that kind of risk with your most important possession?

READ THIS.

query: closing on home June 26, taxes due August 31, how much to I need in escrow account

If your first mortgage payment is due in August, which seems likely, you'll need a full 12 months in escrow to pay the taxes. Your lender also has the right to require up to two additional months for a cushion, so they may collect 14 months.

query: who should pay for title insurance at closing

In Pennsylvania, title insurance is considered a buyer cost. Each state seems to have it's own custom.

query: pennsylvania judgment effect lien entireties

Nothing penetrates tenancy by entireties except an IRS lien. That said, however, should you be insuring a refinance transaction, you have to consider ALL judgments as potential liens just in case the borrowers divorce and cause the title to convert to tenants in common.

query: problems with title companies closing on time

The title company always gets the blame because they are in control of the closing. It's not really fair, though, because so much that affects performance and timing is just out of their hands. A title company can be ready, willing and able to close, BUT....

Can't close without money from the buyer.
Can't close without hazard insurance.
Can't close without mortgage loan approval.
Can't close without seller mortgage payoff letter.
Can't close without executed deed from seller.
Can't close without mortgage loan documents.
Can't close without mortgage lender funding.
Can't close without HUD approval.

...and on and on and on and on......... BUT there are circumstances in which the title company is at fault and should apologize for doing a bad job. It's really just like anything else. It's very hard to judge from one transaction whether or not the title company is a victim of circumstances or a poor performer. The professionals who work with title companies every day can usually tell the difference. It's a little harder for the consumer. My suggestion is to listen, try to relax and hear them out. Make the best of whatever is happening but if logic tells you the transaction is truly out of control, call management and have them step in to fix it.

As for repeat business, same as any service, go with demonstrated good providers.

query: motivation letter to underwriter for loan

Not a title insurance issue but it takes me back to my underwriting days of yore so I'm gonna help.

A real mortgage underwriter- one not swayed by kickbacks, gifts, or conflicts of interest - is weighing risk. Part of the risk assessment is your willingness and ability to repay the debt. It's those two items you must address in your letter.

I presume the normal documentation for loan approval has the underwriter on the fence so your letter is a chance to spin the argument in your favor and perhaps gain loan approval.

Remember, mortgage loan underwriters have heard a million sob stories. Sobbing and "oh, woe is me" stories won't cut it unless you have some kind of unusual and overwhelming circumstance beyond your control AND you can demonstrate that you recovered from the obstacle sufficiently to perform under the repayment terms of the loan. Talk about how the situation has been rectified so that moving forward, you'll be responsible.

Willingness to repay is little more tricky. Willingness is self-evident when the borrower has a reliable credit record combined with sufficient income. I presume you are weak in one of those areas. Your job in the letter to is demonstrate an overwhelming motivation to preserve and protect the project for which you are borrowing. Does something really important to you fully depend on the loan? Circumstances are always unique but if you can clearly help the underwriter understand that this is a case of NEED and not just WANT and that you are fully committed and highly unlikely to walk away, you have a marginal chance of a positive response.

A good underwriter makes their decision based upon the facts. A good underwriter knows it's not safe to rely on motivational letters from prospective borrowers, SO the odds are against you. BUT, it never hurts to try. Good luck!

query: do loan companies waive late fees at payoff when refinancing

Usually, they do not. Unless you make the case that the late fees were charged in error, you should expect to pay them.

Mortgage lenders normally only negotiate in short sale situations. They are motivated by the desire to avoid foreclosure. In a short sale, the lender will review the terms of the transaction and the net proceeds. If they are convinced that they will not make more by taking the property and selling it after foreclosure, they will accept a reduced payoff.

Now, that all said, we ARE in a different environment and new rules are being made to respond to the subprime crisis. It is entirely possible that some lenders may try new ways of avoiding foreclosure. So, ask away. Maybe you'll find a lender willing to negotiate fees.

ok got that off my chest....

FBI has a three page report via fax. Did my job. Copied my underwriter. Poor Al. Hope he doesn't wish I stayed with FATIC. ;)

elder abuse and financial exploitation

Dug a little and found out that's really what that ole flip was about. Is Pennsylvania a mandatory reporting state? Checking............

for comparison, here's another flip on my desk

This one is entirely different and I post the info so you can see the difference.

Husband and wife buy property in 1996 for $72500.00.
They mortgage it in 2001 for $82875.00 - subprime.
They also divorce in 2001.
Mortgage foreclosure in 2006 with funds due lender $95876.22.
Sheriff's deed to lender in 2006 $2811.00.
Deed to our current seller from lender in late 2006 for $49,900.00.
Pending agreement to our buyer now for $119,500.00.

I have no problem with this scenario. I will report it to the lender with the flip note and I know the lender won't care either. This is a perfectly normal recovery out of foreclosure.

Can you see the difference between the two transactions?