FBI raids Titleserv

The FBI raided Titleserv in Woodbury Wednesday morning, a little more than two weeks after the national title insurance agent closed suddenly.

FBI spokesman Jim Margolin said agents went with a search warrant as part of an "ongoing investigation." The search started at 8 a.m. and continued into the early afternoon, ending with agents leaving with boxes of records, he said.

Read more on Newsday.

What? You think you should keep the $25,000?

We closed a transaction last month.  We made a mistake.  Everybody makes mistakes.  That's why you need to buy an owner title insurance policy.

Our seller is a local appraiser, a popular appraiser who has been in the business for a long time.  Our title search revealed two mortgages.  We got two mortgage payoff letters.  The mistake happened in the HUD-1 preparation.  For some reason someone stapled the two letters together and the person who prepped the HUD omitted a primary procedure.  We require that the person preparing the HUD reads each and every page in a payoff letter just in case there are other charges or odd instructions.  If our HUD prep person had followed procedure, this mistake would not have happened.

Most of our procedures have been implemented through experience to prevent errors.  Sometimes employees don't really get the value of a procedure until they themselves make a mistake and then face danger.  This situation turned into a good training opportunity for two members of my staff to "own" the risks of being in the title insurance business.

It's a fallacy that title agents are not at risk.  We are.  If we make mistakes, the title underwriter will step up to the plate and take care of the consumer and their lender but they may turn around later and insist that we cover a loss.  Needless to say, that's why I insist upon hiring individuals who by nature are mortified if they make mistakes and on the whole they make very few.  Still, we are human.

Now, managing risk involves layers of checks and balances.  We had two other procedures which should have discovered this error before closing.  One was to provide a copy of the HUD-1 to the seller prior to closing so that a review could take place without the pressure of sitting at the closing table.  Sellers have personal knowledge of their own transaction and a missing payoff is something a seller should notice.  In this case, the seller received his preview HUD the day before closing.

The other procedure, which I have verified with my closer did take place at the table, is to look the seller in the eyes while reviewing the owner/seller affidavit and ask if there are any other mortgages against the property which are not being paid on our settlement statement.  We even have an extra place next to this clause for the seller to add an initial.  It's the only clause on the affidavit which is in bold and requires a separate initial.  We want the seller to pay attention to this clause and we want our closer to remember to follow procedure, hence the initials.

Our closer reports that the seller was bored and just wanted to sign the documents and wasn't really paying attention though he tried to get him to do so.

At any rate, the seller walked out of the closing $25,000 richer than he should have.  Now he wants to keep the money.  He won't get to keep the money.  That's not how it works.  I have no doubt that the attorney for our underwriter will have this resolved within a week, however, if not, our buyer and our lender will be entirely safe.    The mortgage would be promptly paid with an assignment to the title company who would then pursue other assets of the seller.  Under no circumstances will the individual keep the $25,000.  It's just like the bank depositing money into your account by accident.  It's not yours and you don't get to keep it.

Frankly, everyone in the transaction is less concerned about the error - because they know it will be fixed - than they are that the seller, a professional who should know better, would think he could keep the money.  It's pretty amazing.

tsumani of defalcations? well, maybe not but there sure has been loads of them

I remember sitting down with a group of regulators a few years ago making an effort to help them understand this business.  One of my goals was getting them to embrace the concept that a title insurance agent handles millions of dollars with little or no oversight.  The most frustrating part of that effort was the assignment of regulatory authority and that the oversight for management of escrow accounts was somehow being divorced from the oversight of insurance issuance.  I remain unconvinced that we need new legislation to make that connection, however, as with any law its the interpretation by regulators and courts that matters and at that time they weren't yet fully getting the escrow account angle.  I left the meeting feeling at least somewhat satisfied that I had given them fair warning that they should expect a tsunami of defalcations as the mortgage crisis resolved.

Had to raise this subject today because my Google alerts fished up three defalcations.  Those that hit the news are the only ones we see.  Hard to say how many are resolved without indictments.  I guess it hasn't been a tsunami and for that I am thankful.  A tsunami might have taken out the whole industry including the good title agencies.  That's what happened to the good mortgage brokers.  They virtually lost their wholesale business in a tide that rocked their world.

I am certain that underwriters are being diligent in their oversight of agents.  We see that in the seminars.  The nods and winks have been replaced with hard statements about what is proper conduct.  It's all refreshing and I do feel good that we seem to be on the other side of the darkness.  We're back in the light.  ;)

judge removes stay

FED LO compensation rule is in effect.

RESPANews if reporting LO compensation rule stalled by court

On the evening of March 31, the U.S. Court of Appeals for the District of Columbia Circuit stalled the implementation of the Federal Reserve’s loan originator compensation and steering rule. The court decided to delay the rule’s implementation until it could review the cases filed by National Association of Mortgage Brokers (NAMB) and the National Association of Independent Housing Professionals (NAIHP).

Read more on RESPANews.

almost forgot to share this closing adventure

We've all got crazy closing stories, right?  Well, the other night we had an in office closing set for 5pm.  Folks started arriving a few minutes early just as our severe weather warning siren started blowing.  As the buyers walked in they got a call from a friend who was at the Walmart about 8 miles away.  They had been instructed to get on the floor and away from the windows.  A tornado was on the way.

Here's a picture shared by a reader.  That's Route 30.

Anyway, the storm was on the way, so everybody went to the basement.  Three of us stood in the bathroom while Tracey closed the transaction on a folding table.  The storm passed over high enough that we didn't suffer wind damage in our town.  Hempfield Township wasn't as lucky.

We were pelted with HUGE hail and everyone's cars are dented all over.  Here's one of the big ones Wendy picked up by the high school.



We can live with that, eh?  ;)

getting back to the REO transaction and the odd POA scenario

It hits me that this attorney isn't even in touch with the principal on the POA.  According to her the REO company may not even have current contacts for that company.  This attorney is apparently throwing darts at the public record trying to find a POA that might fit her transaction.  What the hey?

The vested lender is vested on the sheriff's deed because the foreclosure attorney filed an assignment into their name during foreclosure.  Now they want to move the paper to another lender so that lender can convey to my buyer.

In the meantime, after doing a bit of research I was able to contact the VP how signed the POA we have in hand.  It will be interesting to see how this plays out.

Here's a different approach ...affiliate as "single person"

NAILTA supports the FRB's definition of the term "affiliate" as a "single person" for the purposes of the Rule.
An AfBA, according to NAILTA's view, is a single entity and, accordingly, should be subject to the "single person" compensation requirements. Indeed, the trade associations refer to the "affiliate" as a "one-stop" shop.
Therefore, treating them differently for purposes of the Rule "ignores their own intent—a single location for all real estate settlement services."

Read more on National Mortgage Professional.

Facebook connections continue to evolve...

"It is great to see that the courts are willing to embrace new technology," says a British lawyer given permission to serve a summons to a difficult-to-reach debtor via Facebook.

Source techPresident.

criminy...here's a morning chuckle or maybe not - just pretend it's a Monty Python short

You be the judge.

What follows is a transcript of the deposition of Lawrence Patterson, acting head of information technology for the recorder's division of the county fiscal office. The questioner is attorney David Marburger, who filed the lawsuit on behalf of title companies. Another attorney, Matthew Cavanagh, represents the county and raises objections.

Read more on Cleveland.

Thanks to techPresident for the lead.

Are we on Candid Camera?

You be the judge.

What follows is a transcript of the deposition of Lawrence Patterson, acting head of information technology for the recorder's division of the county fiscal office. The questioner is attorney David Marburger, who filed the lawsuit on behalf of title companies. Another attorney, Matthew Cavanagh, represents the county and raises objections.

Read more on Cleveland.

just another day processing REO transactions....

notes for file

The lender's attorney agreed that the 2nd POA she submitted does not cover our transaction.  Our underlying mortgage is NOT part of that servicing agreement.

She wants to make an argument that the first POA she submitted can be used even though it does not specify power to sign a deed.  I disagree but said she can put her argument in writing and I will submit it to our underwriting attorney for a decision.

She expressed frustration that we were requiring an original or court certified POA because they will take time to get.  I think she is in some kind of meltdown because these are normal procedures and she's being illogical.  She may just be having a bad day.

If the buyer asks about delays, just let them know we are taking steps to make certain their title is good and marketable.

Fidelity sends more jobs out of the USA

BANGALORE: The world's largest property title insurance company Fidelity National Financial (FNF) will increase its headcount in India this year as it transfers more work from the US to its captive centre in Bangalore.

Read more on The Times of India.

subdivisions, outsales and foreclosure

TWO....TWO cases in one week with the same situation, well almost.

I've had two transactions cross my desk in one week that involve subdivision, sale of a portion of a mortgaged parcel which later went into foreclosure.  In both cases, the attorneys who handled the subdivisions and conveyance out of the mortgaged parcel overlooked getting a release from the mortgagee.  What were they thinking!

In one case, the foreclosure is over.  The foreclosing attorney didn't notice the outsale and so no notice was given to the owner of the outsale parcel.  I discussed it with my underwriter who raised three issues.  He wanted the outsale to have its own tax assessment identification.  It does.  He wanted the new mortgage lender to have given the outsale no value in the appraisal.  It's a cash deal, so no lender.  He wanted us to make certain our proposed insured buyer was fully aware and agreed to an exception for the outsale.  We provided maps and surveys found on record.  The buyer visited the property one more time, no problem.  Now all I have to do is make certain an exception shows in the deed so our insured doesn't have complications moving forward.

In the other case, the foreclosure process has just begun and our transaction is a short sale.  If the short sale goes through and our buyer is fully aware of the outsale, I see no problem.  On the other hand if the short sale does not go through and the property does go to sheriff's sale, if the foreclosing attorney does their job correctly and gives notice to the outsale owner, they would have to go and outbid the lender at the sale in order to preserve their ownership in the parcel they acquired without having gotten a release from the mortgage lender.  I'll bet that'll be a big surprise.  The listing agent and I chatted about this today.  There's no sense telling the neighbor to go for a release now.  I can't see any motivation for the mortgage lender to consider it when the property is in foreclosure.

Remember folks, if you buy a piece of property, even is it's just a sliver from a neighbor, you had better insist upon full title examination by a competent provider.  In both of these cases, consumers relied upon attorneys who took shortcuts.  It is possible that they advised their clients of the risk of buying without a title examination, or perhaps not.

Be a smart consumer.  

attention all PA title insurers...time to escheat!

April 15 is the deadline to report and deliver unclaimed property to the Pennsylvania Treasury.  Here are a few things to keep in mind as you prepare your company’s report:

• All owner accounts with a last known address in Pennsylvania should be reported to the Pennsylvania Treasury.  Companies incorporated in Pennsylvania should report all “unknown” owner accounts to the Pennsylvania Treasury.
• Reports can be filed prior to or on April 15; reports filed after April 15 may be subject to penalties.
• The Pennsylvania Treasury requires holders to file electronically reports containing 10 or more owners – including reports for tangible property.  Visit www.patreasury.org for links to free reporting software tools.
• Companies in possession of unclaimed property belonging to Pennsylvania residents must file an unclaimed property report.  It’s not an option, it’s the law!
• Failure or refusal to file a report can result in an audit, penalties, or interest.

Treasury’s Web site, www.patreasury.org, contains a wealth of information about filing an unclaimed property report, including:  detailed instructions, free electronic reporting software, a copy of the Disposition of Abandoned and Unclaimed Property Law, and a list of frequently asked questions.
Treasury’s Unclaimed Property Compliance Team is available to assist you with any questions regarding your annual report.  Call 1-800-379-3999, Monday – Friday, 8:00 a.m. – 5:00 p.m. EST or email unclaimedpropertyreporting@patreasury.org.

"political junkie"

The New York head of nationwide title insurance company First American Financial Corp. has left under a cloud of suspicion over his conduct as an executive.

Steven Napolitano, the president, chairman and CEO of First American Title Insurance Company of New York, the wholly owned New York City office, left his postFeb. 15 after speaking with companyhonchos who flew in from Santa Ana, Calif., headquarters.

Additionally, a female executive is currently on "administrative leave," sources said. She declined comment to a Post reporter.

Read more: http://www.nypost.com/p/news/business/cloud_of_suspicion_FRYyERal9p6OhytRrHxm3I#ixzz1EzEdQecv

the conversation sure has changed

Every once in awhile I notice that the conversation has changed and I am so thankful.  For the last two decades every trade publication for the title insurance industry was all about joint ventures.  Every course offered was another way to beat RESPA and form some sort of affiliation.

I must say I don't miss looking at all that stuff.

At least if it's happening, it's happening in the dark where it should be because from a consumer's perspective, at least in my opinion it's mostly part of the dark side of this business.

"During this period we request that members do not commence foreclosures in MERS' name. If a member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the certifying officer proposed to participate in the foreclosure. No foreclosure may be processed in MERS’ name without first obtaining this verification."

Read more on Housing Wire.

just deactivated my free Closing.com listing

I thought Closing.com was a nice platform for folks to find title agents until they put together a program to auto-fill Good Faith Estimates for mortgage lenders.

As I expressed to Dan, the nice fellow who called today from Closing.com, they are giving lenders a false sense of security and basically creating a platform which is about as reliable as ROBO-signing foreclosure plants.

Why is it that my beloved mortgage industry has given up on using human brain power?  Why must everything be automated and robo-processed?

It's okay if you never expect the consumer to use the company whose fees you robotically quote, but what if they do and the fees are wrong?  The lender eats the fee and Closing.com goes after the title agent who hasn't really had a chance to give a quote because Closing.com has robotically quoted figures on their behalf.

I guess I'll never really get that.

one of the soldiers of disaster apologizes

I was 22 years old when I decided to go into mortgage sales. I was finishing an undergraduate degree in criminal justice and had decided that I didn't want to go to law school as I had originally intended. I didn't have rich parents, and had never made any significant money, so I set out to find the highest-paying job someone with my limited qualifications could find.

At the time, my girlfriend's best friend was dating a guy who worked in mortgages. He drove a BMW, had nice clothes and carried himself well. Over drinks one night, I kept quizzing him on his success, and he told me all I needed to do was read a book or two and have some sort of people skills and I could be making six figures. Hearing those words was like a dog whistle to a middle-class immigrant who had only worked restaurant and construction jobs until that point. As it turned out, the bar for entry into the mortgage world was even lower than reading a book or two.

Read more on Salon.

Tell that to my husband and all the other honest mortgage persons whose careers you destroyed.  Punk.

We just finished our annual CPA audit and in the process heard an interesting title insurance claim story.

Yes, we pay to have our books audited annually by an independent CPA.  I wish it was a mandatory audit, but it's not.  I'm not a big government fan, in fact I'm an advocate for limited government - highly bent in the libertarian direction, BUT when a licensed entity has access to millions of dollars of other people's money, I think there ought to be some sort of formal audit standards which include 3rd party oversight.  That's not the purpose of this post, though, so let me switch gears.


The auditor sent out by our accountant this year is a nice young man who while asking some questions, mentioned that he was near the end of a multi-year title insurance claim.  I asked him to tell me the story because I always want to know how a consumer feels when faced with a title insurance claim and whether or not they are happy with the results.

In this case, he and his wife hired an attorney to handle the purchase of 20 acres of vacant land.  They SMARTLY decided to buy an owner title insurance policy.

This young couple bought the land with plans to build their dream home.  They are both accountants and so they are good planners.  When they purchased the land, they were childless and living in a small two bedroom house.  The plan was to build a four car garage with an apartment on top.  Eventually, when they started a family they would build a large addition which would become the main house.

The whole plan fell apart when they applied for a mortgage to do the first part of construction.  The bank used a different title agent to do the title examination for their loan title insurance policy.  This second title examination revealed that there was no legal recorded right of way to the land.  Though there was an old dirt road that looked like a right of way, it went over the land of the neighbor who when approached, refused to grant an easement.

They filed a claim with their title insurance company who then offered a nice chunk of change to the neighbor and met with another refusal.  Soooo....they went into arbitration and years later finally were set to go to court and on the eve of the trial, the neighbor finally agreed and accepted a paltry sum - much lower than the first offer and settled the matter.

Okay, well that shows the value of buying an owner title insurance policy, right?  The title company paid for all the legal work and the consumers eventually got their right of way.  On the surface, it all sounds peachy keen, however, this story helps to demonstrate the VALUE OF SELECTING A COMPETENT PROVIDER.

Now, I am not saying that we human beings do not make mistakes.  Everyone does, but we EARN OUR LIVING BY AVOIDING CLAIMS.  We do a full search and examination to ferret out details BEFORE the closing in an effort to help you avoid the entire claims process.  When you place an order for title insurance, pick your provider carefully.  Make certain you are getting a full search by a competent human being.  Keep your eyes open.  Read your title insurance commitment BEFORE you go to closing.  Complete your transaction with YOUR brain engaged.

WHY?  Well, let's discuss the rest of the story.  During the years this young couple's claim moved through the system, they had two children.  They had to buy a larger home and move on with their life, abandoning their plans for the dream home on their 20 acres.  Yes, in the end, they got their right of way.  Will they ever build there?  They don't know.  Life has moved on.  She is pregnant with their third child.  They are happy they bought title insurance.  In retrospect, they do wish they had paid more attention to the title work and not just trusted that the attorney did everything right.  They knew the dirt road was private but they presumed the attorney would check on the legality of the road.  Yes, the title insurance covered access but as you see from this case, the insurance is the safety net.  What you really want to do is avoid the problem in the first place.

;)

failure to closely guard the escrow account leads to big trouble.......

The indictment alleges that beginning at least as far back as 2004, a substantial shortfall began to develop in an escrow account maintained by Troese Title and Troese/Hughes for the receipt and disbursement of funds in connection with real estate closings carried out by both title companies. This shortfall is alleged to have been partly the result of mistakes made during the closing process on several transactions that required costly pay-outs to resolve, and partly from several large and long-undetected thefts by individual employees, although these factors did not account for all of the deficit. In the spring of 2005, Lukenich, the escrow accountant for the title companies, advised others at Troese Title and Troese/Hughes that the shortfall totaled at least $2 million. The shortfalls were further aggravated in 2006 through 2008 as the real estate and refinancing boom that had started in approximately 2002 first cooled, then collapsed.

Read more on FBIBaltimore.

Pennsylvania Gov.-elect Tom Corbett nominated a partner in the Saul Ewing law firm and former lawyer in the Pennsylvania Insurance Department to become the state’s next insurance commissioner.

Michael Consedine

Consedine’s appointment awaits a confirmation hearing by the state Senate.

Read more on IFAWEB.

Wendy finds the darndest things.

Wendy's job is a critical part of our title examination process.  She receives the raw search reports from our abstractors.  She combs documents and notes just to be sure the abstractor didn't miss exceptions in their report.  She plots the metes and bounds description to see if it closes and looks anything like the map provided by the abstractor then she types our legal description.

I review Wendy's work and make some changes, then I create the title commitment along with notes to our closing coordination staff so they know what, if any, issues must be resolved before we close.

Wendy and I work together in the same office.  [Yes, when we had a larger staff and my job was almost all training and management, I stayed up on the top floor spinning plates, but now that there's only ten of us and we have a wonderfully trained staff, I don't need to spin the plates.  We all spin them together.]  Anyway, when I hear Wendy chuckling I know she has found something interesting.

Her favorite - what were they thinking? - kinda find are typos that stay in the chain.  Know what I mean?  Someone makes a mistake and all the other law offices and title agencies who continue to convey the property all type the same mistake without ever noticing.

Sometimes they glare out and you can't imagine why no one ever thought to ask why.  Like today's find.  Inexplicitly sitting in the middle of a sentence was the numeral 10.  Huh?  Wendy checked back a few deeds and found that once upon a time that odd numeral 10 was really the word is. 

Sometimes it's a missing course or two or three and since most offices don't plot, they never notice the missing piece.

So, I share this with you, dear reader.  If you are responsible for the conveyance of real property, you may want to review your process and include eyes on and brain engaged review of the legal description because you don't want the next person reviewing the chain chuckling in your general direction, eh? It could be Wendy.  ;)

court rules against banks in pivotal mortgage case

"There is no dispute that the mortgagors of the properties in question had defaulted on their obligations, and that the mortgaged properties were subject to foreclosure. Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order," Justice Cordy wrote.  Read more in WT.

Okay, here's my lazy, I'm not going to read the case but will opine anyway, comment.  My first reaction reading this news yesterday was that it's just another example of the absolute degradation of standards in our industry.  I'm certain there are a bunch of others like me who used to do this stuff for a living that ask out loud - "Why didn't you just file an assignment?"

Back in the old days, every time a mortgage was sold, an assignment was filed.  Even when we pooled the mortgages into securities, the servicer acted in this capacity and accepted an assignment which was filed.  

The impetus behind the creation of MERS  wasn't bad.  There was merit in the idea that mortgage servicing of security pools or even whole loans could move within the MERS system without filing assignments.  The original mortgage was either assigned to MERS or MERS was nominated as the lender within the mortgage instrument.  It was presumed, I believe, that the last man standing, the servicing lender at the time of default, would receive and file an assignment from MERS prior to foreclosure.

I believe - and perhaps you will disagree and if so, I'd like to hear from you - that this wholesale dependence the industry fostered in technology cause a dearth of actual know how.  Is there anybody left in the business who remembers how it's supposed to work?  Did the folks who still had knowledge in their human brains retire or did everyone else decide to stop listening to them?


I consider this court's reaction like a well deserved wrap on the knuckles from good old fashioned teacher.  I'm sorry that it mucks up the party and I do hope that lenders jump in and get those assignments filed pronto.  

MERS isn't a culprit.  It's a tool which if used correctly works.  The overriding problem - the REAL problem behind all of the crap that has gone down is a chosen reliance upon tools of technology as replacements for human analysis and decision making.  

Mortgage backed securities aren't culprits.  They are a phenomenal tool when issued in conjunction with a due diligence system run by capable humans.

Tools are for use by capable and trained humans, not as replacements.  Someone has to be driving the bus and that someone should know how to drive and understand the rules of the road.  The bus should be monitored and maintained by a capable mechanic who understands how the bus works.  Consumers are riding the bus and the court is the traffic cop and the mortgage business just got a whopping ticket.  The bus isn't bad.  We needn't outlaw buses.  The cop isn't bad.  The cop is doing his job by keeping the roadways safe.