query - does title insurer have a duty to audit agents and report fraud

Would I be too unkind to say that any title insurer who does not audit its agents is a fool?  There may not be a legal requirement to report fraud but I would certainly hope that the title insurer severs its contract with a fraudulent agent.  I think the title insurer would be doing a service to the industry to report the fraud and have the fraudster taken out of the position of trust they enjoy.

What do you think?

query: title underwriter cannot find policy

Interesting.  Hard to say whether the underwriter had a failure of good document protection or the agent failed to remit.

Might seem strange but this isn't that unusual of a happenstance.  You see, unless the title insurance agent SENDS a copy of the policy to the underwriter, they don't have a copy.  Title insurance agents create policies after the closing.  They then send the premium along with a copy of the policy to the underwriter.  Agents are supposed to do this pronto but some don't.  Some title agents do bad things like use the premium money for operating expenses and then go out of business before ever sending your policy to the underwriter.

What can YOU do as a consumer to solve this problem?  You can present a copy of your title insurance commitment and HUD-1 form.  The underwriter will look to see their name on both and then - even if the commitment isn't "marked-up" - should accept both documents as evidence of insurance.

If you didn't get a copy of your title insurance commitment prior to closing, your mortgage lender may have a copy.  If you paid cash, you'll have to try to make your case with just the HUD-1 form.  If the HUD-1 doesn't list the underwriter, you may not be able to make the case that you are insured through this company because the agent may have represented more than one underwriter.  In that case, seek help from an attorney, the state insurance regulator, or state attorney general.

The query raises the big issue of selection of settlement service providers - title insurance agents - and being a smart consumer.  Please shop for your provider and ask questions up front.  Look for professional demeanor and ask about getting a copy of the title insurance commitment prior to closing.  If you have any reluctance in the response, move on to another provider.  Make sure you review your commitment prior to closing, then when you review your HUD-1 form make certain the name of the underwriting company in the 1100 section of the form MATCHES the company on your commitment.

Good luck!

First American fined in CO

The market conduct examination found 20 separate violations, including: failure to require agents to keep adequate documentation and records in title underwriting files, failure to require agents to remit title premiums within the required contractual period, and failure to provide evidence of written instructions from all necessary parties when First American's agent or direct operation provided closing and settlement services; failure to ensure agents were duly licensed prior to transacting business; failure to provide anti-fraud statements and failure to charge rates in accordance with the rates on file with the Division of Insurance.


Read more in the Denver Post.

query: how do I get a copy of my HUD appraisal

A consumer may get a copy of the appraisal used for their mortgage application by making the request in writing and sending it to their mortgage lender.  If you do not get cooperation from the mortgage lender you can request help from the Consumer Finance Protection Bureau or the state mortgage licensing agency.  In Pennsylvania that would be the PA Department of Banking.

query: difference between a title commitment and title policy

A title commitment is like a mortgage commitment letter.  It's an approval to insure where the mortgage commitment letter is an approval to lend.  Both commitments set out terms and conditions.

A title commitment is typically in a standard format created by ALTA - American Land Title Association.  There is a jacket which gives definitions and other important information.  Schedule A sets out the proposed insurance coverages and reports who currently owns the land being insured.  Schedule B 1 sets out conditions which must be cleared prior to the closing or issuance of the insurance.  Schedule B 2 identifies potential exceptions to coverage.  Somewhere on Schedule A or in a Schedule C you will see a legal description.

It is really important that the consumer and the mortgage lender receive and review the title commitment as soon as possible and PRIOR to closing.

After closing, the title policy will be issued, often after the recorded documents have been returned from the courthouse.  Consumers and lenders should expect to receive the title policy within 60 days after closing.

comments went into spam can

Oops.  Sorry to commentators whose comments went into my spam can!  It's fixed and those awaiting moderation have been posted.  ;)

read your mortgage document before you sign that oil and gas lease

Did you know that your mortgage contains promises made by you to protect the collateral and NOT to store hazardous waste on the property?  If you sign an oil and gas lease without the approval of your mortgage lender you may be in default and subject to foreclosure - even if you are making your mortgage payments on time.

mobile home titles

If you are the owner of a mobile or manufactured home, please take the time to verify the status of the vehicle title.  Get evidence in hand showing that you either have the vehicle title or certificate of origin or evidence of surrender.  Having no hard evidence in place may impact your ability to refinance or sell your property.

Every year we work on transactions which are delayed while the vehicle title evidence is processed.  In Pennsylvania the system is cumbersome.  If you have time, and do not have the original title or evidence of surrender in hand, work on doing that now, before you have a deadline with a refinance or sale transaction. ;)

ah...the semicolon

Here's a blurb concerning a judicial interpretation of the Dodd Frank Act based upon the use of a semicolon:

Judge Altonaga ruled that the plain language of Section 1400(c), in particular, the semicolon in the title, indicates that “Effective Date” is not used as a subcategory of “Regulations.” Rather, the semicolon “suspends the thought regarding regulations and begins a new thought involving effective dates.” As such, section 1400(c) addresses both the regulations that are required to be implemented as well as the effective dates for all sections—not only the effective dates of those sections that call for regulations. Based on this interpretation, Judge Altonaga dismissed the Plaintiffs’ RESPA claims because the amendments were not in effect prior to Wells Fargo’s issuance of the force-placed insurance policies. Read more on cfsbulletin.

I love it.  Presumably lawmakers carefully chose the way in which the language of the law was crafted.  If so, the careful interpretation by the court enforces the intention of the law.  If not, then shame on the sloppy lawmakers for not using the language properly.  WORDS HAVE MEANING as does the punctuation which creates the structure by which we capture the nuanced intention of the author.  Like vitamins and exercise which keep our bodies fit, using the language carefully keeps our brains fit and in this case, protects the pocketbook.  ;)

Jan is curious.

I know someone that recently borrowed against a home his mother owns and has title to.  The father is deceased.

The son has been living in the home for many years.  Even while the father was still alive.  Now they have found it necessary to

borrow against the home’s equity, I’m sure that’s due to the mother’s old age illnesses and the son’s inability to work.   They

borrowed over $86,000.00.  In reading the mortgage note, the SON signed as a“non vested spouse”.  How can this be if he is the son? 

Is that legal?  I also noticed that the note was notarized by a long time friend of the family and the witnesses are neighbors.  The lender

is from out of state.  The notary knows for a fact that this man is this woman’s SON and not her spouse.  What do you think is going on????

Signed,

Jan

Hi, Jan:  It's hard to say whether there was an intention to defraud the lender.  Often people don't read documents.  Even if the lender knew the correct circumstances, they may have made an error in the preparation of the final Note.  If the title agent or notary isn't doing a good job of checking documents they may not notice it.  Since the son isn't working, I doubt that the lender used his financial strength to approve the loan.  He isn't vested in title and so his permission isn't needed to create a lien.  His position - in my opinion as a non-attorney blogging title insurance agent - by being on the paperwork is more of a personal guarantor.   Why the lender added him I don't know but they may have had a reason that is not discoverable by public record.

Diane

computers and me.....finding my inner geek

I saw my first Radio Shack TRS-80 Model I at a friend's house many moons ago.  It was also at that house on the same day that I saw HBO for the first time.  It all seemed so fantastic - a computer that fit on a table top and a commercial free movie on a TV screen.  I'm guessing that was 1977.  I was a newbie selling real estate back then.  The "computer" in our office was a MLS terminal and I can't really remember it having a screen.  It seems in retrospect to have been more like a tele-type machine.

In 1978 I moved into mortgage banking as an originator for a S & L.  We had no computers.  We had no fax machines. We had IBM Selectric typewriters for the processors.  Originators had hand held calculators.  We had P & I books and Reg Zs and GFEs were all manually calculated and hand filled forms.

In 1980 I moved to a private mortgage banker in a super cool building with a heliport.  This was high tech mortgage lending and there were some computer terminals on desks.  I didn't have one.  Originators were still operating in full manual mode.  I had a company car though and that was pretty neat.

Move on to the S & L Crisis and I met the Radio Shack TRS-80 Models II & III. In fact, I became intimately acquainted with these units because I took a one year hiatus from mortgage banking while the world of real estate moved through installment land contracts and seller financing because consumers could not afford double digit interest rates.  I worked at a Radio Shack computer center.  I didn't know it at the time but this one year stint laid a foundation for computer hardware logic that has served me well.  Yes, much has changed but strangely lots of what geeks chat about is basically the same or similar to what I learned back in ye olden days from Tandy.

I used all of that training when in the late 80s and through the 90s - being self-employed - I had to setup technology for my offices - all pre-network independent workstations.  In 2000 when it was time for a network, I let go and hired a pro to set it up and assigned the management of IT to my operations manager.

We had a Windows 2000 server with clients running Windows 98.  We eventually upgraded the clients to Windows XP Pro and tweaked the system here and there, but other than that - as long as it was running and served our purposes, I was happy.

I'm a frugal business person.  I use technology as a tool.  I see no need to constantly upgrade and change unless there is a good reason to do so.  About three years ago I got a good reason to do so.  The local computer guru - when called to fix the server - told me he could no longer get parts for our motherboard.  Though it was working now, I would have to plan for a new server.  I asked for a written estimate.

During these last three years I noticed a slow degradation of the network - oddities that couldn't be explained to me by my IT pro or employee.  I felt vulnerable.  Our local pro was always overworked and not that good at doing things like coming when he said he would or getting me that estimate.

My IT employee needed to move on.  She's a terrific artist and started a gallery.  I decided to take over the network.  I upgraded the backup system on our title archives.  I started working my way around all the workstations - cleaning and defragging and updating.  I still didn't understand the network and planned to take a course.

One day I noticed an anomaly in Displaysoft.  It wasn't updating properly so I called for technical support.  I love Displaysoft and I love their support team.  We tried a fix on two workstations.  She noticed that the network was set up in an odd way and asked if I would give her access at the server.  I did.  While she was remotely connected I heard her say to a co-worker, "Wow, I'm actually inside of a Windows 2000 Server." I realized then what an antique we were using. She didn't even know how it SHOULD be set up - it was so old that she had never been trained on the software but she managed to get our Displaysoft updating properly and I called our local computer pro for that estimate again.  I really didn't push the matter because I still felt like I needed to understand networks before a new one was set up so I took my chances and let it go.

Then, of course, the server failed.  One morning I showed up at the office and slowly heard everyone asking everyone else if they could get in.  We couldn't.  The Internet was functional but we could not access the server.  I called the local pro for emergency service and we started to implement our emergency protocol.

Do you have an emergency protocol?  What's your backup for functionality if systems or the power fails? Depending on the nature of the emergency we have a few emergency low tech tools on hand. We have three old fashioned phones that we plug into lines that bypass our central phone system.  These work without power and give us access to the outside world and allow us to at least answer the incoming calls.  Cell phones can be used for outgoing.   We  have two typewriters to use in a pinch.  Our email is in the cloud so if we have Internet, we have email.  Backup versions of documents also reside in the cloud so we can do some work while the server is down.  We have a single station version of Displaysoft that can be used if we lose our server.  Any data entered into this stand alone must later be entered into the server but in the interim, we can perform and prep closings.

While my staff assessed their tasks in emergency mode, I called our local pro again.  It immediately became clear to me that he wasn't coming.  We had a failure of our server followed by a failure of local tech support.

I called a regional tech service company who did a terrific job of remote troubleshooting and assessment.  I thought it might be the power supply.  He agreed and started for our office with his tool kit in hand - a trip of about 20 miles.

It wasn't the power supply.  This fellow was a good hardware problem solver.  He said what he needed was an old computer with a similar processor.  I gave him access to our retired computers awaiting recycling.  He found one that worked.  He replanted the guts of our server into that little workstation and VOILA we were in business.  I was impressed. My staff was impressed.  Our total downtime was only about three hours.  WHEW.

I asked for an estimate for a new server.  He got it to me the next day.  With some tweaking we bought a system that meets our needs.  It runs on Windows 2008 server.  After he set the system up, we were left with a few problems hanging.  Our HP 5si wasn't working properly.  One of our scanners was offline and the  McAfee software on our old server wouldn't load onto the new server.  He asked that we run the system for a few days, add any problems to this list and he would come back to work through the various fixes.

I made a decision to put my computer hat back on and try to fix all of these problems myself.  I went to Barnes and Noble and spent $120 on three books.  I am happy to say that the days of Radio Shack have connected with the level of expertise I need to run this new system and I was able to call this fellow and say I've got it all running.  We are pleased as punch with the system.  I am slowly improving efficiency of each client - workstation - and the staff reports daily that their computers are running faster than ever.

I may yet take a course - but make that a hardware course.  I'm finding my inner geek.

two spaces after a period

Blogger no longer word wraps with forgiveness of the two space generations like me. So, please forgive me when you see those out of format little spaces at the start of lines.  This is one old habit I'm not trying to break.  It's on automatic pilot - two spaces and me.

Southern Title suspends issuance of policies mainly because of a defalcation.

I spoke recently with the Pennsylvania rep for Southern Title.  He had made the jump from New Jersey Title and was busy signing up agents who were left without an underwriter when New Jersey Title stopped writing new business.

Both regional title insurance underwriters were hit by substantial defalcations.  I am convinced that the system of title insurance underwriting is capable of withstanding title claims - good years and bad.  It's the defalcations that put the entire system at risk.  If underwriters do not get serious about the money that flows through the hands of agents, then regulators ought to focus their eyes on the major weakness of the system.  This is where consumers are most likely to be harmed and the largest vulnerability - in my opinion - to the entire system.

Bonding isn't enough.  We need mandatory annual audits of the escrow accounts.  The audits must be performed by independent CPA firms following some uniform standards. I believe the FHA audit requirements for their approved lenders provide a framework for file review.  General audit guidelines for reconciliation of accounts should cover the agent obligation for a triple reconciliation.  Add to that checks for escheat compliance and a system for monitoring and protecting good funds moving into and out of the agency and you shut down the opportunities for bad agents or stupid agents to play with the money in escrow.  Yes, these audits are expensive.  I have to say, however, that the cost of the audit would most definitely be less than the cost of eating the cost of producing title commitments for files that don't close.  Just consider it a cost of doing business and if you complain to me about that audit being too expensive then we can chat about cancellation fees and RESPA because I am sick and tired of the same stupid game being played over and over and over.  Defalcations will kill the business of title insurance.  It's time to take our medicine.

Virginia Business - News: Title insurance company suspends sales of new policies

Virginia Business - News: Title insurance company suspends sales of new policies

lenders on the RESPA hot seat for reinsurance partnerships

In exchange for the their business, companies such as Citigroup Inc, Wells Fargo & Co, SunTrust Banks Inc. and Countrywide allegedly required reinsurance partnerships on generous terms that violated the Real Estate Settlement Procedures Act, a 1974 law prohibiting abusive home sales practices.

During a two-day presentation in the summer of 2009, HUD's team presented DOJ attorneys with a thick binder of evidence that major banks had engineered a decade-long kickback scheme, people familiar with the investigation say.

Read more on Bank Investment Consultant.

NAIC Title Insurance Task Force report

a must read for title agents

on robosignings

NEW YORK (AP) — Counties across the United States are discovering that illegal or questionable mortgage paperwork is far more widespread than thought, tainting the deeds of tens of thousands of homes dating to the late 1990s.

The suspect documents could create legal trouble for homeowners for years.

Already, mortgage papers are being invalidated by courts, insurers are hesitant to write policies, and judges are blocking banks from foreclosing on homes. The findings by various county registers of deeds have also hindered a settlement between the 50 state attorneys general who are investigating big banks and other mortgage lenders over controversial mortgage practices.

Read more o the AP.

procedures

Having managed lots of folks over my career I respect that individuals think and learn differently, that we aren't automotons and need some degree of personal discretion in our work.  I also know that mandatory procedures are necessary to maintain quality of service and product and, of course, meet contractual and legal requirements.  This is a constant managerial task - finding balance in the workplace with just enough procedural framework within which capable individuals perform their tasks.

As managers we always start with the right individual in the right position, presumably with enough training or experience to meet expectations.  Through trial and error, we learn where and how to implement or improve the procedures.

One of the important procedures we created is the "setting of the table" for closings. A TCS closer is expected to ask for the following at the start of a purchase closing - valid photo ID, good funds and the original deed.  Missing any one of these critical components would cause a closing failure so there is no sense starting until you know you have them in hand.  The "setting of the table" procedure has at least given parties more time to cure a deficiency and have a successful closing.  If someone forgot to pick up the deed from an attorney's office, they can run out and do the job while the others proceed and get the closing started.   If a consumer was confused or forgot to bring funds in the form of a cashiers check, they can run to the bank while the closer explains the HUD-1 to the sellers.  Whatever, the important point is that the procedure is a good one - a tool for avoiding or resolving problems.  It doesn't make anyone's job harder, it simply creates a framework around which a closer can perform.  Everyone does their closing a bit differently.   Closings take on the personality of the closer, but still, the closer works within a simple procedural framework.

I'm chatting about procedures this morning because yesterday I had a holy moly moment while reviewing a 2004 transaction.

A local attorney called to say he had discovered two items in a title we had processed and wondered if I could help him.  First, his sellers - our insured buyers - had informed him that they had a mortgage to payoff but he could not find the document on record.  Also, he had found an unsatisfied mortgage dated 1988.

At first I thought what most title insurance agents would think - maybe there was a indexing error with the mortgage and satisfaction - something that couldn't have been discovered prior to the issuance of the policy.  I said I'd check the file and call back.

Upon review I found - much to my horror - that both items SHOULD have been discovered by my staff prior to closing the transaction.

Let's talk about the unsatisfied 1988 mortgage first.  Back in 2004 when we processed this title order, we ordered a 60 year search.  We always place the order with a written request.  The title order clearly indicated a 60 year search. The abstractor must have misunderstood and did a current owner search.  Okay, they made an error.  We're all human, however, this error ought to have been discovered by our title agent who performed the examination and created the title insurance commitment.  An important PROCEDURE was skipped.  During title examination, the title agent MUST review the title chain and confirm that the search meets our requirements for that transaction.  If the agent had looked at the chain he would have noticed that search only went back to 1996.  No wonder the unsatisfied mortgage went undiscovered.

Now for the mortgage the attorney could not find in the index.  I looked aghast at the document in our scanned file and immediately knew what had happened.  Our buyer was a limited partnership.  It was a commercial loan transaction.  Unlike a residential mortgage loan, when a commercial lender closes, they typically bring the documents to the closing table and explain them directly to the borrower.  PROCEDURE would call for a pre-closing review of the mortgage document by our professional staff.  This procedure had been skipped on this transaction.  No one noticed that the commercial lender had mistakenly prepped his documents entirely in the name of the individuals who were guaranteeing the loan and had failed to include the vested entity as a mortgagor.

Thankfully the matters are being resolved with the payoff and indemnification with follow up for a satisfaction.

I'm posting this for you as a training opportunity as it was for my staff yesterday.  We live and work in a business that requires constant vigilance.  No matter how busy we are, we must take a zen attitude and focus on the file in front of us, respecting our procedures as they are the tools that help us avoid the holy moly moments and keep our consumers safe.

Holy moly.

all is right with the world, the mortgage banking world, that is

WAH?  That's right and do you know how I can tell?  Everyone is complaining about underwriters.  That's a sign of normalcy and that's what has been missing for over a decade.

Ah, the sweet sound of prudence.

New York takes aims at steering by real estate broker to affiliated title agencies

A law aiming to prevent improper quid pro quos for title insurance agents just got a new set of sharp teeth -- causing a furor in the already embattled industry. 

In late May, the Office of the General Counsel of the state's Insurance Department issued an opinion about whether it's legal for a residential brokerage to place lawyers on "recommended" lists, which are distributed to homebuyers, in exchange for those lawyers referring clients to the brokerage's title insurance affiliate. 


Read more on The Real Deal.

Fitch on ORI

The affirmation of ORI's ratings reflects operating performance of its core property/casualty (P/C) as well as title insurance operations that remain in line with Fitch's expectations and similar rated peers. The Negative Outlook reflects the continued uncertainty of mortgage market exposure on ORI's operations.


Read more on Market News.

query: how do you correct a HUD-1 post closing

So long as you have the consent of the mortgage lender, if there is one, and all parties, you simply create a new version of the HUD-1.  I like to put a bold easily found notation on the top of the first page that says something like:

REVISED August 16, 2011 to correct the blah blah.

You could also say that the earlier version of the HUD-1 is null and void.  Have folks initial this statement on the first page to document consent and acknowledge they understand there is only ONE HUD-1 form.

The very important part about correcting a HUD-1 post closing is that you must make certain the correction matches with the actual flow of money.  The HUD-1 form is an official record of the movement of the money and it must be accurate.

complying with privacy rules when managing a request for post closing data

This happens infrequently but enough that it warrants a post.  I received a request from a consulting company who is performing a post closing audit.  In this case they are performing the audit for a private mortgage insurance company.

Presented as evidence of the authority to make the request is the typical quality control authorization signed by most borrowers at closing.  By signing the form the borrower grants permission to the lender to reverify application data.  It specifies that the lender may present the form to any party named in the loan application.

The consulting company making the request for private data is not the lender.  My title agency is not a party named in the loan application.  The form presented no basis under which I might release this private information and so the request was denied.

It's not that we don't want to be helpful.  We do.  If the proper document had been presented I would have provided a pdf response tout suite.  I do have the information this individual seeks.  It is sensitive and very private - the type of information the consumer may even be surprised to know I have in my file.  Even so, I am a guardian and take that job seriously.

query: should sheriff sign a HUD-1 for sheriff sales

I have never heard of a HUD-1 form being used by a sheriff.  I wouldn't expect to see documents that you would normally see in a real estate transaction.  This isn't a typical consumer transaction.  Read everything carefully and unless you have some experience with sheriff sales, I'd seek the advice of a competent real estate attorney.

query: if I pay off my mortgage early is title insurance refundable

No.   The loan policy protected the lien position for the mortgage lender.  It was a one time non-refundable premium.