Elder Law: For deeds, use a title company

There are four types of deeds: Warranty Deed (WD), Special Warranty Deed (SWD), Quitclaim Deed (QD) and Transfer on Death Deed (TOD). I wish you’d take my advice and not fool around with any of them because once you record the thing at the county clerk’s office then it cannot be undone except by the person you deeded it, it being a piece of land, unto, and they may not be cooperative meaning a lawsuit you might not win.

So, use a title company. What if you put a cloud on another’s title, like the neighbor’s, or foul up the legal description, or copy the legal real carefully but from an inaccurate legal description off some old deed, survey, tax assessment notice, or sewer bill? So, use the title company, but some won’t and that’s how real estate attorneys earn their living.

Back to deeds. Never give a WD except for big money, usually at a closing at the title company. Never give big money except for a WD and title insurance at the title company. The warranty given by the seller means he stands behind that good title forever and that he’s going to make up a mistake with his money if the title insurance is insufficient. So, if you are giving something away, or selling it for practically nothing, don’t put your own personal warranty on it with a WD.

Give a QC deed to anybody on anything. I’ll give you one on Sudderth Avenue. How much of Sudderth do I own? None of it and I don’t want to fix the potholes either. QC means you are giving whatever you have and that you are making no promises or warranties. Understand that when you are accepting a QC deed and go first to a title company and see what the problem is. And when I say to give a QC deed on anything you want, I’m kidding. Give one on McDonald’s and you may have a knock on the door for clouding Ronald’s title.

On TOD deeds, we recently had an entire article and unfortunately, most title companies won’t make them since there’s a lawyerly lecture that needs to go along with it usually about how it’s a bad idea to give one to a group of kids if they fight with one another or have legal problems.

SWD’s are special and most often used in case of default on a real estate contract or by bank trustees or estate personal representatives. A special warranty means the seller is promising to make up any problems he caused while he possessed the property while it was in a trust, estate and so forth. A WD makes that promise all the way back to Geronimo.

Complicated? Use a title company and they will tell you if you need a lawyer. Oops, Mineral Deeds another time.

By Tom Dunlap For the Ruidoso News POSTED: 03/24/2015 11:20:04 AM MDT

Comments and opinions expressed in this column are Tom Dunlap’s. Tom takes comments or questions at dunlaplawoffice@cableone.net or 575-622-2607 in Roswell.

Realtors and lenders confused about value of title insurance, says ALTA. Title industry group urges collaboration with real estate, lender partners before rule change

Realtors and lenders are just as ignorant as the general public about what title insurance is and the value it provides to the homebuying process, according to the American Land Title Association.

And with the sweeping changes that the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures (TRID) rule will bring to the closing process later this year, more educational efforts and outreach are critically important, ALTA stressed at its 2015 Business Strategies conference last week.

Title insurance protects buyers from problems that could arise with a title they have purchased that were not uncovered in the title search process. Those problems could include errors with the deed or mistakes in the record — or even forgery or undisclosed heirs. When a homeowner purchases title insurance, then the title company will help pay any valid claims or defend the homeowners’ claim in a lawsuit.

The TRID rule, which takes effect Aug. 1, is widely considered to be the most significant change to the closing process in four decades. The 1,888-page rule and its accompanying 400-plus regulatory citation changes will impact how closings are conducted and the time frame in which they occur, as well as business processes, technology, policies and procedures — and, as highlighted at ALTA’s conference, the relationships among various vendors.

“Collaboration begins now,” said ALTA President Diane Evans as she kicked off the annual conference, attended by more than 500 title insurance and settlement professionals March 18-20 at the Sheraton Hotel in downtown Philadelphia. “We’ve been slow to engage, and now the time is critical that we start talking about the importance of the work we do. You will leave here with the tools to talk to Realtors and lenders to engage in critical conversations that need to occur sooner than later, and to collaborate with them as they prepare for Aug. 1.”

Evans, who is also vice president of Land Title Guaranty Co. in Denver, said during ALTA’s research for its consumer messaging campaign last year, Realtors and lenders who participated in focus groups showed “confusion” about the value of title insurance.

“Few recognized that we have two types of policies,” Evans said. “We learned they lacked a clear understanding of what we do, what we insure, how we price our products.”

We’ve been slow to engage, and now the time is critical that we start talking about the importance of the work we do.” Diane Evans, president of the American Land Title Association
The real estate professionals said title insurance professionals need to sell their own product — “It’s not up to them,” Evans said.

“It is up to us to take the reins and communicate directly to consumers earlier in the homebuying process to ensure they will have the peace of mind that their investment is protected after they get the keys to their home,” she said.

Part of the confusion stems from the CFPB’s decision to label an owner’s title policies as “optional,” she said.

“A consumer’s largest investment — their home, the very product that provides the most secure financial coverage for that home — and it’s optional,” she said. “Does that bother you? Are you concerned? I am. We now are tasked with making sure that consumers are educated early on in the process when they are buying their home. We have an obligation to make sure they understand the loan process, but we’ll have the opportunity to talk to them early on, and that part of the loan process includes protecting that investment. Why, for the one-time fee that we charge, it may be the single most important safeguard they purchase. We get to sell that to them and help them understand why it’s important.”

But because the CFPB will require lenders to assume responsibility for all of its closing table partners, it “will become critical to have leadership conversations” with Realtors, lenders and other vendors, Evans said. She urged title insurance and settlement professionals to educate their partners about the work they do to minimize claims and the risk homebuyers may have on their investment.

“We want to make sure they understand that the one-time premium gives them that peace of mind,” she said.

Evans urged attendees to take the lead and start “setting the expectations and having conversations with lenders” and other partners on how they will collaborate to exchange information on the new TRID disclosure forms.

“Every one of you in this room is going to become leaders in your community, in your market. You will help define and set the expectations in managing the next new paradigm shift in real estate closings,” she said.

Acknowledging the challenges that lay ahead in the next five months as everyone prepares for implementation, Evans said she expects everyone involved in the real estate, mortgage and settlement service industries to “morph, change and adapt to make practical applications and solutions for real-world problems.”

“I think we’ve got a lot of challenges ahead of us,” she conceded. “I think after Aug. 1, after we’ve experienced many of those pressure points, we will absolutely find a way to accommodate those changes.”

ALTA is co-hosting several TRID forums along with the Mortgage Bankers Association and National Association of Realtors to train members on the changes to come. Two forums remain, but are sold out: March 26 in Chicago and April 16 in Washington, D.C.

from INMAN.com March 24, 2015

ALTA President’s Congressional Testimony Highlights Three Regulatory Reforms

Introduces Three Regulatory Reforms to Benefit Businesses and Consumers

 

3. Congress should pass H.R. 1195 as soon as possible. This bipartisan legislation establishes a small business advisory board at the CFPB.

Washington, DC (PRWEB) April 16, 2015

American Land Title Association (ALTA) President Diane Evans NTP submitted the following testimony today before the Financial Institutions and Consumer Credit subcommittee of the House Committee on Financial Services.

During the hearing titled “Examining Regulatory Burdens on Non-Depository Financial Institutions,” Evans will highlight three regulatory reforms that will benefit businesses and consumers:

1. The Consumer Financial Protection Bureau (CFPB) should publicly commit to a hold harmless period for enforcement through the end of the year following the Aug. 1 implementation of the Bureau’s new integrated mortgage disclosures. A hold harmless period will help ensure consumers have a positive experience when obtaining a mortgage and purchasing a home. Without a hold harmless period, businesses will likely follow more stringent risk-management procedures that limit access to credit and settlement services. This will likely result in fewer options for consumers and less companies to choose from to get their transaction completed.

2. The CFPB’s new Closing Disclosure will confuse consumers because the government-mandated form will disclose different prices than the actual costs a homebuyer sees while shopping for title insurance. This is the only cost disclosed at closing that the CFPB prevents consumers from receiving their actual charge. The Bureau should resolve this issue by allowing the industry to disclose the actual title insurance premiums required in each state.

3. Congress should pass H.R. 1195 as soon as possible. This bipartisan legislation establishes a small business advisory board at the CFPB. It will provide formal and open channels of communication between Bureau staff and industry.

Title Insurance Regulatory and Legislative Update – April 2015

adapted from JDSupra Business Advisors

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS

Title Guaranty Fund Guidelines Adopted: The Title Insurance Task Force met at the NAIC Spring National Meeting in Phoenix, Arizona and adopted the “Title Insurance Guaranty Association-Title Insurance Consumer Protection Fund Guideline” after receiving a report from  Title Insurance Guaranty Fund Working Group noting that no comments were received on the exposure draft of the guidelines by the March 20 deadline. The guidelines were also adopted following votes of the Receivership and Insolvency Task Force and Property and Casualty Insurance Committee.  The guidelines are now posted on the NAIC’s website and available for legislators and policy makers to consider as a template for the establishment of a state title insurance guaranty association.  Unlike certain model laws however, adoption of the guidelines is not an NAIC accreditation requirement.

New York

Report Foreshadows New Regulations Affecting Third Party Service Providers: The New York State Department of Financial Services recently released a report entitled “Update on Cyber Security in the Banking Sector: Third Party Service Providers”.  The report is the result of an October, 2014 survey of 40 banking organizations regulated by the department, and found potential cyber security vulnerabilities with banks’ third-party vendors.  Banks rely on third-party vendors for a broad-range of services and often have access to a financial institution’s information technology systems, providing a potential point of entry for hackers.  As a result of the report’s findings, the department is now considering regulations establishing cyber security requirements for financial institutions that would apply to their relationships with third-party service providers, including potential measures related to the representations and warranties banks receive about the cyber security protections those providers have in place.  These regulations could have a significant impact on third party service providers, including the title industry.

 

2015 NRMLA Regional Conference, Day Three

Tradition Title Agency representatives Karen Keating and Alison Keating met many of our partners at this year’s National Reverse Mortgage Lenders Association Regional Conference in New York.  Here is a recap of the conference topics, a day at a time.

On Friday March 27, the conference panel resumed with the “Counsel’s Briefing” where the NRMLA legal team of Jim Brodsky and Jim Milano gave participants a regulatory and legal update.  They covered several topics of interest.

In general, marketing has been under scrutiny by the CFPB (Consumer Financial Protection Bureau). The Bureau has taken action against misleading advertising, with litigation and penalties imposed.  Cases examined included an ongoing lawsuit against All Financial regarding HECM advertising, a settlement with former HECM lender New Day over non-disclosure of paid endorsements, and a civil penalty against Lighthouse Title for paying referral fees.

The team advised caution in marketing.

The non-borrowing spouse case of Bennett vs Donovan (as Secretary of HUD) was resolved with a determination that regulations at the time were unclear, with an ongoing effort for senior borrowers, as a class, to be protected.

As always, loan officer compensation rules were discussed.  The CFPB has said that LOs cannot be paid based on terms of the loan, no dual compensation is permitted, and no steering can be allowed.  These rules are not applicable to open-ended loans.

The CFPB has compiled a complaint database on the Bureau’s website where Yelp-like reviews can be posted.  Their internal complaint portal has a feature where companies can sign up to receive and respond to any complaints.

The final session of the day and of the conference was an update on the secondary market: “HMBS Investor Issues and Trends.”

The latest on secondary markets is summed up in this article:

http://www.nrmlaonline.org/RMS/SECONDAY_MARKETS.ASPX?article_id=1591

2015 NRMLA Regional Conference, Day Two, Afternoon

Tradition Title Agency representatives Karen Keating and Alison Keating met many of our partners at this year’s National Reverse Mortgage Lenders Association Regional Conference in New York.  Here is a recap of the conference topics, a day at a time.

The first topic covered Thursday afternoon was “Trends and Issues in Counseling”.  The panel reiterated that HECM counselors do not make pass/fail decisions on Financial Assessment.  Their mission is to explain, field questions, and determine whether their client fully understands the HECM product.

Counselors are not permitted to steer clients to any particular product or lender, but they may encourage them to shop around and to negotiate fees.  There were conference attendee comments that stated occasions when counselors had given erroneous information to borrowers, and the panel urged everyone to call the counseling agency in question if they believe that is the case.

Counseling agency panelists had comments of their own on the topic of lender steering, and reminded the audience that steering to any particular counselor is not permitted.  They asked attendees to report to HUD any marketing information received by a counseling agency, because in the same way, counseling agencies are not permitted to solicit clients.

 

The second afternoon session addressed HECM Loss Mitigation.  Payment of property taxes is tracked by the servicer directly, while insurance coverage and policies are tracked using outside vendor services.  Technical delinquency is defined as a failure to pay taxes and/or insurance when due.  Servicer actions include paying taxes and “lender-placed” insurance.

Reminder letters are sent before taxes are due, and if they are not paid in a timely manner the servicer will pay taxes on the borrowers behalf, notifying them by letter that they have done so.  Letters are sent before homeowners insurance premiums are due and upon being late for 21 days, lender-placed insurance becomes effective.  If property charges are paid by the servicer, a letter is sent to the borrower requiring them to contact the servicer, and a repayment plan is put in place.

A borrower is determined to be in default if they are Unable to pay, Unwilling to pay, and Unresponsive to servicer prompts.

A “due and payable” process may be set in motion if all loss mitigation options have been exhausted.  The timeline for the demand letters leading up to the foreclosure process and sale is regulated by each state.  A borrower can at any point reinstate their loan by paying taxes and insurance up to date.  A borrower is not personally liable for a reverse mortgage, so no deficiency judgment is filed after a foreclosure sale.

Very specific rules govern non-borrowing spouses who do not fall under the rules set forth on August 4, 2014.  There is a Principle Limit test and a Factor test which are outlined in Mortgagee Letter ML 2015-03.  A call to the servicer is recommended in all cases where there is a question or problem.

 

Thursday’s final session was “Understanding the Mechanics of Social Security and Its Impact On Your Clients Retirement Plan.”

A variety of options and scenarios were provided, highlighted by some useful information and ideas.  A 62-year-old loses $200,000 – $300,000 in lifetime Social Security benefits by NOT holding off until age 66 to claim benefits.  Maximum benefits are gained by claiming between ages 68 and 70, while maximum spousal benefits can be claimed at around age 66.

Full retirement age for people born between 1943 and 1954 is 66, while for those born 1960 and later full retirement will not come until age 67.  For those years in between, there is a scale of months based on years of age.  Social Security looks at the best 35 years of earnings.

Couples can use strategies such as “File and Suspend” and/or “Restricted Application” to maximize the combination of personal and spousal benefits.

Speaker Russell Settle of Social Security Choices provided his website http://www.SocialSecurityChoices.com to explore the various strategies.

 

 

2015 NRMLA Regional Conference, Day Two, Morning

Tradition Title Agency representatives Karen Keating and Alison Keating met many of our partners at this year’s National Reverse Mortgage Lenders Association Regional Conference in New York.  Here is a recap of the conference topics, a day at a time.

On the morning of day two, FA (Financial Assessment) continued to be the hot topic.  The consensus seemed to be that loans will become more complex and there may be difficulties until everyone becomes accustomed to new procedures, but everyone will eventually figure things out.

Loan opening will take longer with expanded documentation, and more detailed explanations to the borrowers will be required.  It is vital to set proper expectations at origination.  There may be pain in the short term but it will lead to the long term success of the reverse mortgage industry.

All panelists and speakers emphasized the importance of training.

The morning session continued with tips on marketing the “new” reverse mortgage to the Baby Boomer target audience.  Reverses can be compared with home equity loans for Boomers who want to be in control of their finances, especially where their home is their larges asset.  Consumers must be taught to use their home equity as a source of retirement funding.

Targeted marketing is easy through digital media, and the Boomer audience has proven to be responsive to technology.  Beware, we are warned, of referring to our clients as “seniors” – terms like “older Americans” are more acceptable.

FHA staff stepped to the podium to talk about the HECM program before lunch.  Their job has been to reduce risk to the MMI fund and create a loan that is a sustainable solution for the borrower.  Every loan is subject to a PETR, or Post-Endorsement Technical review which monitors compliance.  Speakers stressed that documentation will be key.

A few questions regarding reverse mortgage counseling were addressed.  RM counselors are not expected to make decisions regarding qualification of borrowers.  Counselors will soon be participating in NRMLA training webinars to help them keep abreast of updates to the program.

 

2015 NRMLA Regional Conference, Day One

Tradition Title Agency representatives Karen Keating and Alison Keating met many of our partners at this year’s National Reverse Mortgage Lenders Association Regional Conference in New York.  Here is a recap of the conference topics, a day at a time.

Day One featured an in-depth session on the Financial Assessment that goes into effect for FHA case numbers assigned on or after April 27, 2015.  In 2012, the FHA promised Congress to restore the insurance fund in two ways:  through Financial Assessment (FA) and Tax and Insurance Set-Asides.

Fundamentally, the FA will assess credit history, assess property charge payment history, and calculate residual income.  This will apply to every HECM, every borrower, without exception.  A full assessment will not be required for a non-borrowing spouse unless their residual income is used as a compensating factor.

There was discussion of the use of FA as a sales tool, providing valuable information to borrowers in the decision-making process.  FA can be used to go further than loan qualification and truly understand the applicant’s situation.  In the same way, analysis of a credit report can be used to track spending habits and credit card debt to see where a particular situation is heading.

The panel gave attendees some useful tips, including the use of a checklist and FA worksheet.

The LESA, or Life Expectancy Set-Aside was discussed extensively.  Based upon income and debt, and the predicted cost of living, borrowers must demonstrate that their residual income is sufficient.  If payment history and income fall within acceptable parameters, a LESA may not be required.

If an applicant does not meet standards even with the consideration of extenuating circumstances, a fully-funded LESA is required.  If credit and payment history is satisfactory but income is insufficient, a partially-funded LESA can be prescribed, where the mortgagor sets aside funds to be provided to the borrower periodically for the payment of property charges.

LESA charges include real estate taxes, homeowners insurance and flood insurance.

It was strongly recommended to read the FA handbook – more than once if possible – to fully understand FA.  You can download the pdf file here:

Click to access huddoc