Inyo-MonoTitle Industry News

2012 Homebuying Resolutions

2012-01-04T10:03:00.000-08:00

As each new year approaches, many Americans like to prepare by establishing some resolutions that they will try to live up to. The year 2012 has proven to be no exception, as a recent survey from Fidelity Investments found that nearly half of Americans say saving is their top priority in the new year.

"The results of this survey indicate that many Americans are continuing to put their financial houses back in order with some very positive financial strategies," said Ken Hevert, vice president of Fidelity.

What may be driving so many consumers to make saving their most pressing priority for 2012 is the state of housing and the hopes of buying a home of their own. In 2011, homeownership dropped to record lows due to a variety of factors, including a high rate of foreclosures, job insecurity and restrictive lending requirements that some borrowers weren't able to satisfy.

These realities have left many real estate market observers questioning what tactics consumers will employ to save more money in 2012. Will they put the few dollars they spend on daily coffee runs toward a down payment on a house? Will they take greater strides toward paying down their debt loads by buying with credit less frequently?

While there are a variety of strategies prospective homebuyers can implement to achieve the American dream, real estate experts Ilyce Glink and Samuel Tamkin suggest a few homebuyers' New Year's resolutions.

Writing for Tribune Media Services, Tamkin and Glink say maintaining a strong credit score is of utmost importance. Because mortgage lenders have tightened the requirements borrowers have to meet to qualify for a low-interest loan, they have put a greater emphasis on checking credit scores, typically pulling copies of them from all three credit reporting bureaus and reviewing them thoroughly.

Tamkin and Glink say that borrowers should not only know what their scores are before they're pulled, but they should be sure they've practiced good credit behavior beforehand. This is best accomplished by having limited lines of credit and paying bills in full and on time. Typically, scores of 780 or more qualify for the best rates, housing experts indicate.

Something else to get into the habit of doing in 2012 is shopping around for a lender rather than going to just one. Tamkin and Glink say borrowers should meet with at least five lenders, which will enable them to take multiple factors into consideration, such as closing costs before deciding which one to sign papers with. Better knowledge of what other lenders are offering may also help mortgage applicants negotiate a better rate.

Finally, Tamkin and Glink say that if house hunters have gone through the homebuying process without assistance in the past, they should change that in 2012 by establishing a home-buying team. Members should include a housing agent, mortgage lender, real estate attorney, tax preparer and a home inspector. Each individual will able to offer their own expertise, helping prospective homebuyers turn their hopes of purchasing a house in 2012 into a reality.

Hello 2012!

2011-12-30T15:56:00.000-08:00

Inyo-Mono Title Company wishes 2011 off with a bang! Welcome 2012! Thank You to all our customers and clients. Have a wonderful 2012!

Bills Submitted to an Escrow File

2011-12-20T14:15:00.000-08:00

Bills, invoices, irrevocable assignments and demands for payment from an escrow file may arrive in the mail, the delivery system, fax or email.

Recent changes in the escrow industry have caused title and escrow companies to take a second look at the bills submitted that are not for recorded liens or are for matters not related to the transaction. Matters that are considered to be transaction related could be from home warranty companies, home cleaning, Notary Public, or repair companies.

Some title and escrow companies have taken the position that bills that have no relation to the escrow or are not in connection with a recorded matter, shall not be paid from an escrow transaction. Yet, an Escrow Holder cannot simply ignore a bill that has been submitted to an escrow file.

These types of bills have become a troublesome issue. The Escrow Holder should seek the guidance of an Advisory Officer whenever faced with a bill that is not transaction related or is not for a recorded matter. The bill could be from an attorney who prepared a settlement agreement between the parties and was promised payment from the escrow. The bill could be from a contractor who made improvements or repairs to the property, and is potentially entitled to a mechanics lien. The bill could be from someone who has held off from recording their lien based on a promise that payment would be made from the escrow. Often, the bill will only reflect the debtor’s name, how much money is due, and where to send the funds.

The Title or Escrow Holder does not always know the circumstances that caused the bill to be submitted to the escrow file. But, what the Title or Escrow Holder does need to know is whether or not the bill should be paid as a part of the closing.

Providing your company policy, and your Escrow Advisory Officer, allow for payment of these types of bills, the escrow file will need to have signed instructions from the principal to pay the bill. A copy of the bill should be presented to the principal with a ‘read and approved’ stamp for the principals to sign, as their acknowledgement of the bill. Additionally, the amount and payee name should be included as a part of the signed estimated statement and the final statement.

Should the principal object to payment of these types of bills, obtain a written instruction from the principal for nonpayment of the bill.

Should the principal decline to pay the bill, or your company policy prohibits such payments, the Escrow Holder must give notice to the party submitting the bill. The notice of non-payment should be provided to the submitting party in a written form, such as by mail, fax or e-mail. The escrow file should also retain documentation that the submitting party received the notice of non-payment prior to the close of escrow.

Another type of request for payment from an escrow may be in the form of an irrevocable assignment. Some Real Estate Brokers use and some Title and Escrow Holders accept the California Residential Purchase Agreement and Joint Escrow Instructions. This agreement provides that the Buyer and Seller irrevocably assign to Brokers compensation specified in paragraph 23, respectively, and irrevocably instruct Escrow Holder to disburse those funds to Brokers at Close of Escrow or pursuant to any other mutually executed cancellation agreement. Compensation instructions can be amended or revoked only with the written consent of Brokers. Buyer and Seller shall release and hold harmless Escrow Holder from any liability resulting from Escrow Holder’s payment to Broker(s) of compensation pursuant to this Agreement.

Every once in a while, a Buyer or Seller will deliver instructions to the Title or Escrow Holder cancelling or eliminating the payment of the real estate commission. The Title or Escrow Holder should take care to present the details of the circumstances to an Advisory Officer upon receipt of a notice from the Buyer or Seller of the cancellation of the real estate commission.

Foreclosure Activity rises 7% in October 2011

2011-11-15T08:24:00.000-08:00

While mortgage rates are at their lowest levels in recorded history, a considerable number of Americans are still struggling to pay their mortgages.

According to RealtyTrac's latest Foreclosure Market Report, distressed property filings - which include mortgage default notices, scheduled auctions and bank repossessions - totaled nearly 230,700 in the month of October, up 7 percent on a month-over-month basis. Compared to October 2010, however, foreclosure filings were down nearly 31 percent.

James Saccacio, CEO of RealtyTrac, said that many of the distressed property filings included in the October report actually occurred earlier this year. Rule changes at the state level may have also contributed to the monthly increase.

"The October foreclosure numbers continue to show strong signs that foreclosure activity is coming out of the rain delay we've been in for the past year as lenders corrected foreclosure paperwork and processing problems," said Saccacio. "Recent state court rulings and new state laws keep changing the rules of the foreclosure game on the fly, creating more uncertainty in the housing market and threatening to prolong the road to a robust real estate recovery."

The report also detailed the type of foreclosure activity that took place last month. For example, first-time defaults were filed on nearly 77,800 properties in October, a 10 percent rise compared to September. Foreclosure auctions, meanwhile, were scheduled for more than 85,300 residences last month, an 8 percent rise compared to the previous month. On a year-over-year basis, however, both types of foreclosure activity fell compared to October 2010, down 23 and 38 percent, respectively.

In addition to the type and the total number of foreclosures, the report detailed the rate of distressed property filings at the state level. Once again, Nevada posted the nation's highest rate of foreclosure, the 58th consecutive month it's led all states. The Silver State remained at the top despite a 34 percent drop in foreclosure activity month-over-month.

Meanwhile, distressed property filings increased in California, making it the state with the second-highest rate of foreclosure activity after increasing 17 percent from the previous month. California property owners appear to be having trouble paying down their mortgages, despite a recent report from the California Association of Realtors which found that housing affordability improved in the third quarter.

Rounding out RealtyTrac's top five states for foreclosure activity in October were Arizona, Florida and Michigan. Fifty-three percent of the month's total distressed property filings occurred in these states.

Pending home sales index rises from one year ago

2011-11-01T08:32:00.000-07:00

NAR ups forecast for US economic growth

By Inman News, Thursday, October 27, 2011.

A monthly index that tracks pending sales of U.S. resale homes rose in September compared to a year ago, while falling on a month-to-month basis, the National Association of Realtors reported today.

Also today, NAR released its latest forecast report for 2011 and 2012, revising up an earlier prediction for U.S. real gross domestic product growth in the wake of third-quarter GDP data released today.

Third-quarter data showed a 2.5 percent rise in GDP, compared with 1.3 percent in the second quarter. NAR expects U.S. GDP growth of 1.8 percent for the full year in 2011, with 2.3 percent GDP growth in 2012. A previous NAR forecast, released last month, anticipated U.S. GDP growth of 1 percent this year and 1.3 percent in 2012. Actual U.S. GDP rose 3 percent in 2010 and declined 3.5 percent in 2009.

NAR's Pending Home Sales Index, which measures real estate sales contracts signed but not yet closed, increased 6.4 percent year over year, to 84.5, in September. On a monthly basis, the index declined 4.6 percent. The index typically represents about 20 percent of all existing-home transactions. An index score of 100 is equal to the average level of sales contract activity in 2001, which was the first year examined by the trade group.

The index rose on an annual basis in all four U.S. regions. The Midwest saw the greatest increase, up 12.3 percent to 71.5. The region also saw the greatest month-to-month index decline, down 6.2 percent.

In the West, the index jumped 5.6 percent on a year-over-year basis in September, to 105.8 -- the highest index value of any region. The region also saw the smallest monthly index drop, down 2.1 percent.

In the South, the index rose 5 percent year over year, to 91.6. On a month-to-month basis, the index slipped 5.5 percent in the region.

The Northeast saw a 4 percent index increase compared to a year ago, to 60.6, and a monthly decline of 4.7 percent.

In its latest economic forecast, NAR projects 4.955 million sales of resale homes this year (up 1 percent compared to 2010), and 5.169 million existing-home sales in 2012 (up another 4.3 percent), with the existing-home median price falling 4 percent this year, to $165,900, and rising 2.6 percent in 2012.

Sales of new, single-family homes, meanwhile, are forecast to fall 4.7 percent this year, to 307,000, and to rise 21.3 percent next year, to 372,000. The median price of a new home is projected to rise 1.8 percent this year, to $225,000, and jump 3.5 percent in 2012.

The interest rate for a 30-year fixed-rate mortgage is not expected to change much. The rate was 4.7 percent in 2010, and NAR forecasts a rate of 4.5 percent for the full year in 2011, and 4.7 percent in 2012.

NAR forecasts the unemployment rate to average 9 percent in 2011, and to improve to 8.7 percent in 2012; last year's unemployment rate was 9.6 percent.

Lawsuits impacting the Title Industry

2011-10-25T12:56:00.000-07:00

Wells Fargo Bank, N.A. v. Old
Republic Title Ins. Co.
Case No. 10-1087, 2011 U.S. App.
LEXIS 4030 (E.D. Va. March 1, 2011)

Facts: An originating lender and closing agent engaged in a scheme to defraud the warehouse lender by creating fictitious loans, failing to pay off prior mortgages, and failing to record the mortgages purportedly securing the loans sold to the warehouse lender. The warehouse lender sued the title insurer for, among other things, breach of closing protection letters and fraud, claiming the closing agent was acting as title insurer’s agent for purposes of the closings. The Virginia District Court granted the title insurer summary judgment in 2009. Holding: The Fourth Circuit recently affirmed the District Court’s grant of summary judgment, holding that the title insurer was not the principal of the agent for purposes of the closings and that the title insurer was entitled to the same defenses of fraud against the warehouse lender’s claim for breach of the closing protection letter that it would have had against the originating lender. The Fourth Circuit held that the agency agreement between the title insurer and the closing agent was not ambiguous merely because it both expressly limited the scope of the agency to exclude “escrow, closing or settlement business” and required the agent to record documents necessary to insure the interest. It also adopted the District Court’s reasoning that the warehouse lender stood in the shoes of the originating lender and that the insurer was thus entitled to the same defense of fraud against the warehouse lender that it would have had against the originating lender. Relevance to the Title Industry: Subsequent lenders’ claims based on the loan originator’s fraud are still prevalent and they will be working their way through the courts for the next few years. This case is important because it affirms the limited scope of a title agent’s agency and the unambiguous language of the title agency agreement and also sets an important limitation on closing protection letter claims where the insurer elects not to issue a policy based on the closing agent’s fraud.

Inyo-Mono Title 30 Second Historical Video

2011-10-21T08:42:00.001-07:00

2011-10-14T10:31:00.001-07:00

The Mortgage Bankers Association (MBA) expects to see mortgage originations fall from an estimated $1.2 trillion in 2011 to $900 billion in 2012. The drop will be driven by a significant decline in refinance originations, while purchase originations will increase only slightly.

According to MBA, the economy will see another year of anemic growth in 2012, and then will grow somewhat faster in 2013. Refinance originations are expected to fall despite low mortgage rates as economic uncertainty lingers and fewer eligible borrowers remain.

“We think growth driven by consumer spending on durables and business spending on new plants and equipment will keep the U.S. out of recession, but there is significant uncertainty around this forecast,” said Jay Brinkmann, MBA's chief economist and senior vice president for research and education. “Europe is in or soon will be in recession. There is the risk that the European situation could harm the U.S. financial system, and could lead to further damage to U.S. consumer and business confidence. If that were to happen, we think that the U.S. could fall into a short, and relatively mild recession. We do not anticipate any actions out of Washington that would have a material impact on the economic outlook.”

“However, the uncertainty is not one-sided,” Brinkmann said. “We also see a path for the economy that could lead to above-trend growth in 2012. Housing inventory and shadow inventory is declining steadily. A more robust housing market recovery could spur faster overall growth. The odds of this scenario, however, are low and we think the most likely outcome is another year of frustratingly slow economic growth and stubbornly high unemployment.”

“We expect that mortgage rates are at or near their low points, but we have been wrong on this call before,” he said, noting that rate forecast assumes that the Fed maintains short-term rates near zero for the next two years, and also assumes that mortgage-Treasury spreads remain wide, given the current supply and demand imbalance in the market.

“If the economy tips into recession, rates would stay lower for longer, but we do not anticipate they would drop significantly,” he added. “If the economy recovers more quickly, even with the Fed’s Operation Twist, longer-term rates could rise faster.”

Brinkmann said MBA anticipates that purchase volumes will stay low, with home sales changing little in 2012 from the current pace.

Refi volume is expected to slow as mortgage rates increase, although potential changes to the HARP program may increase refinance volume.

The two unknowns that remain, according to Brinkmann is whether or not we will indeed see another recessionary dip or if the economy will start to speed up at a faster pace than predicted.

“A faster economic recovery led by the housing market would mean faster home price growth and more sales volume, increasing purchase originations somewhat, but would cut off refinance volume sooner than in our forecast,” he said.

“In summary, regardless of which path the economy and mortgage rates take, we are predicting another tough year, with origination volumes at their lowest point since 1997. Continued slow economic growth will mean that unemployment will remain elevated through 2012, which could slow the improvement in delinquency and foreclosure volumes, meaning that in addition to lower production volumes for the industry, mortgage servicers will also continue to be under pressure,” he concluded.

Following are the key points of the latest MBA forecast:

• Real GDP growth will be 1.3 percent in 2011, which began with a dismal 0.4 percent growth in the first quarter and 1.3 percent growth in the second quarter. MBA expects the second half to average around 1.8 percent, but even that is on shaky ground, with a weak labor market, volatile financial markets and looming risks of a spillover from the European debt crisis. MBA expects 2012 to continue in a similar fashion, showing growth of around 1.7 percent, as Europe enters a recession of its own and the US economy flirts with a shallow recession until midway through 2012. There should be a modest recovery in 2013 with growth reaching 2.4 percent for the year.

• The unemployment rate will increase slowly until the second quarter of 2012, hitting 9.3 percent, from the current level of 9.1 percent. It is expected to be around 9.1 percent for 2011, 9.3 percent for 2012, and 9.1 percent for 2013. Even though both economic and job growth are in positive territory, they are still insufficient to lower the unemployment rate in the near term.

• Fixed mortgage rates are expected to remain low by historical standards, finishing 2011 at around a 4.5 percent average for the year, falling slightly to 4.4 percent for 2012 and climbing back up to 4.9 by 2013.

• Total existing home sales will stay around the 4.9 million unit pace for 2011 and 2012, before increasing slightly to 5.2 million units in 2013 as the broader economy recovers. The recovery in the new home sales will have a comparably slow start, and may well be slow for most of 2012, but will show some meaningful increases in 2013.

• Home price measures that exclude distressed transactions have stabilized, and certain markets are showing year-over-year appreciation. FHFA's national repeat transactions home price measure, which does not distinguish between distressed and non-distressed sales, will continue to decline before starting a reversal in mid to late 2012, but will vary by state and home value.

• Purchase originations will likely decrease in 2011 from 2010, totaling $400 billion from an estimated $472 billion in 2010. Seeing as 2012 will likely be another year of slow economic growth, purchase originations will increase slightly to around $412 billion for the year. As the economy picks up a little more speed in 2013 and home sales and home prices also start to increase, purchase originations are expected to increase to $770 billion for the year.

• Despite lower mortgage rates towards the end of the year, refinance originations in 2011 will be lower than in 2010, falling to $783 billion from an estimated $1.1 trillion, as there were fewer eligible borrowers left to refinance. MBA expects this “burnout” to continue through 2012 and 2013, even as rates remain below 5 percent, with refinance originations falling steadily to $495 billion and then $332 billion, respectively.

CALIFORNIA REALTOR BADGE! NEW WIDGET AVAILABLE!

2011-10-12T08:27:00.001-07:00

California REALTORS® have a new way to differentiate themselves and show consumers they maintain a high level of knowledge of the home-buying and selling process and are bound by a strict code of ethics by using the REALTOR® Badge, a new, free CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) member benefit introduced today by Real Estate Business Services® Inc. (REBS®).

The REALTOR® Badge is a personalized widget that verifies a REALTOR®’s license status and displays their REALTOR® information, including office, specialization, and designation information. REALTORS® can display the REALTOR® Badge on their website, blog, and property listing pages.

“Consumers who are making one of the most important financial decisions in their lives want to know they are working with someone who is knowledgeable about the real estate industry and who follows a strict code of ethics,” said REBS Chairman Robert Bailey. “The REALTOR® Badge instantly identifies a REALTOR® as belonging to an elite group of real estate professionals that consumers can trust. “I’ve even included the REALTOR® Badge on my website because I want my clients and prospective clients to be assured they are working with a REALTOR® and to understand what that means,” said Bailey.

The REALTOR® Badge also includes a REALTOR®’s area of expertise, market specialties, and any additional languages the REALTOR® may speak or read. With a link directly to the California Department of Real Estate (DRE), a consumer can verify a REALTOR®’s license status.

The badge is also available to other state associations. For pricing and additional information about the REALTOR® Badge, visit www.realtorbadge.com.

REBS® is a subsidiary of the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and is a leading provider of real estate products and services to practitioners in California and nationwide.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Builder confidence largely unchanged in September

2011-09-26T10:12:00.000-07:00

Despite inexpensive closing costs and mortgage interest rates declining on what seems like a weekly basis, builder confidence levels have remained stagnant for the past several months. September proved to be no different, a new survey reveals.

According to the National Association of Home Builders, builder confidence for single-family homes in September fell to 14 from last month's 15. For the past six months, the index has hovered between 13 and 16.

Bob Nielsen, chairman of the NAHB, said the index is revelatory of the housing market being in a state of stasis.

"Very little has changed in terms of housing market conditions so far this year," said Nielsen. "Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time. Beyond this, both builder and consumer confidence took a hit in recent weeks with the market disruptions caused by the S&P downgrade and congressional gridlock on the budget deficit."

David Crowe, chief economist for the NAHB, agreed with Nielsen's assessments, saying that the index reflects builders' awareness that people, for the most part, aren't buying, and that reality likely won't change until the job market improves.

Mortgage giant Fannie Mae recently released its findings regarding the state of housing. According to its mortgage market analysis group, because the housing market is so fragile, any "additional shocks" may cause the economy to slip back into a recession. Potential problems that could lead to more negative repercussions for the country's real estate industry include further regression of Europe's financial markets and political instability in the Middle East.

"The weakening economic backdrop, a persistently high unemployment rate, and fear of a double-dip recession are casting a shadow over the housing market," said Doug Duncan, Fannie Mae's chief economist. "In turn, respondents to the Fannie Mae National Housing Survey indicate a continued shift of sentiment toward renting and away from ownership, at least in the near term."

Duncan went on to say that Americans' concerns about their employment status has had the biggest impact on consumers' limited desire to buy a house. When combining the 9 percent unemployment rate with the 26 percent of people who are worried about their employment status, according to a recent poll, "this is hardly a strong support for housing demand," he said.

Legislature Imposes Questionable Emergency Fee for Fire Zones

2011-09-22T09:26:00.000-07:00

As part of a last-minute budget fix, the California Democratic Leadership passed controversial legislation that will become effective on September 1, 2011. AB X1 29, signed by the Governor in July, will assess up to $150 per structure for property in certain designated high-risk fire prevention areas. The legislation was enacted with less than a two-thirds vote with most Republicans voting against the measure and little time for public or association input.

Since the measure did not pass with a two-thirds margin, it is arguably in violation of the recently enacted Proposition 26. The Howard Jarvis Association has stated publicly that it will sue for injunctive relief to keep this program from being enacted.

This bill requires that on or before September 1, 2011 the State Board of Equalization (BOE) adopt emergency regulations establishing the fee on each structure within a state responsibility area. To date, those regulations are not yet available. The Department of Forestry and Fire Protection (CALFIRE) is also required to assist in administering this program. CALFIRE has already developed regulations regarding who is subject to these fees, the amount of the fees, and an appeal process relating to its implementation. These regulations can be found on the CALFIRE website.

AB X1 29 was a trailer bill to the Budget Act of 2011. The fee will be collected by the BOE in accordance with the California Fee Collection Procedures Law. The new law does permit a petition for redetermination as to whether the fee applies to a particular property.

The Natural Hazards Disclosure Act already requires that sellers and their agents provide any prospective buyer with a "Natural Hazard Disclosure Statement" when the property being sold lies within one or more state-mapped hazard areas. These areas include “Very High Fire Severity Zones” and “Wildland Fire Areas.”

Under existing law in effect prior to the passage of this bill, the BOE determines areas in which the financial responsibility of preventing and suppressing fires is primarily the responsibility of the stateCopies of maps identifying the boundaries of lands classified as state responsibility are sent to the county assessors.

An unpaid fee can become an enforceable state tax lien but it is not effective against persons acquiring an interest prior to recording of the notice of state tax lien in the office of the county recorder of the county in which the real property is located. To what extent the state will record county-by-county tax liens for the $150 fee is unknown.

Inyo-Mono Foreclosure Figures Ten Years to Date

2011-09-16T08:25:00.000-07:00

Inyo-Mono Title Company has run some rough figures in terms of defaulted properties that went to sale in Inyo and Mono Counties. Our team has run the figures from Jan-August 22 in all cases as to not skew the data.

1-1-2001 thru 8-22-2001

INYO- NDF: 17 TRD: 3 (17.64% of NDF went to sale)

MONO- NDF: 24 TRD: 6 (25% of NDF went to sale)

1-1-2010 thru 8-22-2010

INYO- NDF: 48 TRD: 14 (29.16 % of NDF went to sale)

MONO- NDF: 170 TRD: 96 (56.47 % of NDF went to sale)

1-1-2011 thru 8-22-2011

INYO- NDF: 50 TRD: 30 (60% of NDF went to sale)

30.84 % increase from 2010

42.36 % increase from 2001

MONO- NDF: 135 TRD: 93 (68% of NDF went to sale)

11.53 % increase from 2010

43.00 % increase from 2001

Inyo-Mono Title Company Future Notice of Trustee’s Sale Schedule Page

Inyo-Mono Title Company Daily Notice of Trustee’s Sale Results Page

Inyo-Mono Title Company Online!

Inyo-Mono Title Company Industry News Blog

Escrow Officer Indicted In Mortgage Fraud Scheme

2011-09-15T11:40:00.000-07:00

In May 2010, an escrow officer by the name of Donna Demello pled guilty to conspiracy to commit wire and mail fraud for her role in a mortgage fraud scheme. Demello was the escrow officer on approximately 80 condo purchases in the San Diego area. She acted as a co-conspirator by concealing large disbursements in the transactions.

After the lender foreclosed on all 80 loans and investigated the transactions it was discovered the properties were purchased by straw buyers who obtained purchase money loans. At closing, the escrow officer would prepare two HUD-1s. The first HUD-1 reflected all the receipts and disbursements including the payment of a "marketing fee" (usually in the amount of $150,000 payable to individuals and entities who were not a party to the transaction). The second HUD-1 did not disclose the payment of this "marketing fee." Instead, the second HUD-1 stated all the proceeds were disbursed to the seller. The disclosure of the payment of the "marketing fee" proved to be material to the lender, and would have affected their decision to approve the loan.

Demello was just one of six co-conspirators. The mastermind, James Delbert McConville, also recruited a notary, personal banker, loan officer and real estate agent. The indictment indicated these co-conspirators prepared false and misleading loan applications, false bank statements, false verification of assets, forged signatures, and notarized documents when the signer was not present and knew the signatures were forged.

Demello is currently waiting to be sentenced. She faces a maximum prison sentence of 30 years and maximum fine of $1,000,000. Her plea agreement includes a forfeiture provision. It says she, "shall forfeit to the United States all property, real or personal, which constitutes or is derived from proceeds traceable to said offense, including but not limited to the following property: a sum of money equal to the total proceeds from the commission of the offense."

Per Title 18: U.S. Code Section 1010 it is a crime to knowingly make false representations to the U.S. on a HUD or similar statement. Penalties upon conviction can include a fine and imprisonment. Unfortunately Donna Demello did not take this seriously. Not only has she lost her career – but she now has a felony conviction against her.

Figures hold steady

2011-09-09T11:27:00.000-07:00

Mortgage applications decreased by 4.9 percent from one week earlier, the third consecutive week of declines, the Mortgage Bankers Association (MBA) reported in its Weekly Mortgage Applications Survey for the week ending September 2. On an unadjusted basis, the Market Composite Index fell by 5.3 percent compared to the previous week. The four-week moving average fell by 3.2 percent.

The seasonally adjusted Refinance Index fell by 6.3 percent from the previous week. The four-week moving average decreased by 3.1 percent. The refinance share of mortgage activity decreased to 77.1 percent of total applications from 77.8 percent the previous week.

The seasonally adjusted Purchase Index showed the only improvement, increasing by 0.2 percent from one week earlier. The unadjusted Purchase Index decreased by 2.1 percent compared to the previous week and was 13.5 percent lower than the same week one year ago. The four-week moving average fell by 3.7 percent.

“Heading into the Labor Day weekend, the 30-year rate was at its second-lowest level in the history of our survey — the low point was reached last October — and the 15-year rate marked a new low in our survey," said Mike Fratantoni, MBA vice president of research and economics. “Despite these rates however, refinance application volume fell for the third straight week, and is more than 35 percent below levels at this time last year. Purchase application volume remains relatively flat at extremely low levels, close to lows last seen in 1996.”

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.23 percent from 4.32 percent, with points decreasing to 1.04 from 1.29 (including the origination fee) for 80 percent loan-to-value ratio loans. This is the second-lowest 30-year rate recorded in the survey. The effective rate also decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.41 percent from 3.49 percent, with points decreasing to 0.94 from 1.00 (including the origination fee) for 80 percent LTV loans. This is the lowest 15-year rate recorded in the history of the survey since the beginning of January 1990. The effective rate also decreased from last week.

The adjustable-rate mortgage share of activity was unchanged at 7.1 percent of total applications from the previous week.

The survey covers more than 50 percent of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

FHFA filing 17 lawsuits against financial institutions

2011-09-07T11:39:00.001-07:00

The government appears to be regaining interest in the mortgage market. First was speculation of the Obama Administration potentially boosting refinances, and now the Federal Housing Finance Agency (FHFA) is going on the offensive against many of the nation’s largest lenders.

The FHFA filed lawsuits against 17 financial institutions, certain of their officers and various unaffiliated lead underwriters, alleging violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (PLS) to the enterprises.

As conservator of government sponsored enterprises Fannie Mae and Freddie Mac, FHFA is charged with preserving and conserving these companies’ assets. The complaints reflects the FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities (PLS) are attributable to misrepresentations and other improper actions by these firms and individuals. Based on its review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the GSEs for those securities.

These complaints were filed in federal or state court in New York or the federal court in Connecticut. The complaints seek damages and civil penalties under the Securities Act of 1933. In addition, each complaint seeks compensatory damages for negligent misrepresentation. Certain complaints also allege state securities law violations or common law fraud.

FHFA filed the complaints under the broad authority granted to it by the Housing and Economic Recovery Act of 2008. The U.S. legal system provides for addressing such alleged misrepresentations through the nation’s securities laws and traditional common law. FHFA is following those legal remedies in filing these complaints and seeks to recover on losses to the GSEs that are the legal responsibilities of others.

Complaints have been filed against the following lead defendants:

1. Ally Financial Inc. f/k/a GMAC, LLC
2. Bank of America Corp.
3. Barclays Bank PLC
4. Citigroup Inc.
5. Countrywide Financial Corp.
6. Credit Suisse Holdings (USA) Inc.
7. Deutsche Bank AG
8. First Horizon National Corp.
9. General Electric Co.
10. Goldman Sachs & Co.
11. HSBC North America Holdings, Inc.
12. JPMorgan Chase & Co.
13. Merrill Lynch & Co. / First Franklin Financial Corp.
14. Morgan Stanley
15. Nomura Holding America Inc.
16. The Royal Bank of Scotland Group PLC
17. Société Générale

A similar suit was filed in July, against UBS, and it sought at least $900 million. These lawsuits could be worth billions, as the court documents cite more than $160 billion worth of total purchases by the GSEs from these banks within the designated time frame. Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers.

The FHFA’s prayer for relief in the court documents is for “all damages sustained as a result of the defendants’ wrongdoing, in an amount to be proven at trial, but including: Rescission and recovery of the consideration paid for the GSE Certificates, with interest thereon; each GSE’s monetary losses, including any diminution in value of the GSE Certificates, as well as lost principal and lost interest payments thereon; attorneys’ fees and costs; prejudgment interest at the maximum legal rate; and such other and further relief as the court may deem just and proper.”

Arbitration Permitted for Class Actions against Title Companies

2011-09-06T10:00:00.000-07:00

A United States District Court recently allowed title companies to require the arbitration of antitrust claims. The decision was based on a recent U.S. Supreme Court decision applying arbitration to class actions. The plaintiffs claimed that title companies unfairly fixed prices. The court allowed the title companies to compel arbitration based on the arbitration clause in the title policies, which was silent as to whether class-action arbitration was permissible, and even though the companies failed to request arbitration earlier in the case.

The court decided that prior to the Supreme Court decision the law in California would have precluded the arbitration in class actions, but now the title companies could assert their right to require arbitration since the California law had been preempted by federal law. The court also addressed a change in arbitration administration since the National Arbitration Forum no longer arbitrates consumer disputes. The Court designated the American Arbitration Association as the arbitrator, as originally contemplated by the parties. The case is In re California Title Ins. Antitrust Litig., CIV. 08-1341-JWA, 2011 WL 2566449 (N.D. Cal. June 27, 2011).

2011-09-02T09:24:00.000-07:00

The threat of losing your home is stressful enough to make you ill, it stands to reason. Now two economists have measured just how unhealthy the foreclosure crisis has been in some of the hardest-hit areas of the U.S.

New research by Janet Currie of Princeton University and Erdal Tekin of Georgia State University shows a direct correlation between foreclosure rates and the health of residents in Arizona, California, Florida and New Jersey. The economists concluded in a paper published this month by the National Bureau of Economic Research that an increase of 100 foreclosures corresponded to a 7.2% rise in emergency room visits and hospitalizations for hypertension, and an 8.1% increase for diabetes, among people aged 20 to 49.

Each rise of 100 foreclosures was also associated with 12% more visits related to anxiety in the same age category. And the same rise in foreclosures was associated with 39% more visits for suicide attempts among the same group, though this still represents a small number of patients, the researchers say.

Teasing out cause and effect can be delicate, and correlation doesn't necessarily mean foreclosures directly cause health problems. Financial duress, among other issues, could lead to health problems—and cause foreclosures, too.

The economists didn't find similar patterns with diseases such as cancer or elective surgeries such as hip replacement, leading them to conclude that areas with high foreclosures are seeing mostly an increase of stress-related ailments.

Is the housing crisis making Americans sicker? New economic research suggests just that. The research found a direct correlation between foreclosure rates and the health of residents. Mitra Kalita explains on Lunch Break.

Tuesday brought news of further weakness in the housing market as the closely watched S&P/Case-Shiller home-price index came in 5.9% lower for the second quarter from a year earlier. Continued job losses and economic uncertainty could weigh on home prices and make for another wave of foreclosures, economists say.

It may not just be foreclosure victims arriving at hospitals—but neighbors also grappling with depleting equity in their biggest investment.

"You see foreclosures having a general effect on the neighborhood," Ms. Currie says. "Everybody's stressed out. There is a connection between people's economic well being and their physical well being."

The situation got so bad for Patricia Graci, a 51-year-old Staten Island, N.Y., resident, that she canceled a recent court appearance related to the foreclosure on her house because she couldn't get out of bed. After her husband lost his job as a painter in 2008, the Gracis relied on savings to pay their mortgage for two years.

"Everything was going downhill. My savings were going down to nothing," says Ms. Graci. "When I realized the money wasn't there anymore, I started getting very anxious and depressed."

She says her lender advised her to default on her mortgage to qualify for a loan modification. Ms. Graci, who was an assistant bank manager and already had rheumatoid arthritis, says she began seeing a therapist and landed in the hospital with difficulty breathing in December 2009. A few weeks later came the foreclosure notice from the bank.

"They told me it was more anxiety and stress that made me wind up in the hospital than the arthritis," Ms. Graci says. After repeatedly missing work due to illness, Ms. Graci went on long-term disability.

The areas that have the highest foreclosure rates also tend to have a large portion of their population unemployed, underemployed or uninsured. Ms. Currie says the research accounted for this by instituting controls for persistent differences among areas, such as poverty rates, as well as for county-level trends. Much of the 2005-2009 period examined came before unemployment peaked, too, she says. The researchers examined hospital-visit numbers and foreclosure rates in all ZIP Codes that had those data available.

The areas that have the highest foreclosure rates also tend to have a large portion of their population unemployed, underemployed or uninsured. Ms. Currie says the research accounted for this by instituting controls for persistent differences among areas, such as poverty rates, as well as for county-level trends. The time period examined, 2005 to 2007, was before unemployment peaked, she says. The researchers examined hospital-visit numbers and foreclosure rates in all ZIP Codes that had those data available.

They found that areas in the top fifth of foreclosure activity have more than double the number of visits for preventable conditions that generally don't require hospitalization than the bottom fifth.

At the local hospital in Homestead, Fla., a city of mostly single-family, middle-class homes about 30 miles from Miami, the emergency room has been bustling. Emergency visits to the hospital in 2010 more than doubled from 10 years earlier to about 67,000, and emergency department medical director Otto Vega says they will surpass 70,000 this year. Homestead has the highest rate of mortgage delinquencies in the U.S.—in June, 41% of mortgage holders in the hardest-hit ZIP Code of Homestead were 90 days or more past due on payments, according to real-estate data firm CoreLogic Inc.

While the most common ailments are respiratory problems and pneumonia, Dr. Vega notes an increase in psychosomatic disorders, such as patients with chest pain and shortness of breath, and others who feel suicidal. "A lot of young people, less than 50 years old, have chest pain. You know it's anxiety," he says.

Nationwide, overall emergency-room visits have also been rising, growing 5% from 2007 to 127.3 million in 2009, according to the American Hospital Association. But inpatient stays have largely kept pace with population growth over the last decade, says Beth Feldpush, a vice president for policy and advocacy at the National Association of Public Hospitals.

The number of people covered by employer-sponsored insurance has been falling, she says. "When people don't have insurance, they put off seeking care for too long and end up in the emergency room."

And some of those seeking treatment had medical conditions before foreclosure—but the stress of losing their homes has exacerbated their ailments.

In 2008, Norman Adelman of Freehold, N.J., called his lender to ask for a forbearance of three or four months, saying he was about to undergo knee-replacement surgery. The lender complied and Mr. Adelman, who runs a home-energy business, says he began scaling back his work. He underwent needed tests and doctor visits.

After two months of not paying his mortgage, he successfully applied for a loan modification, taking his monthly payment from $2,700 to $1,900. But then the loan was sold—and a new servicer didn't recognize the terms of the arrangement, he says.

Mr. Adelman is fighting the new lender but says he has been in and out of the hospital for the last two years. He never had his knees replaced and is now on antidepressants and antianxiety medication.

"He's deteriorated. He's had sleepless nights," says his wife, Shulamis. "You always have this fear of being thrown out. He's just gotten worse and worse from not sleeping."

Earlier this month, after working with the nonprofit Staten Island Legal Services, Ms. Graci received a trial loan modification. "I'm happy but I am still scared," she says. "I want a permanent solution. I don't know if I am in the clear."

Pending home sales above year-ago pace, but decline from previous month Pending home sales above year-ago pace, but decline from previous month

2011-08-31T10:17:00.000-07:00

Pending home sales declined in July but remain well above year-ago levels, according to the National Association of Realtors (NAR). All regions show monthly declines except for the West, which continues to show the highest level of sales contract activity.

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, slipped 1.3 percent to 89.7 in July from 90.9 in June but is 14.4 percent above the 78.4 index in July 2010. The data reflects contracts but not closings.

Lawrence Yun, NAR chief economist, said sales activity is underperforming. “The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” he said. “We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.”

The PHSI in the Northeast declined 2 percent to 67.5 in July but is 9.7 percent above July 2010. In the Midwest, the index slipped 0.8 percent to 79.1 in July but is 18.8 percent above a year ago. Pending home sales in the South fell 4.8 percent to an index of 94.4 but are 9.5 percent higher than July 2010. In the West, the index rose 3.6 percent to 110.8 in July and is 20.6 percent above a year ago.

“Looking at pending home sales over a longer span, contract activity over the past three months is fairly comparable to the first three months of the year, and well above the low seen in April,” Yun said. “The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge. It is now a question of lending standards and consumers having the necessary confidence to enter the market.”

Title/Escrow/Settlement makes up 14% of FBI Fraud Files in 2010

2011-08-29T16:00:00.000-07:00

If you’ve followed the news during the past year, it’s no surprise that the latest report from the FBI shows that mortgage fraud remains at an elevated level, consistent with that seen in 2009, when it initiated its Operation Stolen Dreams program. In the overall fraud picture, title/escrow/settlement made up 14 percent of FBI cases opened in 2010.

The main theme of the FBI’s 2010 Mortgage Fraud Report is that the housing market is in such bad shape, with elevated levels of foreclosure, delinquency, negative equity, unemployment, etc., that it’s only logical that mortgage fraud continues to be a problem, as these conditions breed fraud.

The FBI reports that it had 3,129 pending fraud investigations in 2010, which is actually a 12 percent increase from 2009 and a 90 percent increase from 2008. Seventy-one percent on those pending investigations involved dollar losses totaling more than $1 million. The report also cited data from CoreLogic that says more than $10 billion in loans were originated with fraudulent application in 2010.

At the title and settlement services level, the FBI reports that 38 percent of its field offices are reporting some form of title/escrow/settlement fraud. According to these reports, a majority of these frauds involve the “diversion or embezzlement of funds for uses other than those specified in the lender’s closing instructions.”

Associated schemes include: “failure to satisfy/pay off mortgage loans after closing refinances; the reconveyance or transfer of property without the homeowner’s knowledge or consent; the failure to record closing documents such as property deeds; the recording of deeds without title insurance but charging the homeowner and absconding with the money; the use of settlement funds intended to pay subcontractors by general contractors to pay debts on previous projects; the use of dry closings; the delayed recording of loans; the filing of fraudulent liens to receive cash at closing; and the distribution of settlement funds among co-conspirators.”

The FBI’s review of 2010 files shows title agents and settlement attorneys in at least 21 investigations in 14 field offices involved in the non-satisfaction of mortgage schemes. These people are engaged in misappropriating and embezzling more than $27 million in settlement funds for personal use.

The report cites a laundry list of perpetrators, including: licensed/registered and non-licensed/registered mortgage brokers, lenders, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives and trust account representatives. They are people with a high level of access to financial documents, systems, origination software, notary seals and so on.

And these perpetrators are committing a laundry list of schemes in addition to title, including: loan origination (62 percent), foreclosure rescue (2 percent), real estate investment (7 percent), equity skimming (2 percent), short sale (4 percent), commercial real estate fraud (4 percent), builder bailout (2 percent), bankruptcy fraud (1 percent), advance fee (2 percent), and foreclosure rescue (2 percent).

The FBI concluded the top states for mortgage fraud in 2010 were Florida, California, Arizona, Nevada, Illinois, Michigan, New York, Georgia, New Jersey and Maryland.

Mitchell Stein of the national law firm of Mitchell J. Stein & Associates LLP, commented in a release: “Incredibly, the fraud now involves brand new loans or loan transfers, where the banks are continuing to subject the American public to the same practices that started the meltdown in 2008.

“Now that the FDIC and Department of Homeland of Security have reported at length on the problem, banks and bank servicers have become resilient and more sophisticated in their schemes,” he continued.

Interthinx also released its quarterly Mortgage Fraud Risk Report, which covers data collected in the second quarter of 2011. This report tracks overall and type-specific mortgage fraud risk with an analysis of fraud risk from specific ZIP codes to state and national levels. The big story in this report the last several quarters was the dramatic increase in fraud in the Chicago area. According to the most recent analysis, fraud risk has decreased significantly in the Chicago metro area. Miami now ranks among the top 10 riskiest metropolitan statistical areas (MSAs) for three of the four type-specific fraud risks tracked in the report.

“The recent decrease in mortgage fraud risk in the Chicago ZIP codes was as dramatic as it was sudden,” said Kevin Coop, president of Interthinx. “It suggests that when the industry has actionable intelligence and increases its scrutiny of an area, word gets out, and the fraudsters move on.”

Miami, on the other hand, has experienced a resurgence in fraud risk and has been high on the list of risky MSAs for the past year. Like the rest of the state, Miami is struggling to get the problem under control, with five of the top 10 riskiest ZIP codes and eight of the top 20 in Florida.

As for the rest of the country, the national Mortgage Fraud Risk Index remains elevated but has stayed relatively flat over the past year.

Pending California home sales dip in July by PEbusiness

2011-08-25T08:54:00.000-07:00

Pending home sales, a sign of the direction of the housing market, fell 1.7 percent in California last month, according to the California Association of Realtors. Still the index for pending home sales that the association uses was up 4.9 percent from July, 2010.

The downturn in new sales contracts isn't expected to continue, the association said in a statement. "While pending home sales dipped in July, all indications show we should continue at the current level for the next couple months," said C.A.R. President Beth L. Peerce. "Pending sales have been ahead of last year's level for the past three consecutive months and should be on track to finish the year even with last year's pace," she said.

Also the share of distressed homes, including bank owned and short sales, fell statewide to 44.5 percent in July, from 46.9 percent in June and 47.7 percent a year earlier, the association reported.

Distressed single family homes sold in Riverside and San Bernardino counties remain at a higher level than for the state as a whole. In Riverside County last month distressed homes represented 62 percent of sales, down from 67 percent in July, 2010 but up from 61 percent in June. In San Bernardino County last month distressesd homes comprised 65 percent of sales, down from 69 percent in June and 72 percent a year earlier.

HUD to clarify RESPA regulations

2011-08-25T08:38:00.000-07:00

HUD Issues Technical Corrections to Clarify RESPA

HUD issued a final rule clarifying amendments to RESPA regulations, including a clarification on instructions for the HUD-1.

Posted by Inyo-Mono Title Company. Serving the Eastern Sierra in Inyo and Mono Counties since 1913. www.inyomonotitle.com

Elder Financial Abuse

2011-08-22T08:52:00.000-07:00

Recently some states and U.S. Territories have enacted statutes which require Title Companies to educate their employees on elder financial abuse, ways to detect it and where they should report any suspected incidents.

Elder financial abuse is the theft or embezzlement of money or any other property from an elder. Elder financial abuse, just as any other type of financial abuse or fraud is a concern to our Company. This memorandum describes some of the signs and the proper steps to take when a settlement agent encounters a transaction where the true intent or understanding of an elderly principal may be in question.

Elder abuse of a financial nature happens when the victim is exploited because of vulnerabilities associated with age, such as impaired mental capacity. It occurs when someone, usually someone close to the elder, forces him or her to sell personal belongings or property, steals their money, or withholds the elder’s money needed for daily living. Theft, fraud, forgery, extortion and the wrongful use of a Power of Attorney are also forms of financial abuse. Such exploitation may also occur without the victim’s knowledge and it is a crime.

Signs of elder financial abuse:
The elder is forced to sell or give away their property or sign a Power of Attorney.
Sudden changes in an elder’s Will.
Different or inappropriate people coming to the office.
Home health aide, housekeeper or other person is added to the elder’s account or is receiving an assignment of proceeds.
Older customer isolated. Older customer seems unable to comprehend the financial implication of the transaction at hand.
Older customer signs papers without knowing or understanding what they are signing.
Numerous unpaid bills, such as overdue rent, utilities, taxes, etc.
Family members or “trusted” friend discourages or interferes with communication directly with the elderly principal in a transaction.
Recent change of title to their home in favor of a “friend”
The elderly customer is incapable of understanding the nature of the transaction, or eviction notice arrives when the elderly person thought they still owned their home.
Promises of “lifelong care” in exchange for willing or deeding property/bank accounts to their caregiver.
Elderly customer complains they used to have money, but does not have any anymore.
Caregiver evasive with the elderly person about specific of the financial transaction at hand while in our offices.
Elderly customer is fearful or seems afraid to speak in front of someone (family member, loan officer, real estate agent, etc.)
Accompanying person seeks to prevent elderly customer from interacting with others.
Elderly customer and their family or caregiver provides conflicting accounts of an incident, expenditure or financial need.
The elderly person appears disheveled or without proper care even though he or she has adequate financial resources.

Predatory Lending
Most Americans over the age of 50 are homeowners. It is this group of homeowners who have built up equity in their homes and have a good credit rating. As a result, elders become a target of predatory loan originators who pressure them into high-interest loans they may not be able to repay. Older homeowners are often persuaded to borrow money through home equity loans for home repairs, debt consolidation or to pay health care costs. These loans are sold as a “miracle financial cure” and homeowners are devastated to find out they cannot afford to make the payments, pay off the loans and, as a result, may lose their home. Often these loans are packed with excessive fees, costly mortgage insurance, pre-payment penalties and balloon payments.

Many states have strict requirements and procedures regarding reporting elder abuse.

Posted by Inyo-Mono Title Company. Serving the Eastern Sierra in Inyo and Mono Counties since 1913. www.inyomonotitle.com

Short Sale Law Effective Immediately in California

2011-08-18T08:16:00.000-07:00

No Fee to Approve Short Sales and Short Sale Law Now Applies to Junior Loans

Governor Brown has signed Senate Bill 458 (Corbett) expanding anti-deficiency protection to all 1-4 residential mortgages or deeds of trust where the beneficiary consents to a short sale, whether a first deed of trust or a junior deed of trust. As an urgency bill, it became effective on July 15 when it was chaptered into law. The new law also limits the short sale anti-deficiency protections by excluding sales where the trustor is a limited partnership or LLC. Existing short sale law enacted in 2010 already excluded corporations.

The new law also clarifies the application of short sale law to multiple collateral situations by treating the short sale as a foreclosure under a power of sale for purposes of any other properties securing the note. This provision is meant to clarify that the short sale provisions do not impact multiple collateral loans.

Of particular importance to title and escrow companies, the bill prohibits a note holder from requiring the borrower to pay additional compensation, aside from sale “proceeds,” in exchange for the note holder agreeing to the short sale.

Two concerns have arisen with respect to the prohibition on additional compensation for consent to the short sale. One issue involves open escrows, and the second the meaning of the term “proceeds.” There may be open escrows where a lender consented to a short sale based on an agreement by the borrower to pay a fee or charge. The second issue is whether the new law means “net proceeds” or “gross proceeds.” For instance, is the lender entitled to all the sale proceeds with the seller funding closing costs, or is it only the proceeds remaining after closing without the deposit of any seller funds into escrow?

The CLTA hosted a conference call recently with representatives of the lending, real estate and title community to discuss the bill. One of the sponsors of the new law, the California Association of Realtors, states that the intent is that “proceeds” mean net proceeds remaining after closing costs. Senator Corbett, who is the author of the law, may be asked by CLTA to submit a letter to the Senate Journal to make the intent clear.

The new law expands on short sale anti-deficiency legislation passed last year. Senate Bill 931 (Ducheny) was enacted last year in response to concerns that borrowers could have greater liability after a short sale than after a foreclosure. SB 931 prohibited a lender from obtaining a deficiency judgment as to a first mortgage or deed of trust following a short sale. Since SB 931 only applied to first mortgages, homeowners with more than one mortgage could still be liable to a junior noteholder after the short sale. The new law addresses that issue.

Posted by Inyo-Mono Title Company. Serving the Eastern Sierra in Inyo and Mono Counties since 1913. www.inyomonotitle.com

Title Insurance Brings Confidence to the Real Estate Market

2011-08-17T11:50:00.000-07:00

The loss of confidence in the economy and the stock market is a direct reflection of the loss of confidence in our government and its leaders. In a serious crisis, there are so many problems to tackle at the same time and so many opinions on what the best course of action should be that there seems to be no consensus by the people or the leaders. The more fractured our leaders look, the more uncertain the people feel. The more uncertainty that is broadcast by the government and media, the more fear takes hold. The majority of citizens need to agree on how priorities are arranged - what the short-term and long-term solutions are - and feel assured that steps are being taken in the public and private sector to address each priority in order. In addition, since the “Great Recession” was caused by a rapid decline and overcorrection of real estate prices, perhaps any lasting recovery must begin with encouraging and unleashing residential and commercial pent-up demand.

What can we do? We can play an active role in supplying certainty to the real estate system. We can also each express our views to the government on the priority of the real estate recovery through our local and national land title associations. We often see ourselves as mere technicians researching chains of title, but the title insurance product has a broad and profound influence on not just real estate, but human rights as a whole.
Without even basic real property rights, where would our civilization be today? Human rights are woven into the fabric of laws relating to real property rights. In talking about the evolution of English land laws, Kevin Gray eloquently summarizes in his treatise entitled “Land Law and Human Rights” in the book edited by Louise Tee called Land Law: Issues, Debates, Policy (Willan Publishing 2002, pages 211 - 245):

The law of property silently betrays a range of value judgments about the proper entitlements of human and other actors.6* These value judgments reflect a complex picture of social relationships and rankings, each casting a shadow on some extra-legal index of freedom, dignity and equality. For instance, the law of matrimonial property long bore the imprint of a dogma of marital symbiosis which ensured that, deep into the 20th century, a substantial portion of the population lived most of their adult life in a state of legal and factual dispossession. The medieval notion of spousal unity - of husband and wife as ‘one flesh’ - had the effect of suspending the legal personality of the married woman and rendering her incompetent to acquire property or even to earn wages in her own name.7 As Lord Denning MR acidly observed some time later, ‘the law regarded husband and wife as one: and the husband as that one.’8

The invidious discrimination practised against the married woman was reversed only slowly by the long-term effects of the Married Women’s Property Acts of 1870 and 1882, but the historical process provides yet another reminder of the way in which, as Professor C.B. Macpherson pointed out, the idea of property is being gradually broadened to include a ‘right to a kind of society or set of power relations which will enable the individual to live a fully human life.’9 Indeed, in an older and more enlightened property philosophy which lies deeply embedded in Anglo- American political thought, the concept of ‘property’ was always accounted as inclusive of a person’s ‘life, liberty and estate.’10 This Lockean articulation of the coalescence of property and human right was to have energising - even revolutionary - consequences. For James Madison in 1792, just ‘as a man is said to have a right to his property, he may be equally said to have a property in his rights.’11 By that stage, of course, the American colonists, in active assertion of ‘certain unalienable rights,’12 had just thrown off the yoke of British rule and, equally important, had altered the Grundnorm of a large part of a continent’s land law.13

Your role as a title agent takes on greater importance when viewed from a more distant vantage point. As you all know, the activities of a title agent are vastly different from those of other types of insurance agents. Unlike other insurance agents who take an application and act as more of a sales conduit, title agents are crucial in rendering the title insurable. Title agents actually review the chain of title and/or title commitment to determine who has what rights in the real estate and then proactively work to uphold the various rights in the real estate. You minimize the risks of later attack on the title and render the title marketable to a third-party buyer or lender. For example, you may obtain pay-off statements, deeds, probate documents, joinder of spouses and compliance with divorce decrees/ property settlement agreements, and determine whether liens and judgments attach and resolve them of record. We often lose sight - in the minutiae of details in conducting a closing - of the fact that by making and addressing commitment requirements, we are in some way enforcing the rights of the parties and assuring the buyer or lender, subject to the terms and conditions of the policy, that they have what they bargained for as far as their rights in the real estate. This in turn provides needed certainty in the real estate market.

Just as our recent personal financial losses or job losses have caused us to reprioritize and renew our focus on family and friends, professionally we must step up and become leaders of the highest caliber in order to play our part in restoring integrity to our industry. During the boom we were pressured by the market to speedily get title orders out to the customers and lenders who wanted to close quickly. The need to stay competitive and give customers the turnaround time that they required was exhausting and difficult. But we did it - we made it happen. I was there at ground zero, running an agency title plant in rapidly growing Palm Beach, Fla. We could not find enough experienced people to handle the work, plus we were constantly training on new systems that were morphing to stay ahead of the curve. With the market bust, we did temporarily return to a more normal pace, but then right-sizing was needed in order to make it through the severe downturn. So we had less staff to do the work - back to grinding out those files as quickly as possible while trying not to miss anything.

There is a balance. We do not need to “fly speck” the titles, but we need to understand where our losses are coming from and address those areas in our review. Technology has helped tremendously: We can do computer title searches for most areas of the country from anywhere, and we can retain the best people to search and examine the titles. But we all know computer systems live by the “garbage in, garbage out” rule, so we must ensure the accuracy of the information that is put into the system. We must review the titles carefully and explain what we can to buyers and borrowers about the title and closing so that they know what they are getting. Seek to recognize as soon as possible in the transaction if you sense that they need legal advice to understand their rights, and refer them quickly to an attorney to give them counsel and represent their interests.
Real estate markets have always been and will continue to be cyclical. Our industry has learned to manage those cycles pretty well. Though we do not create the laws and we do not control the financial cycles of the market, title agents and underwriters play vital roles in protecting and upholding the real estate laws that ultimately reflect our human rights. My hope is that we will all be leaders in the return to a stable and growing real estate market.

Footnotes

6. See Gray and Gray, Elements of Land Law (3rd edn., Butterworths, London 2001), pp. 95-6.
7. The married woman’s persona at common law was ‘incorporated and consolidated into that of the husband … her baron, or lord’ (Blackstone, Commentaries, Vol. I, p. 430). See Gray, ‘Property in Common Law Systems,’ in G.E. van Maanen and A.J. van der Walt (ed.), Property Law on the Threshold of the 21st Century (MAKLU, Antwerp, 1996), pp. 238 - 40. It is remarkable that the full legal capacity of the married woman was finally recognised in England only in the Law Reform (Married Women and Tortfeasors) Act 1935.
8. Williams & Glyn’s Bank Ltd. v Boland [1979] Ch. 312 at 332C.
9. ‘Capitalism and the Changing Concept of Property,’ in E. Kamenka and R.S. Neale (ed.), Feudalism, Capitalism and Beyond (ANU Press, Canberra 1975), p. 120.
10. John Locke, Two Treatises of Government (2nd critical edn. by P. Laslett, Cambridge 1967), The Second Treatise, s 123 (p. 368).
11. ‘Property,’ in The Papers of James Madison (R.A. Rutland, et al [ed.], University of Virginia Press, Charlottesville, Va., 1983), Vol. 14, p. 266 (National Gazette, 27 March 1792).
12. ‘We hold these truths to be self-evident, that all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness’ (United States Declaration of Independence [1776]).
13. After the close of the Revolutionary War, the land law system of the former colonies became ‘allodial’ (see Stevens v City of Salisbury, 214 A2d 775 at 778 [1965]; City of Annapolis v Waterman, 745 A2d 1000 at 1006 [Md 2000]).
>originally written by Katherine (Kitty) Stevens, VP, National Agency Counsel, FNTG
* For the purposes of this article, we have retained the original footnote numbering from the quoted treatise.

Posted by Inyo-Mono Title Company. Serving the Eastern Sierra in Inyo and Mono Counties since 1913. www.inyomonotitle.com