These classes are all available at Classes.Landrecs.com.
For information on new classes contact me.
PACE (Property Assessed Clean Energy) is a new way to finance energy efficiency and water conservation upgrades to buildings. PACE pays for new heating and cooling systems, lighting improvements, solar panels, water pumps, insulation, and more for almost any property – homes, commercial, industrial, non-profit, and agricultural. The idea is great – who doesn’t want more energy efficiency? Lower Energy Bills? Better Environmental Health?
But real estate agents, closers, abstractors and title companies, BEWARE. We may have a problem.
The PACE advertisement reads:
“Property owners across the US are using PACE because it saves them money and makes their buildings more valuable. PACE pays for 100% of a project’s costs and is repaid for up to 20 years with an assessment added to the property’s tax bill. PACE financing stays with the building upon sale…”
While that is a true statement, PACE financing does stay with the building upon sale, it’s not quite that simple. Once PACE is added as an assessment, it becomes part of the real estate taxes. And, as we all know, real estate TAXES are a FIRST LIEN.
So, let’s say Home Owner Holly uses PACE to install $30,000 worth of PACE-energy efficient fixtures (with a 5% interest rate on the 20 year PACE Assessment) and enjoys low energy bills. Two years later, Holly is offered a new job out of town. She lists the home with Realtor Rick. Rick is excited because he is an energy efficiency advocate and lists all of the energy upgrades for this fine home, selling for only $249,900. Bobby Buyer comes along and makes an offer of $240,000. Holly agrees. She is thinking the buyer will just take over the house and taxes.
Bobby Buyer applies for a loan of $192,00. They order title work. The title company and abstractor know that the $28,000 is a first lien along with the taxes. Holly has not thought to use any of the money saved from her lower electric bills to pay the PACE lien. She thought PACE told her the PACE financing would “stay with the building.” She never thought she might have to cough up the money at closing. . Bobby’s lender does not want to be in Second position behind a $28,000 PACE lien, so now the conundrum. Where does that extra $28,000 in PACE money come from at closing?
I’m not saying PACE’s a bad idea, I love energy efficiency! But let’s make sure everyone understands PACE and how it works.
Here are some excerpts from Thomas Pryde’s new Blog pertaining to abstractors. To read the entire article click: Thomas Pryde Blog
I couldn’t agree more.
There are certainly opportunities to succeed in this market. If independent service providers are going to take advantage of them, they must differentiate themselves from the rest of the market, and nothing sets the independent apart from the crowd better than the fact that they know abstracting, in the context of their local areas, better than anyone.
However, while this is a distinct advantage, there are two critical obstacles to getting that message out to clients and convincing them to use your services. Once the obstacles are understood, the opportunities and challenges become clearer.
This is really the point of this article. The message that local expertise results in superior results is not making it to the clients. This may be partially due to a lack of marketing and communication from the independent providers, and/or it may be partially due to the fact that the ultimate clients (consumers and lenders) are frequently insulated from the independent provider that is performing the search.
Even where this is understood there is no way to verify or validate genuine expertise, and therein can be found the biggest challenge. Until there is a broadly accepted education and certification process, there is not likely to be any significant traction gained in regards to the one market value that independent providers can best deliver.
Gains can be made in the other two values, and that will be important. However, very few things would positively impact the market for independent providers better than a robust certification program. Such a program would be good for the market as a whole; it would especially benefit consumers, and independent service providers would have the means to communicate the difference between a discount provider and one with genuine local expertise.
What can be done?
- Recognize that you are part of a large group of providers that can significantly impact the market, if there is unity.
- Participate in SOT and other social media venues (Linkdin has several communities as well)
- Contribute to best practices discussions, in particular, and strive to educate your clients as to why commodity searches are inferior.
- Join NALTEA or other professional organizations that can provide the structure for increased cooperation and unity.
- Speak up on behalf of better education practices for training abstractors, and join efforts to codify that effort in a certification process.
There is much work to be done, but without a unified commitment to these things, the opportunities will be eaten away slowly, until the idea of independent search services is a thing of the past.
My husband and I recently had a fire at our home with a terrible loss. For many years I have paid what I considered a very hefty premium because my insurance agency said it was what I needed, and I trust them. They know the business, they had our home valued for replacement value, so we paid the premiums, never believing we would use it. It was just the right thing to do. Now, thank heaven, we know why we paid those hefty premiums. Insurance company to the rescue – but it has been and will continue to be a process to rebuild our lives. We rely on those who”know their stuff” to help us with complicated purchases, like insurance. I am thankful to my agent and my insurer.
Similarly, as I have said for a long time – “Title Insurance is like fire insurance – You hope you’ll never need it, but if you do, it’s worth it’s weight in gold!” The difference with hazard insurance is that you pay it over and over again, each month, or each quarter or each year. With title insurance you pay once and it’s done. I sold a LOT of owner’s policies, and while only a few “paid off,” those who needed them, really needed them and were thankful.
Along that vein comes a good article in the Washington Post:
Insurance is one of those necessary evils in life. You purchase a policy and hope you never have to file a claim. And in the meantime, you send a regular payment to your insurance company “just in case.”
That’s true of all but one type of insurance. Unlike other policies, title insurance is a one-time fee paid at closing. It protects your financial stake in the property you’re buying should an unforeseeable claim arise in the future. A claim could stem from anything from fraud or identity theft to encroachment or mortgage liens.
Without an owner’s title insurance policy, the legal costs to hash out a title claim would be in the tens of thousands of dollars paid directly out of your pocket. Not to mention you could lose the money you’ve invested in your property such as your down payment and any improvements you’ve made. A frequent refrain we hear from our clients is “Why do I need title insurance when you have already done a title search?” Not only does title insurance cover mistakes made during a title search, it also covers a gamut of issues that even the best title search cannot reveal. Read the entire article here
I have commented in the past on how not handling title claims in a timely manner can cause damages, and I use real examples to stress the point. Well, comes another heavy duty example. The Superior Court of Pennsylvania has upheld $1,572,909.24 in punitive damages in Davis V. Fidelity National Title Insurance Company for what could have/should have been a fairly minor claim.
Here is a quote from the court document:
Initially, we note the trial court awarded Davis $393,227.31 in compensatory damages and $1,572,909.24 in punitive damages. This represents a 4:1 ratio of punitive to compensatory damages. The United States Supreme Court stated: We decline again to impose a bright-line ratio which a punitive damages award cannot exceed. Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. In [Pacific Mut. Life Ins. Co. v.] Haslip, [499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991)] in upholding a punitive damages award, we concluded that an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety. 499 U.S., at 23- 24. 111 S.Ct. 1032. We cited that 4–to–1 ratio again in Gore, 517 U.S., at 581, 116 S.Ct. 1589. The Court further referenced a long legislative history, dating back over 700 years and going forward to today, providing for sanctions of double, treble, or quadruple damages to deter and punish. Id., at 581, and n. 33, 116 S.Ct. 1589. While these ratios are not binding, they are instructive. They demonstrate what should be obvious: Singledigit multipliers are more likely to comport with due process, while still achieving the State’s goals of deterrence and retribution, than awards with ratios in range of 500 to 1, id., at 582, 116 S.Ct. 1589, or, in this case, of 145 to 1.
Remember, Title Agents, Title Insurers, the face amount of the Title Policy is NOT the ceiling on your title claims.
Reasonable comments made in Lexology about the CFPB publishing consumer complaints for the whole world to see. I mean really – is that fair? After all, who wants their name besmirched by a cranky customer. This makes the lender, title company, real estate company, etc. look guilty with no chance of rebuttal.
by Sirote & Permutt PC
The Consumer Financial Protection Bureau announced with some fanfare two weeks ago that it is going to publish consumer complaints on its website. So, let’s see…
A disgruntled consumer, who decides to get back at his lender, files an unverified, unsubstantiated and unproven complaint. The CFPB, without verification, substantiation or proof, then posts the complaint on its website – first stripping away information identifying the consumer, but not the lender. What can be wrong with that?
Well, for starters, if the lender is a bank then disparaging the same may be a crime under state law and federal law – or at least it used to be. Even if it is not illegal (i.e., disparagement as a crime) it is hardly fair to the lender not to be given an opportunity to investigate and if appropriate, protest the nature of the complaint, before the same is made public.
But say consumer advocates, surely disgruntled consumers would not file a frivolous or irrelevant complaint. Hmmm. Has anyone out there experienced an increase in the volume of frivolous and irrelevant letters alleging account errors?
As we said in a recent post, the CFPB seems to shoot first and ask questions later.
So, the CFPB promotes the situation where the lender’s reputation is damaged with no safeguards or method to appropriately respond.
A post from Thomas Pryde’s Blog, re-printed with his permission.
The prevailing view among some industry leaders seems to be that the independent abstractor is a dying breed, the last vestige of an ancient way of doing business. This is attributed to the rapidly expanding digitization of title documents and new technology solutions that are being designed to quickly and efficiently obtain and deliver those documents to their clients. This is one example where technology has made promises well beyond what it can actually provide.
While it is true that the need for independent title abstractors might actually be eliminated if the idealized descriptions of a technology provider’s capabilities proved realistic, proclamations of the imminent demise of their business may be premature. In fact, the independent abstractor has a real opportunity that seems to have been largely overlooked, but in order to understand and take advantage of this opportunity, we have to first examine the promised market of full digitization and automation.
In this oft-prophesied and idealized market, all archived public documents will be available both remotely and digitally, and the client who needs these documents would be able to simply and efficiently obtain them, removing the need for someone to go to the courthouse, manually obtain documents, scan them, and then deliver them back to the client.
All search-related activities could be performed remotely, and there would be no need for any local expertise. This is the essence of what is promised on the back of technology.
However, if digital availability was ubiquitous, if the digitized documents were perfect, and if all the related data was flawless, such technology might indeed eliminate the need for a skilled abstractor. However, achieving such perfection in the document chain would also virtually eliminate the need for the title insurance industry as a whole.
Of course, the reality is (and will continue to be) far from this ideal, and title insurance companies will continue to thrive on the potential existence of problems that might be found in any given document chain. As long as this is true, local expertise and timely results can work together to offer a value proposition that will ultimately trump a mindless search service offered at rock bottom prices.
This is a commentary by Thomas Pryde in his Blog, reprinted with his permission.
If independent abstractors are going to take the necessary steps to be seen as valued specialists, as opposed to mindless searchers, it isn’t enough to rail against the over-inflated promises of technology. There needs to be a clear understanding of what technology can do. Perfection in the document chain is not a promise that technology will soon deliver, but there are some direct advantages that technology can provide.
Like it or not, the industry is increasingly being driven by technological forces. This happens because our clients understandably want to pay less, get results faster, and ensure greater accuracy. Technology can improve results in all three of these areas, but over-prioritizing the first two values can (and frequently does) undermine the last.
For example, it used to be enough to offer unparalleled accuracy, but speed and price have become paramount to many of our clients. As long as they don’t have to sacrifice too much in quality, faster and cheaper will win the day. For clients who value price and speed above quality, off-shore operations can offer labor rates that will undercut any US based search operations.
Technology has facilitated this possibility, but offshore operations pose a significant risk: quality inevitably suffers when there is a lack of sufficient local knowledge. To further complicate the matter, doing business with US based companies does not eliminate this risk. “US based” operations can employ an offshore search team.
It is important to point out that the technology that makes cheaper and faster possible cannot actually improve the reliability of the person performing the search, and in the end, search quality is heavily dependent on the skill of the abstractor. With that said, there are some direct advantages to be gained by using technology to automate or facilitate three main processes:
Theoretically a full implementation of these technologies could leave the customer and the abstractor doing business with one another directly. Ideally it would, but the reality remains that in between the origination of the order and the person actually doing the search there are a variety of businesses, processes, and other factors that all add cost and time to the order. Used effectively, technology can at least minimize the impact of these factors.
By understanding the forces of technology that are changing our marketplace and taking advantage of the available technology, independent abstractors can compete in this increasingly technological world. That is why the company I lead exists, but ultimately technology can only be part of the solution. The market needs to see that errors resulting from inexperienced searchers, either in the US or offshore, ultimately hurt the customer (and the consumer in the end).
Independent abstract specialists can and must make the case that their local expertise provides a significantly more reliable result. That is the difference between being an abstract specialist or a mindless searcher. Technology can help you be more efficient, it can help you be faster, and it can even help eliminate some kinds of errors, but only a pair of well trained eyes can provide consistently reliable results.
Good Title Article in Lexology about new construction projects, claims, title policies and defenses.
On March 12, 2015, the United States Court of Appeals for the Seventh Circuit entered an opinion interpreting “the most litigated provision in the standard-form title-insurance policy purchased by real-estate lenders to protect their security interests in ongoing construction projects.”1 Exclusion 3(a) in the standard-form construction lender’s title policy provides that liens that are “created, suffered, assumed or agreed to” by the insured lender will not be covered under the title policy. In BB Syndication Services, Inc. v. First American Title Insurance Company, the Seventh Circuit held, in the context of a failed construction project, that this exclusion applies to mechanics’ liens arising as a result of a construction lender’s decision to declare a default and stop funding additional loans.2
The Seventh Circuit’s interpretation of Exclusion 3(a) in the standard-form construction lender’s title policy places the risk of loss associated with unpaid subcontractors arising from a lender’s decision to stop funding squarely on the construction lender, not the title insurer. There are, however, steps that a construction lender can take to mitigate this risk of loss.
Read the entire article HERE
I understand why Minnesota licenses its closers. It is a big responsibility to handle the hundreds of thousands of dollars each month that go a closer’s hands. It seems prudent to run those background checks, identify those trust accounts, etc. to secure the rights of the public and be able to follow those funds.
After all, it is a big temptation when times get tough. I know people, “good people,” who have “borrowed” funds (illegally.) I truly believe they thought they would just need a little help for a short time, to cover the rent or make payroll, until things got better and then they would reimburse the account. It’s a sad story and a dangerous tale. But we all know the title business is a very seasonal business and it seems it is always feast or famine. We are always looking to hire, or lay off.
On the other hand there are those who knowingly steal and think they can get away with it.
A title agent in Estero, FL is a recent example. Here is an account from Insurance News
March 14–A former title insurance agent in Estero accused of siphoning more than $705,000 from her clients in 2010 faces theft and fraud charges.
Lana Kaye Dargai, of the 22000 block of Forest View Drive, was arrested March 7, accused of stealing escrow funds put aside for the purchase and sale of real estate in Estero and Bonita Springs in June and July of 2010, according to theFlorida Department of Financial Services.
The department’s Division of Agent and Agency Services and Division of Insurance Fraud investigated the case. Dargai was doing business under the name Global Title Co., which she owned.
The investigation also found:
–Global Title used escrow money to purchase cashier’s checks to pay its own monthly rent and its own property taxes.
–In one instance, $9,000 in escrow money was moved into a bank account for Dargai’s father.
–At least eight times, from August 2009 through June 2010, funds from the company’s escrow account held with Bank of Florida were transferred into Global Title’s operating account, held with the same bank.
Dargai faces up to 15 years in prison for first degree grand theft and fraud charges, and her title agent license has been revoked. Dargai’s case will be prosecuted by the State Attorney’s Office in Fort Myers.
“These cases are thoroughly investigated, which takes time. Also, the State Attorney’s Office had a forensic accountant going over all the facts and figures,” said Ashley Carr, a spokeswoman for the Department of Financial Services.
Dargai, she said, turned in her Global Title agency license in 2011. She made off with money from at least five clients.
Stewart Title Guaranty, the underwriter for the money, reported the fraud to the state. “The clients weren’t even aware of any issues as Stewart Title covered the losses,” Carr said. “The clients are not out any money. The victim is Stewart Title.” Florida Community Bank was among the claimants that Stewart paid.
All Insurance companies are concerned with data privacy and security, especially title insurers and closers who deal with Privacy Laws and the Gramm Leach Bliley Act. There should therefore be particular interest in the second annual Global Insurance Symposium, May 26-28 in Des Moines, will include sessions on cyber security, big data and innovation.
Speakers include Thomas Sullivan, associate director of the Federal Reserve board of governors; Daud Vicary Abdullah, president and CEO of the Global University of Islamic Finance; and insurance commissioners Ken Kobylowski of New Jersey, John Huff of Missouri, Ted Nickel of Wisconsin and Kevin McCarty of Florida.
Sponsors include the Iowa Insurance Institute, the Federation of Iowa Insurers, the Iowa Economic Development Authority, the Greater Des Moines Partnership and the Iowa Insurance Division.