07.31.07
Posted in Education, Industry News, Value of a title searcher at 4:22 pm by Jeanne
In researching the book “Title Insurance for Real Estate Professionals” for Dearborn Real Estate Education, I contacted ALTA, asking for updated claims data. I had an old Pie Chart showing claims history by category from a major Underwriter from the 90’s, but it was outdated, and I wanted new data. ALTA verbally told me that the Underwriters “had collectively decided to no longer share that information.” (They did not wish to put that statement in writing.)
I for one would love to know what is causing claims. I would rather learn from someone else than the hard way - by making the mistake myself!
I am not sure what the Underwriters are hiding, but my guess would be that some (many?) of the Underwriters and Agents have blatantly bought into a wholesale disregard for good abstracting and title underwriting standards.
As the market demands Faster, Cheaper, many seem to have decided to cut costs by basically “not telling the whole truth” about the title. By merely giving a cursory sketch, they can simply use a current owner search, done cheaply offshore in many cases. They can then use pure risk underwriting, and when errors come up - as they do in one out of three cases, says ALTA, they can just give each other “insured closing letters,” guaranteeing, that if the problem rears its ugly head before the expiration date of the lien (or whatever the problem is…)the first company who made the mistake (and gets caught) will fix it.
The sad thing for those of us who are abstractors and title searchers, and understand the business, is that the consumer is no longer informed about easements, restrictions or other key data, because the policies are being done from a last record owner search.
I, for one, want to know “the whole truth” about the title and what I am buying. I believe that we as an industry are getting a black eye, and the consumer is getting the shaft with a poor quality product by NOT telling the whole truth… and all for the almighty buck.
Your comments would be appreciated!
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07.24.07
Posted in Don't underestimate a title searcher!, Education, Industry News at 5:53 pm by Jeanne
The American Title Insurance Industry: How a Cartel Fleeces the American Consumer is the newest book about the title industry, that will grace the shelves of local bookstores on August 1st.
In an Editorial Review Book Description about the manual, it states:
“In this important and fascinating book, the authors expose a scam that has fleeced Americans of billions of their hard-earned dollars since World War II. The title insurance industry, they show, has captured its regulators, and imposed exceedingly high costs on American homebuyers by means of a cartel-like arrangement. If that arrangement can be broken, price gouging would end and all American homeowners would enjoy what Canadians and Iowans do-reasonably priced peace of mind.”
–Robert E. Wright, Stern School of Business, New York University
For More information click here
From the, admittedly, quite limited amount of research done by this writer, I question Mr Joseph W Eaton’s authority to write such a comprehensive condemnation of a long standing institution. Mr Eaton, (assuming he is one in the same as the Joseph W Eaton listed on Amazon.com as the same author of books with the same name) has written such things as:
Card-Carrying Americans: Privacy, Security, and the National Id Card Debate, Culture and mental disorders;: A comparative study of the Hutterites and other populations, Prisons in Israel and Influencing Youth Culture: Study Youth Organizations in Israel. I fail to recognize how this makes him an expert on Title Insurance.
I recognize that I have not yet read this novel, but I am offended by the title. Title Insurance is a product that is issued by thousands of Title Underwriters and Title Agents across the country who are honorable and diligent in their search to protect the public.The product has been instrumental in securing homeownership for millions of Americans for many decades. It assists as a vehicle in the buying and selling of mortgages on the secondary market. It has saved many a consumer from loss of his home.
Additionally, the title industry collects and pays real estate taxes, assessments, State Tax Liens, Federal Tax Liens, Judgments and Child support liens. Even the IRS acknowledges that without the title industry their is no one to collect these taxes. These taxes fund our schools, fire departments, police, libraries, welfare programs and much more.
As well is issuing title policies, the title industry handles billions of dollars monthly when it closes transactions. This “soft side” of of the industry deals with consumers while executing complex Purchase Agreements, Loan Documents, Title Commitments as well as many State and Federal Regulations such as Truth in Lending Laws, FCRA, Respa, Gramm-Leach Bliley and dozens of others. It is not a simple task, nor one that can be replaced by simply pressing a button on a computer.
Mr Eaton, I look forward to defending a truly noble industry. While we are not perfect, we are hard-working professionals, and we are certainly NOT out to fleece the American Consumer.
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07.23.07
Posted in Industry News at 2:23 pm by Jeanne
The “National Deed Service,” offers to obtain a certified copy of a homeowner’s deed for a significant fee. They apparently go to the Courthouse to find fairly recent sales, and then contact the consumer to tell them they should have a Certified Copy of their deed in order to be able to sell their home.
A Realtor told me this week that her new listing had just paid $67.50 for the copy and waited for weeks. She had the customer pull out the Closing Documents from their Purchase, and sure enough, the closer provided a copy of the deed at the closing table.
Here’s a detailed account for anyone who’s interested: Deed Scam
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07.22.07
Posted in Industry News at 3:31 pm by Titleguy
Excellent Opportunity!
Manager wishes to retire within a year or so, leaving this position as heir to the top position running the title group. Seeking person with abstracting and examining background, as they would need to help with both residential and some commercial examining right now in addition to managing six people. Bank owner is acquiring other banks and is in a growth mode in WI, IA and MN and wants to open two new title closing offices now and more next year. They are willing to pay relocation expenses, a signing bonus and have a good benefits package. Send private inquiries to LandRecs@aol.com for referral.
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07.15.07
Posted in Industry News at 2:31 pm by Robert Franco
As the host of SOURCE OF TITLE for the past four years, the question I get asked the most is “how do I become a title abstractor?” I guess it’s the glamor of the profession that attracts so many people to the profession. My first thought is always “WHY!?” I will address that question later, first I’ll share my opinion on what it takes to lean to abstract titles.
There are no short-cuts to learning how to be an abstractor - it takes on-the-job training with an experienced abstractor. The duration of the training is nothing concrete, but I would suggest that it would take a minimum of three to six months before you should be completing searches on your own. Even after that, it is important to have a good mentor that you can ask questions. And, you will have many questions. No matter how long an abstractor has been working in the business, they always come across something new. That is one reason it is so tough to learn to be an abstractor. It’s not so much knowing how to abstract - its knowing what an abstractor should do when they find something they have never seen before and recognizing the situation when it arises.
[More:]
When we train a new employee abstractor, we have them shadow an experienced abstractor for at least three months and after that we still review their work closely and explain new concepts to them.
It is also very important for an abstractor to be familiar with the state’s real estate laws. If your state has title standards promulgated by the bar association, they are a “must read.” In Ohio, we also rely heavily on a book published by the Ohio Land Title Association, Principles of Ohio Real Estate Titles, now in the fourth edition. An abstractor should be very familiar with any resources on the subject. For more on this, see a previous post from February - The Red Book.
There is a common misconception in this business that it’s easy. You just have to report the deeds, mortgages and any liens that affect the title. But, its really more complicated than that. To do the search, you have to know who has an interest in the property so you can search them in the indices. That requires that the abstractor be able to determine the validity of the documents. You can’t just assume that because it was filed it is a valid document.
For example, we recently did a search that showed the two most recent transfers as a transfer on death (TOD) deed, and an affidavit of death to transfer the interest to the TOD beneficiaries. Upon examining the TOD deed, we noted that the deed only conveyed a one-half interest. According to the Ohio Revised Code section that deals with the TOD deeds, the interest must be the “entire separate interest” of the grantor. Thus, we were able to determine that the deed was void and title was actually still vested in the estate of the grantor. For more on this transaction see Avoid The Use Of The Transfer On Death Deed.
Another sticky situation is knowing when an encumbrance on an adjacent parcel affects the title to your subject property. For instance, an appurtenant easement granting access to your parcel may require a limited search of the adjacent parcel to determine the validity of the easement. Because title insurance insures access, it is important to make sure that the easement is enforceable.
The most troubling aspect of abstracting for new abstractors is probably pending suits, i.e. foreclosures and probate cases. Was everyone with an interest in the property properly served notice? When does lis pendens attach? Were the proper taxes and fees paid? Not all interests in property are neatly conveyed by deed, some are transferred or extinguished by court order or operation of law.
These are but a few of the aspects to searching titles that new abstractors need to understand. They are not simple concepts, but they are important.
Over the past several years online courses have popped up on the Internet promising to teach you everything you need to know to become an abstractor. Some even promise you clients when you complete the course. However, real estate laws vary significantly from state to state and an online course cannot possibly prepare you for this line of work, nor the liability the abstractor has in performing his duties.
And, that brings me to the “WHY.” Why would anyone want to get into this business right now? One of the biggest complaints that abstractors have is the low fees that are paid for their work. Abstractors are extremely under-compensated for the amount of liability they assume in their duties. There has been a trend of declining fees for past few years, in some cases the fees are actually lower than they were 10 years ago. Yet, the operating expenses of abstractors have been increasing significantly - gas prices and errors and omissions insurance are two such examples.
When you factor in the liability, along with the increase in operating costs and the low fees, abstracting is not all that appealing. Take for example a court case from 2004, Fidelity National Title Insurance Company v. Suburban West Abstractors. An abstractor was held liable for a $176,000 loss incurred by Fidelity after it settled with a creditor who held a $380,000 judgment missed by the abstractor. The abstractor’s fee for the search was only $25. The abstractor had a disclaimer on the search limiting its liability to the $25 paid for the search, and also argued that its fee sheet limited its liability under their E&O insurance to $10,000. The court held the disclaimers to be invalid. For more on this case, see the SOURCE OF TITLE article Searcher Owes Insurer For Missed Judgement.
The second largest complaint, behind the low fees, is the difficulty abstractors have actually getting paid for their services. There are numerous complaints about several companies on the SOURCE OF TITLE forums that companies do not pay their abstractors. It is customary for abstractors to bill at the end of the month with NET30 terms. By the time the first invoice is due, the abstractor has completed 2 months worth of work. Some clients run up bills with their abstractors and when the abstractor ceases to complete more work, they simply switch abstractors. In some cases, the clients change their name and start over again.
So, in addition to being a profession that many abstractors must invest considerable time and effort in learning, they have to deal with an extraordinary amount of potential liability for very little compensation and they bear a substantial risk of not getting paid at all. Before you decide you want to become an abstractor, you need to be sure you know what you are doing and you must be willing to dedicate a considerable amount of time to keeping on top of your collections.
So you still want to be an abstractor? Can you accept the fact that you will always be learning new things and you could potentially be liable for hundreds of thousands of dollars for a search you were only paid $25 to complete? When you look at the facts, there are certainly other professions that are easier to master, with less liability and more profit potential… McDonald’s comes to mind, but I’m sure there are others.
Robert A. Franco
SOURCE OF TITLE
rfranco@sourceoftitle.com
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07.06.07
Posted in Education, Licensing at 9:34 am by Jeanne
This web log article was approved for publishing by James Pearson, Director of Licensing, MN Department of Commerce.
In order to understand the closer licensing requirements, I have had several excellent conversations with the Department of Commerce.
To quote Mr. Pearson, the Director of Licensing for MN Dept. of Commerce:
“In my view, the licensing requirement is clear, but the confusion begins in reviewing the exception language. Minn. Stat. 82.34, subd. 16 provides for an exception from the licensing requirements (among other things) based on a contractual agency relationship with a title insurance company. In such cases, no closing agent license is necessary, but if a closing agent is involved in a transaction outside of that contractual relationship, a license is required. It my understanding that this is where the confusion stems from.”
Mr. Pearson also stated, “The discussions that I have had with Dave [Welshons, President of the MN Land Title Assoc.] and others was on this point. In my view, it is up to the industry to determine if they (as an industry) want to do anything legislatively to clarify this situation. Currently the only guidance that the Department can provide is for them to consult their specific contractual agreements.”
Comment by Jeanne Johnson: I think Mr. Pearson clearly describes the essence of the licensing issue when he says, “if a closing agent is involved in a transaction outside of that contractual relationship, a license is required.” In other words, to resolve the issue, each title agency must review its contract as it pertains to specific closing liabilities. While Title Underwriters generally cover those closings done with both an Insured Closing Letter and corresponding Title Insurance Policy. in some instances, an Agency Contract may be expanded to cover a broader range of closings. However, closing liability is handled on a case-by-case basis between the Underwriter and Agent.
While typically, there are closings outside the agency contract that would require the license, such as cash closings, any owner’s policy (without an insured closing letter issued to the owner,) assumption closings, closings using an attorney’s opinion, Contract for Deed transactions, etc., that is not always the case. The bottom line appears to be Title Agents need to carefully review their contracts to see if the closings they handle fall outside those covered by their Agency contract.
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