08.14.07
Check the Gap or Pay the Consequences
Catching up on email today, I saw another fine example of fraud. This one I have seen many times, but it keeps rearing its ugly head. An average couple taking out a home-equity line of credit… er, that would be five home-equity lines of credit, all in the same day, sinking five different lenders into the mucky-mud of bad loans never being repaid because of a home with negative equity. More fodder for my classes.
How incrediby important is each person in the chain - The Closer in rushing the documents to the County Recorder - the Recorder in getting the documents of record, the Abstractor in checking the public record to new recordings.
As an educator for County Recorders, Abstractors, Closers and Title Personnel, I am always harping on how important it is to record in a timely manner. After all laws in most states explain that the first person to get to their document recorded at the Courthouse has legal rights over others. I stress with Recorders how important it is to be timely in recording. I stress with Closers in those states that do not close in escrow how important it is to record ASAP. And I stress with Abstractors how important it is to be thorough in checking the record.
I was recently told by a customer that their policy was NOT to bother to re-check the record if the existing work was 3 mos old or less. Alot can happen in 3 mos. Alot can happen in three hours - as the article exemplifies. I am saddened by those who do not think it necessary to re-check the public records at the time of closing to see if anything has been filed in the interim that would afftect title. In my opinion, they are being negligently irresponsible. In my opinion, check the Gap, or Pay the Consequences.
But, in a case like this one, even the most prudent Abstractors, Recorders and Closers would likely not help the loss.
Taking 5 loans in one day is a classic example of the danger in table-funding closings. In “table-funding,” the closer disburses funds immediately upon signing documents, and the danger of interim recordings, known as “the gap period,” is assumed. Under this scenario, the title insurer or closer is at tremendous risk. Will Underwriters in table-fund states re-think the way of doing business by requiring a closing in escrow or perhaps pushing e-recording – or will the traditional marketplace way of doing business continue to dictate…. time will tell.