Jeanne Johnson & Associates, Land Title Abstracting, Title Searching, Title Exam, Closing, Real Estate Education
Here is a post from a Tulsa, OK paper that is typical of the misunderstanding of the Abstracting Industry. It’s claims are ridiculous, absurd, unfounded and downright annoying. Read it to see why we need to educate the world about our jobs as title abstractors.
From online blogs today, we see horrendous discussions of “how do we get around the RESPA Law?” Here are some prime examples:
Any ideas on how to give an incentive to get a builders business RESPA legal? As an incentive for the builder to give me his business, I would like to purchase the buyers home warranty. Is there a way to show this transaction on the hud that I am paying for it, or does it have to disclose that the builder is paying it but then I slip him under the table which I know is a violation of RESPA. Does any one have any ideas to get a builder’s business and for those of you who are successful with builders?? Ahh….other than giving good service!!!!
I have always used a ABA (affiliated business agreement) or AMA (affiliated marketing agreement) where I would give the builder half a point to a point once the loan sells. Always seems to work when you dangle the carrot in their face.
I used to work for Countrywide and for their builders they give major incentives for the builder to send them business. Some include but aren’t limited to: Having a seasonal crawfish boil where the originator and branch office cover the total expense for the party, cut all lender fees except the origination, hosting wine and dinner parties for the builders realtors and office staff. And from what I understood when I was working for C/W, to make it RESPA legal, all the builder had to do was put up a C/W banner at their model homes and the builder and C/W called it a JOINT MARKETING AGREEMENT.
Not only do we need RESPA reform, we need RESPA Education and some serious RESPA enforcement.
It is UNBELIEVABLE to me that conversations like this are taking place online. Are these people CRAZY? Do they not take RESPA seriously? Do they want to go to JAIL? Obviously, they have no ethics. Go get em RESPA police. They deserve whatever they get.
Americans are failing. It is happening right before our eyes. A Nation once so proud is failing quicky. We are happy to spend money on Fancy Coffee Drinks and Nintendo Games. We are happy to run up credit card debt to get what we want today . But when it comes to paying higher taxes for better roads, education and health care we balk. We spend more time watching TV than planning our futures or helping our children plan theirs.
Have Americans become arrogant, because we think we are the best? We have lost a proud focus on what our parents and grandparents taught us - to evaluate and plan for what is most important to us. We should learn to SAVE for a rainy day. We should PLAN for retirement. We should BUDGET our expenses. We should TEACH our children good habits about money. We are not setting a good example.
Point in case - How much time have you spent educating your children about money? Do you know if they can define “interest rate?” How about “Annual Percentage Rate.” Can they tell you how long it takes to pay off a credit card when they only make the minimum payment with a 21% interest rate? Can they tell you how much that $1,000 hi-def TV really cost on that same credit card?
And the older we get, the worse it gets, apparently. We are lazy. On the most important decision of most people’s lives, their mortgage (note I didn’t say house.) Studies from the FTC show us that in reviewing standard mortgage documents:
• Half the borrowers surveyed couldn’t correctly identify the loan amount.
• Nine in 10 couldn’t figure out the total up-front loan costs.
• Two-thirds did not recognize that they would have to pay a penalty if they paid off the mortgage within the first 3 years. And 95% didn’t know how much that penalty would be.
• Three-quarters did not know when substantial charges for FHA or PMI insurance had been included in the loan and monthly payments.
• One in five couldn’t correctly identify an annual percentage rate, the amount of cash due at closing or the monthly payment, nor did they know if their payment included charges for taxes and insurance.
And why can’t we read and interpret these documents? Partially, because we do not educate our children about economics. Not in the home. Not in school. At home, we are setting bad examples. At school, only 17 states require students to take an economics class to graduate from high school and only seven states require a basic personal-finance course, according to a survey by the National Council on Economic Education
With the economy as it is, and all the worry about gasoline prices, we have more than just oil to worry about. We need to take a better look at our priorities. Let’s look in the mirror and recognize where we are going. Then stop, and think, where do we really want to be.
Only occasionally do we find news with facts that point out that title insurance is a good and valuable product. In this blog article, and comments, we see that someone has an understanding of a real estate title problem and of a product that takes card of the problem. Kudos to Larry Cragun at Seattle PI.
Read the article here. Seattle PI
Due to the multitudes of bad loans written in the last few years, and the subsequent foreclosure problems, the government is trying to institute what I call a “Bozo-proof” approach to the loan. So how do you take a complex set of mortgage documents and make them “easily understandable?” Answer: the Miranda Respa Script
Under the proposed new rule, closers would be reading from and providing a copy of a ‘‘closing script’’ to borrowers; known as the Miranda RESPA . The script might read something like this:
Miranda RESPA Script
You have the right to provide payments,
Any prepayments you make can and will be held against you with a prepayment penalty.
You have the right to have an attorney present, to ask questions during closing.
If you cannot afford an attorney, a Miranda Script will be provided for you.We have the right to raise the rate.
Anything our documents say can and will be used against you in a court of law.
We have the right to have an attorney draft and slip in loan terms
If you cannot afford payments, an attorney will be appointed to foreclose.
Do you think HUD can successfully create a Miranda Script to explain a hundred pages of complex mortgage documents?
In the midst writing the 2nd edition of Title Insurance for Real Estate Professionals, I recognize how things have changed in the last couple of years for the title insurance industry. At the moment, I am working on closings.
Title Underwriters have been forced by demands from the market to begin insuring the closing process, a dangerous and expensive endeavor in today’s market. This was never part of title insurance. It is not something that was accrued for in planning and reserving money for claims. And where does closing liability end? Will closers and title companies be sued because someone claims they didn’t understand their loan documents – or worse yet, say the lender was in cahoots with the title company and closed the loan for the title premium and fees? Similar to the recent lawsuit by a buyer that they paid too much for their house because they were advised to do so by their real estate agent.
And the liability becomes worse - over the past years, closings have become more and more complicated. New types of loans—variable-rate, adjustable-rate, balloon mortgages, growing equity mortgages, interest-only loans, construction financing, reverse-annuity mortgages, and others—have moved into the market. These complex documents must be explained to the borrowers, a very difficult task, particularly evident is the lack of understanding of these documents in the real world, where foreclosures have run rampant the last years and the reality of the documents hits home.
Complications of closing also include dealing with heavy legislation pertaining to Federal Laws such as the Patriot Act, Truth in Lending (TIL) laws, the Real Estate Settlement Procedures Act (RESPA) and the Gramm-Leach Bliley Act (GLBA) dealing with privacy rules and closing. New local and federal legislation related to the sub-prime market and poor quality loans are making, and will continue to make, closings even more difficult by requiring additional documentation.
Independent “signing agents,” which are a fairly new phenomenon in the U.S., are unknowns in closing. Signing agents typically have no relationship with a title underwriter. They go to a home, bringing the documents with them for closing (frequently used in re-finance transactions.) Some signing agents see themselves strictly as notaries public, who witness signatures with no responsibility other than verifying the identity of the signers. Other signing agents are very knowledgeable about the documents and may thoroughly explain them – but do they have errors and omissions coverage? What if an error is made, who is responsible?
Is it appropriate for title companies to give a Closing Protection Letter, in effect insuring the closing? The State of New York says NO. It has specifically prohibited the practice in NY, citing the fact that the practice is a form of insurance, and potential claims are not being accrued for. What do you think?