Kudos for Abstract Class
I didn't get a chance to thank you for the great learning experience on Monday and Tuesday. THANK YOU for presenting the material in such a way that even I, with little to no experience, could understand it. I appreciated the one-on-one "checks" during the breaks making sure that I was doing alright with the subjects and I definitely learned many things that will be helpful while I am still getting comfortable with my position at the County. I hope that I will be able to attend more of your seminars in the future, especially the one pertaining to legal descriptions. Thanks Again, Sam
Condo and Garage Stall Woes
For those who took the abstracting class May 2-3, here is a classic example that hit my email inbox today. It shows what can happen when legal descriptions intended for sale in a condominium are not carefully described. At the abstractor class we talked about garage stalls and storage spaces in particular, being separately salable units or appurtenances, depending on how they are described in the Declaration and Floor plans. Seems to me the Purchase Agreement in the scenario below was the problem. Maybe the two parking spaces were on the street…? After all, we are not mind readers, how are we supposed to know WHAT you bought if you don’t tell us….
Client purchased a condo unit and (he thought) two parking spaces from the developer. The accepted offer to purchase described the condo unit by number, but referred to the two parking spaces without specific designation. A title company prepared the deed of conveyance describing the unit by number, but omitting any reference to parking. The condo declaration provides that parking spaces are “units” rather than limited common elements, and can be separately conveyed as such. The title company acted as closing agent. What duty does the title company owe to the buyer in this case? Is the buyer entitled to rely on the closing agent to prepare a deed which conveys all of the property described by the purchase contract? Unfortunately for my client, he was not represented by counsel, did not notice any discrepancy in the deed, and has no recourse against the seller who went bankrupt. To further complicate matters, the two parking spaces were subsequently sold by an investor who purchased the unsold units out of receivership to an innocent third party. Any suggestions?
Time Is Running Out To Register For Land Title Abstracting Class
Don’t forget to Register for the Annual Title Abstracting Class In St Paul, MN on May 2&3. The 200 page “Principles of Abstracting, Searching and Land Records Management” manual has been updated for 2011 to reflect many additional topics including: UCC’s; dealing with Manufactured Housing and Mobile Homes; changes in foreclosure laws; and statute of limitation changes on liens. If you haven’t been to a title abstracting class recently for updates, or if you are looking to obtain your license, this is the time to sign up. Hope to see you there!
Abstractors – Our Business Has Changed
Certainly the title insurance and abstracting business has changed. The good old-fashioned in-depth abstracting that was required for “marketable title” is disappearing, and at least for residential properties, it has been replaced with a one or two-owner search that is used to provide “insurable title.” Insurable title being a risk-underwriting product, as opposed to the old “fix-the-problem-so-there-ARE-no-claims” product. But, as I have mentioned before, the core business for the best abstractors is not to chase the $35 residential sales, but the more intricate in-depth work that still exists for: commercial work; cell towers; wind farms; mineral titles; gas and oil rights, etc. I am often asked where to find these professionals, and the major underwriters are now developing “specialty teams” that they fly around the country to do such work. But that is a concern, because we all know that title searching is a VERY specialized, VERY localized occupation, and that no one from outside the area can catch those all important nuances that make a title good or not.
Are you staying current with all the changes in titles in your state? Changes have been rampant the last few years, new liens, mortgage rules due to the need for new tax revenue and the mortgage debacle. Are you advertising your professional expertise? Are you taking advantage of the changing market? I hope so, it could mean like or death for your job and your industry.
Expert Abstractors and Title Examiners Needed
I have had three contacts in the last couple of weeks where friends in the industry have reached out to find competent title abstractors and examiners. In one case it was searches for cell towers in Michigan, in another an expert witness for a complicated title indexing issue, and the third for a company that can’t find experienced, competent people for complex searches. They were looking at sending a team of “professionals” all over the country for those difficult searches that require serious expertise. Why is it that we are all fighting for $25 searches for the simple ones, when others, willing to pay can’t find experienced people. Think about that. Maybe we need to change our focus.
FEDERAL REGULATION OF TITLE INSURANCE – WHY NOT?
There has been much discussion about regulating insurance, including title insurance at the federal level.
Of all the lines of insurance, none are as inexorably entwined in state and local laws as title insurance. Local practices regarding real estate vary from state to state and even county to county within a state. The abstracting, examining and underwriting of title insurance involves a review and assessment of these state and local-specific records, so that title policies can only be properly issued in connection with inherently understood local transactions. I believe it would represent an enormously burdensome and expensive undertaking for a federal agency to establish federal regulations that would reflect variations in the real property law of all 50 states. State regulators are much closer to local practices and can respond to changes in the marketplace more quickly. Therefore, I believe state regulation remains the most effective form of supervision for our industry.And since when is a “bigger government agency” better than local government?
Clouded Titles and Mortgage Foreclosures
Daily Finance has a great story on the mortgage mess for land title abstractors and title insurance people that is definitely worth the read. To quote from the article:
The Solid Effects of Clouded Titles
You can’t sell real estate when you can’t establish that you own it — banks won’t loan money for purchasers to buy the property. That’s because the bank wants to be sure that if it forecloses, it will get good title to the property. (Yes, this issue practically oozes irony.) That’s why banks won’t approve a mortgage for a property if a title insurance company won’t insure its title. And title insurance companies won’t do that if they know the title is clouded.A few months ago, the Massachusetts Supreme Judicial Court issued its Ibanez decision, which made it clear that the banks’ foreclosure practices — and indeed, the standard securitization deal — violated longstanding basic Massachusetts real estate law, and thus, many completed Massachusetts foreclosures were invalid. The foreclosing banks, which had either since sold the properties or still “owned” them, had no right to foreclose, and therefore had never owned those properties. So who owns them now? Well, the fact that it’s a question is the very definition of “clouded title.”
See full article from DailyFinance: http://srph.it/epe9SQ
Specialty Land Title Searches – Minerals
Real Estate titles are complex and very state specific. Underwriters have seasoned veterans who are in charge of underwriting for each respective state. Take for example
Tarrant County Texas:
Remember Jed Clampett? The “poor mountaineer barely kept his family fed. Then one day when shootin’ at a brood, up through the ground came a bubblin’ crude – oil that is, Texas tea…”
Do you own mineral rights to your land? That question may be crucial for people buying or selling land in Tarrant County, TX near the Barnett Shale gas field. It might be hard for most people to answer under new rules proposed by the Texas Insurance Department.
Mineral Rights can have tremendous value. In most states, insuring title to the land includes insuring the surface, subsurface (mineral rights) and air rights. Perhaps not so in Texas. Recently, title companies have quit insuring mineral rights on properties. The change has incensed some lawyers and left landowners in limbo if they own mineral rights. Do you know how to search mineral rights?
How Much do You Know About Land Titles?
The business of abstracting is changing. I have been teaching title searching for years, but it’s different now. Residential abstracting has gone by the wayside in favor of one-owner and two-owner searches. Title Insurance companies do not abstract and do “risk underwriting,” nor do they “cure titles.” They just insure over problems. That has worked in the past, but as has been said -”How’s that workin’ for ya now?
But the best, most qualified abstractors are busy with new lines of work: Oil and Gas Lease titles, Cell Towers, Commercial Property Titles and Wind Farms. These are now the day-to-day jobs of those abstract experts who are truly experienced in land titles and know how to search titles in depth. Here is an article on one such instance, a county recorder who has to limit the number of title abstractors because of the volume of work in Oil and Gas Leases. How much do YOU really know about abstracting titles? Is it time to bone up? Do you need more business?
Read More at the Post-Gazette.
Proposal for a Federal Land Title Depository – My Opinion
Having spend most of my adult life working in the land title industry, I was very pleased to find a thoughtful report on the American Land Title Recording System in the Columbia Law review:
Tanya Marsh, Foreclosures and the Failure of the American Land Title Recording System, 111 COLUM. L. REV. SIDEBAR 19 (2011)
I was pleased, not so much because I believed in her suggestion that implementing a Federal System would be an answer to our current system, but rather because I applaud the research, investigation and thought process in analyzing our public recording systems. It makes my brain “tick” – how better could this whole recording system work? It is not often that anyone notices us.
Ms Marsh says:
The recent announcement that major lenders were suspending pending foreclosure actions in the wake of questions about their documentation practices has focused attention on another opaque system that has failed to keep pace with the increasing complexity of the modern real estate industry: the American land title system.
I have mixed feelings on that quote. After all, the system was working quite well before a specific group decided to start a separate system of recording mortgage assignments. But, you say, “times change, and mortgages are no longer mom and dad local customers borrowing from the local bank. Mortgages are now big business commodities, where packages of millions of dollars of mortgages are sold in packages to investors who no longer collect the payments. They do not have a 100% interest in the land – just fractionalized interest in the mortgage. And they certainly have no interest in the local economy.”
I personally, believe that the MERS change was not driven by failure to “keep pace with the increasing complexity of the modern real estate industry,” but was driven rather by a business opportunity for making corporate profits. After all, recording mortgage assignments requires much specialized local knowledge – not the mass handling that big business is used to. Consider the inexperienced staff, asked to record thousands of mortgage assignments. They grouped them by state and sent all mortgage assignments for one state to the same county for filing- OOOPS. Yes, recording requires specific knowledge. It is time consuming. It is expensive, and fees vary from location to location. In theory, recording assignments “under the covers” dozens of times saves lots and time and money. It would be much more efficient. It could be a very profitable business.
As Ms. Marsh points out, land record recording has always been a “local business” meaning that customs, fees, rules and regulations for recording are a hassle. But land titles ARE a “local business” in that each state has it’s own real estate law. Foreclosures are driven by those state laws, and changing to a Federal System would only complicate things even more. A Federal System would require a complete revamping of all existing state laws and possibly the US constitution, as real estate laws currently fall under the auspices of each respective state.
There are other considerations. What about all those judgment searches. State and Federal Tax Liens, Child Support Liens, Court Judgments, etc. They are all maintained in the same local, county systems we know so well. As a title person, we know that those 3000 separate county offices mean that a common name is somewhat manageable when searching those names. After all, we can’t reference their SSN as that would be an identity theft problem. A Federal System would be an absolute disaster. And the States and Feds acknowledge that the only way they are able to collect those State and Federal Liens are through our current recording system.
She Says:
Although many local recorders have viewed MERS with suspicion, a number of state courts have expressly permitted the recording of mortgages with MERS. Some courts and other observers, however, are concerned that the legal fiction of MERS’s status as the “mortgagee of record,” when it holds no beneficial interest in the property, is irreconcilable with [STATE- added for emphasis] mortgage law.
I agree with that statement. MERS did not anticipate the complexity of 50 distinct state foreclosure laws, or the definition, state by state, of “Nominee” vs. “Assignee” or the change in the market. Yes, I agree that … a private MERS-like system is not the answer.
But what is the answer? I can’t agree with the statements that “the federal government should implement a solution that replaces … the existing local land title system…” When has a bigger government done a better job than the locals? But I love the dream ideas that:
- Indexes should not be limited to the names of the parties, the type of conveyance, a legal description, and the date of recording, etc.
- Conveyance documents could be identified with limitless data, including cross-referencing to prior conveyances.
- Imagine integrating property tax records, subdivision plats, and recorded documents with a dynamic map. How fabulous would that be!
Ms Marsh ends with: “I do not lightly suggest that we abandon 370 years of precedent. But the residential foreclosure crisis, and the role of MERS, demonstrates that the American land title system is broken. The time has come for a radical reinvention that meets the needs of the modern real estate industry.”
I love the passion, research and inspiration behind her work, but as a day to day title practitioner, author and teacher of land titles, I know the problem is much more complex than she imagines. I can dream about the possibilities, but I can’t wrap my head around how to accomplish a better land title world. Your comments are welcome.
Home Closing 101: An Educational Initiative of the American Land Title Association
