Mamouth US Supreme Court Case for Title Insurers
From The Supreme Court Blog comes an interesting and important title case. The case began in Cleveland and is scheduled to be argued before the U.S. Supreme Court this fall. The outcome could determine whether lawyers can file a new sort of consumer lawsuit against title companies on behalf of those who haven’t actually suffered any actual title damages or even a financial loss .
The lawsuit, First American Financial Corp. v. Edwards involves a homeowner named Edwards, who bought a house in September 2006 and paid for a title insurance policy from First American Title. A few years before that, First American had paid the firm that closed the transaction $2 million for a minority stake in the company and they made an agreement to exclusively sell First American title policies according to reports at Forbes.com. First American claimed there were no financial damages to Edwards.
However, the case appeared to violate RESPA laws, which prohibit title insurers from paying kickbacks or anything of value for referrals. The Supreme Court will review the case and its decision could mean that any violation of the RESPA law, regardless of injury or financial damages, could subject title underwriters who have practiced co-ownership with agents to enormous class action lawsuits.
Beware – Two More Scams for Title Closers
Scam One: The Florida Land Title Association reports having been hit with a new fraud of a type that could easily catch any of us. A couple left their closing with a check for their proceeds. A couple of hours later, they returned to the closing office with the check and asked for a wire transfer instead. The closer voided the check and processed the wire. Unfortunately, the couple had used their smart phone and deposited the check before returning to the branch.
Even normal “Positive Pay” protections would not have caught this as the original check had already been approved for payment.
Scam Two: Similar Scam could be used for closing, so beware: Nigeria has extradited a man accused of scamming more than 80 law firms and lawyers out of $31 million in a debt collection ruse.
Nigeria’s anti-graft agency announced the extradition of Emmanuel Ekhator to the United States on Friday, the Associated Press reports. He is one of several people accused of participating in a fraud ring. Charging documents say the ring not only collected $31 million in the scam, it also tried without success to defraud 300 other lawyers and firms out of $100 million.
The scam worked this way: One scammer would contact a law firm for help collecting a debt. Another person posing as the debtor would send a fake check to the law firm, which would take its fee before sending the remainder to the client. If the scam goes according to plan, the so-called client gets the money before the fake check is discovered.
According to a superseding indictment (PDF), victims included several Pennsylvania law firms, a Canadian law firm and an Alabama law firm.
Closer Woes and Underwriter NOs
Another amazing story of fraud in the Title Industry. An underwriters nightmare, and a closer clearly over her head. Palm Beach Post
MN Commerce Commissioner Wants to Send Message to Title Insurers
The Minnesota Department of Commerce has charged three title insurance companies and mortgage originators for alleged offenses ranging from misappropriating funds to charging fees for services not provided.
Albert Lea Abstract Company, sister companies Meredian Financial Corporation and Fortis Title Solutions Corporation, and New Millennium Title Group received enforcement actions last week that outlined alleged abuses and violations of Minnesota Law.
“We want to send a clear message today that companies doing business in our state must act responsibly and abide by our laws,” Commerce Commissioner Mike Rothman said in a statement. “These scams and swindles not only hurt consumers, but threaten healthy competition in the marketplace.” Read more at the Twin City Business Magazine
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?
Over Six Hundred Counties Now Record Electronically
E-Recording, although not new, is finally coming into its own. I am not sure it’s for everyone as I do not know the costs involved for small businesses. But I am sure that as time passes, it will become as simple as faxing documents into the Courthouse through some type of secure transmission. Per the Property Records Industry Association Press Release:
The number of counties electronically recording documents surpassed 600
during the month of February, according to Richard Bramhall, president of the
Property Records Industry Association (PRIA). “Between April 2010 and
February 2011, the number of counties committing to the eRecording process
increased by 20 percent,” said Joan McCalmant, Linn County (Iowa) recorder
and PRIA Technology Committee co-chair. “As the PRIA eRecording
standards continue to mature, the number of counties leveraging this
technology is rapidly expanding.”
According to PRIA’s tracking system, it took from the late 1990s until August
2006 to reach the 200 eRecording counties mark. That number has now more
than tripled in the ensuing four and a half years. “It’s exciting to see so many
counties embracing this technology and, along with the technology, the PRIA
standards,” Bramhall said.
PRIA, the national standard-setting body for the land records industry,
maintains a list of counties that have implemented eRecording technology and
posts the list on the association’s website. The list includes counties whose
implementations have been confirmed by PRIA. “We are confident the actual
number of eRecording counties is higher than what we publish, but the list is
limited to those counties that have been accurately verified,” said Technology
Consultant Mark Ladd. The names of the eRecording counties are available to
the public, while PRIA members have access to a more detailed list which
includes contact information for the counties, as well as the individual county’s
technology vendor(s). The list is continually updated by the PRIA Technology
Consultant who tracks down reports of new eRecording-enabled counties from
a variety of sources.
“PRIA has worked diligently to develop XML standards and promote industry
adoption of this important technology,” said Technology Committee Co-chair
Kate Teal of Ernst Publishing. “eRecording is experiencing unprecedented
success with recorders who have installed the technology. It is also providing a
competitive edge to the firms that submit documents to the recorders
electronically, as it decreases turnaround time and allows firms to more rapidly complete the transaction process.”
Keeping the Right Documents for Taxes
The Washington Post has a good article for our clients and a reminder for us of the paperwork involved in closing a real estate transaction. It discusses what documentation should be kept and why along with some good pointers. It reminds us that the key documents are the HUD-1 settlement statement, the promissory note, the deed of trust (mortgage), the truth-in-lending disclosure and the deed. It highly recommends an Owner’s Policy of Title Insurance, and suggests that you should also keep copies of all paid invoices for all major repairs, improvements and additions that affect your cost basis in the home. I.e. capital improvements, that include the following: building an addition, replacing the roof, paving a driveway, installing central air conditioning, and rewiring. IRS Publication 551 , available at IRS.gov, provides detailed information for determining increases and decreases to your home’s cost basis.
ALTA REVISED SURVEY STANDARDS TAKE EFFECT FEB. 23, 2011
New Survey Standards have been approved by the American Land Title Association (ALTA) and the National Society of Professional Surveyors (NSPS.) The purpose of the Minimum Standards is to set nationally recognized uniform standards for land surveys and to assist title insurance companies, surveyors and lenders to use nationally recognized uniform standards to assist title insurance companies, surveyors and lenders.
The new standards discourage the drafting of new legal descriptions and also require:
• a reference to any title commitment be included on the face of the survey
• a vicinity map
• more detailed information regarding easements and right-of-way lines
• use of a standard certification.
See more at ALTA.org
Twin City Attorney Disbarred
A Twin Cities lawyer who pleaded guilty last year to federal fraud and money-laundering charges, Trent C. Jonas, has lost his license to practice in Minnesota. Authorities said Mr Jonas siphoned about $5.3 million from more than 3,000 mortgage transactions through Jonas’ title insurance companies, Title Source and Zen Title. More at The StarTribune
MD Regulator Suspends Title Insurance License
Maryland insurance regulators have suspended the license of Beltway Title and Abstract Inc. of Crofton and related settlement companies due to misappropriation of funds. The company used more than $1 million that was set aside to pay mortgages or closing expenses for clients to cover its business expenses. Acting State Insurance Commissioner Beth Sammis says, “We’re going to work with the industry and all producers to find the best way to ensure that Marylanders can have faith that when they close on a house, it’s done properly.” Read story from Baltimore Post
Home Closing 101: An Educational Initiative of the American Land Title Association
