Abstracting/Searching

MN Dept Commerce New E-license Website

The Minnesota Department of Commerce  has a new e-license Website regarding Closing Agent Licenses, look here for info:  https://mn.gov/elicense/a-z/?id=1083231369#/list/appId//filterType//filterValue//page/1/sort//order/

For the Abstracter Licensing the new  e-license link is: https://mn.gov/elicense/a-z/#/list/appId/0/filterType/Subject/filterValue/Abstracters/page/1/sort//order/

Minnesota Considers New Ag Tax Credit for Farmers

Author Comment:  In spite of Green Acre taxes, Minnesota Farmers face heavy real estate taxes on farmland, causing them to vote against independent school district referendums. So look for a new tax search to follow along with deferred Green Acre and Open Space  Taxes.   Lt. Gov. Tina Smith is working to help resolve this. 

Daily Globe | January 20, 2017

Smith called the current situation a perfect storm. Farmers are suffering from low commodity prices, high land values and, for many, crushing health care costs. The prospect of their property taxes increasing by hundreds or thousands of dollars sent many to the polls in November to vote down building bond referendums like the one for ISD 518.

“The farm economy has been struggling for the past few years. Rising property tax bills are not what’s needed across the state,” said Minnesota Agriculture Commissioner David Frederickson. Noting that property taxes have increased by 114 percent for Minnesota farmers in the past decade, Frederickson said a majority of levy referendums in rural Minnesota failed in 2016, while the majority of levy referendums posed to city dwellers passed.

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California Man Gets Two Years in Title Theft Scheme

   

press release

11/20/2016

Daniel Deaibes was sentenced recently to 24 months for his role in a scheme to steal title to Southern California homes and then “sell” the properties to unsuspecting buyers – before the buyers realized who the true owners were.

From September 2012 through their arrest in November 2014, Deaibes and his co-conspirators, including co-defendants Mazen Alzoubi and Mohamed Daoud, fraudulently sold or attempted to sell at least 15 homes worth more than $3.6 million that actually never belonged to them. On at least 10 occasions, they were successful—earning illicit proceeds of nearly $2.2 million.

Deaibes pleaded guilty in March 2015 to participating in the fraud and was sentenced today by U.S. District Judge Cynthia Bashant. As part of this plea, Deaibes admitted that he used aliases to deceive escrow and title officers into believing that he was “John Moran,” and that he was the true owner of property that was being marketed for sale. In fact, “John Moran” did not exist, and Deaibes and his co-conspirators planned to fraudulently sell the properties, divert the proceeds to their own bank accounts, and then quickly disburse the money overseas. On at least three occasions, Deaibes, posing as “Moran” and presenting a fake driver’s license, appeared before notaries to sign title documents and property deeds.

To make it appear that they owned these properties, the co-conspirators generated forged deeds that made it appear the true property owner had sold his or her home to a sham real estate “investment” business the co-conspirators controlled. They forged the true owners’ signatures on the deeds, and used forged notary stamps to make them appear legitimate. In reality, though, the true owners were entirely unaware of the pretend sales. Once the fraudulent documents were recorded in the chain of title, Alzoubi (using aliases and stolen identities) listed the properties for sale, posing to buyers, escrow companies, and title officers as the new owner. In this way, the co-conspirators collected all the proceeds of the sale, and the true owners were left with nothing.

Alzoubi, the ringleader of the fraudulent scheme, assumed multiple fake identities to keep the scheme going. He also posed as real people, pretending on one occasion that he was an attorney for one of the true owners. (Unbeknownst to Alzoubi at the time, he was talking to an undercover federal agent.) As a result of his greater role in the scheme, Alzoubi was charged with, and in January 2016 pleaded guilty to, aggravated identity theft, which carries a mandatory sentence of two years in prison in addition to his sentence for the fraud and money laundering. His sentencing is scheduled for November 7, 2016, at 9:00 am, before Judge Bashant.

Mohamed Daoud also pleaded guilty, in July 2015, admitting that he helped Alzoubi launder the proceeds of the scheme. They used Daoud’s company, “Norway LLC,” to pretend to acquire title to some of the properties. Daoud received approximately $270,000 in proceeds. In December 2015, before he was sentenced, Daoud fled the country and is now a fugitive.

Most of the properties the co-conspirators “sold” were post-foreclosure properties owned by banks or institutions such as Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are governmentsponsored enterprises with a mission to provide liquidity, stability, and affordability to the United States housing and mortgage markets. As part of this mission, Fannie Mae and Freddie Mac purchase residential mortgages in the secondary market, enabling lenders to replenish their funds to finance additional single family loans. Fannie Mae and Freddie Mac can become the property owners if they own the mortgage loan at the time a home is foreclosed.

“Schemes like this one undermine the public’s confidence in their most personal and important investment, their homes,” said U.S. Attorney Laura Duffy. “I am committed to prosecuting people who continue to prey on the victims of the devastating mortgage meltdown, and sending those criminals to prison.”

“This scheme was designed to literally rip home ownership right out of the hands of innocent victims, and for those victims the costs were far greater than a title to a house,” said Leslie P. DeMarco, Special Agent in Charge, Western Region. “This scheme is callous and the perpetrators deserve the punishment set out for them. FHFA-OIG remains committed to our relentless pursuit of individuals who try to profit from the aftermath of the housing crisis.” “

Fraud targeting a family’s home, the heart of a family’s financial investment, has a ripple effect through our nation’s economy,” said FBI Special Agent in Charge Eric S. Birnbaum. “The FBI is committed to investigate and uncover schemes by those who defraud homeowners.”

In addition to his jail sentence, Deaibes was ordered to pay $1,819,591 in restitution to the victims of the fraud.

 

CFPB Updates Use of Service Providers

On October 31st, the CFPB issued updates to lenders  on use of Service Providers. This appears to allow a bit more flexibility for the lender to handle day to day affairs with its Servie Providers and is good news for title companies, abstracting and closing companies.  The update states:

“The Bureau is reissuing its guidance on service providers, formerly titled CFPB Bulletin 2012-03, Service Providers to clarify that the depth and formality of the risk management program for service providers may vary depending upon the service being performed—its size, scope, complexity, importance and potential for consumer harm—and the performance of the service provider in carrying out its activities in compliance with Federal consumer financial laws and regulations. This amendment is needed to clarify that supervised entities have flexibility and to allow appropriate risk management.”

Lenders continue to be advised to:

take steps to review Service Providers and should include, but are not limited to:

  • Conducting thorough due diligence to verify that the service provider understands and is capable of complying with Federal consumer financial law;
  • Requesting and reviewing the service provider’s policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or compliance responsibilities;
  • Including in the contract with the service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities, including engaging in unfair, deceptive, or abusive acts or practices;
  • Establishing internal controls and on-going monitoring to determine whether the service provider is complying with Federal consumer financial law; and
  • Taking prompt action to address fully any problems identified through the monitoring process, including terminating the relationship where appropriate.

For more information pertaining to the responsibilities of a supervised bank or nonbank that has business arrangements with service providers, please review the CFPB’s Supervision and Examination Manual: Compliance Management Review and Unfair, Deceptive, and Abusive Acts or Practices.[3]

 

 

 

ALTA Members Comment on FinCEN Money Laundering Prevention Effort

The American Land Title Association (ALTA), the national trade association of the land title insurance industry, released the following statement in response to the United States Department of Treasury Financial Crime Enforcement Network’s (FinCEN) new Geographic Targeting Orders (GTO) announced today:

“As an independent party at the closing table for millions of real estate transactions each year, ALTA members take their responsibility seriously,” said Michelle Korsmo, ALTA’s chief executive officer. “Once again, we are ensuring our members have the tools and information they need to properly comply with FinCEN’s reporting requirements. We appreciate FinCEN’s efforts to prevent money laundering schemes and the illegal purchase of real estate.”

Top 5 Things to Know about the GTOs:

  1. New GTOs include all title insurance underwriters
  2. Effective Date: 180 Days Beginning on August 28, 2016
  3. Counties Covered and All-Cash Purchase Price Thresholds include:
    1. Bexar County (San Antonio), Texas – $500,000+
    2. Miami-Dade, Broward and Palm Beach Counties, Florida – $1,000,000+
    3. New York City Boroughs of Brooklyn, Queens, Bronx and Staten Island – $1,500,000+
    4. New York City Borough of Manhattan – $3,000,000+
    5. San Diego, Los Angeles, San Francisco, San Mateo and Santa Clara Counties, California – $2,000,000+
  4. ALTA will continue to work with FinCEN and ALTA members to implement the expanded orders
  5. More information and ALTA’s FAQs on the FinCEN GTOs will be updated soon here.

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About ALTA

The American Land Title Association, founded in 1907, is the national trade association representing 6,000 title insurance companies, title and settlement agents, independent abstracters, title searchers, and real estate attorneys. With offices throughout the United States, ALTA members conduct title searches, examinations, closings, and issue title insurance that protects real property owners and mortgage lenders against losses from defects in titles.

Title Insurance Costs Exceed Estimates by Thirty Percent

RedVision/Accenture have put out a study on the changing costs for Title Insurers due to what it aptly calls “Multiple Disruptive Forces” including such things as regulatory changes, digital operations, industry convergence, and a subdued economic outlook. The benchmark study focuses on the true costs of title insurance origination and finds that the true cost is about 30% higher than their study participants estimated.

From my perspective, it’s a thoughtful analysis. I think the ultimate thought would be to have all the information simply digitally dumped into an automated system that would spit out a title commitment. But, as we all know, as the chain of title is put together, there are many stops involved and many places to collect data, all with different systems:Treasurers, Auditors, Assessors, County Recorders, Cities, plats/surveys, etc.etc. And while I know there are inefficiencies in manually obtaining data, and I recognize that much of the information can be downloaded, I believe we are light-years away from a one-stop automated process.

In order to have a “good” title product, someone has to actually LOOK at the data as it will not simply download into the appropriate category. There are too many variables. A good search needs to verify the physical signatures on that deed, look for recitals in documents, review divorce decrees, etc. Yes, streamlining is very important, but so is the knowledge of those persons who examine the instruments. On the other hand, if the industry wishes to become completely automated, it could choose to do so and become like a casualty underwriter – don’t check past history, just prepare and reserve for much higher claims.

It has been a long time since I have seen information from Commerce on the Licensing requirements for Abstracters, and I was pleased to see their latest bulletin.  While I know there is no education requirement, the content is significant and requires a good working knowledge of the trade. For those who need assistance with the legalese in title searching the online Principles of Abstracting course can help.  In any case, here is the outline from the PSI bulletin.

ABSTRACTER EXAMINATION CANDIDATE INFORMATION BULLETIN

Legal description and elements of real property (10 items)

  1. Definitions and components of real property
  2. Methods of legal description
  3. Estates in real property
  4. Forms of ownership
  5. Transfer / alienation of real property
  6. Deeds
  7. Types
  8. Characteristics / elements

iii. Warranties

  1. Land use controls
  2. Public
  3. Private/Covenants, conditions, and restrictions (CC&Rs)
  1. Condominium Law

Documents (15 items)

  1. Conveyance
  2. Recording
  3. Torrens
  4. Encumbrances
  5. Types and priorities of liens
  6. Easements
  7. Encroachments

Research and Compilation of Abstract (20 items)

  1. Indexes
  2. Search requirements and techniques
  3. Documents and Entries
  4. Legal description in abstract
  5. Searches (including judgments in favor of the U.S.)
  6. Certification

Licensing and Professional Conduct (5 items)

  1. Licensing requirements
  2. Prohibited conduct

 

Mortgage Note NOT Assigned to Foreclosing Lender?! OOOPS -It’s all in the Details

Interesting case out of Alabama.  See more detail.

Her mortgage had been foreclosed, but the mortgagor challenged the foreclosure by appeal, saying the lender who foreclosed had no legal interest because the note was not properly assigned. The appeal court agreed and the foreclosure sale has been  reversed and remanded to the trial court.

Moral of the story: Dot your I’s and cross your T’s when it comes to assignment of mortgage notes.

Ever Heard of a PACE Assessment?

PACE (Property Assessed Clean Energy) is a new way to finance energy efficiency and water conservation upgrades to buildings. PACE pays for new heating and cooling systems, lighting improvements, solar panels, water pumps, insulation, and more for almost any property – homes, commercial, industrial, non-profit, and agricultural.  The idea is great – who doesn’t want more energy efficiency? Lower Energy Bills? Better Environmental Health?

But real estate agents, closers, abstractors and title companies, BEWARE. We may have a problem.

The PACE advertisement reads:

“Property owners across the US are using PACE because it saves them money and makes their buildings more valuable. PACE pays for 100% of a project’s costs and is repaid for up to 20 years with an assessment added to the property’s tax bill. PACE financing stays with the building upon sale…”

While that is a true statement,  PACE financing does stay with the building upon sale, it’s not quite that simple. Once PACE is added as an assessment, it becomes part of the real estate taxes. And, as we all know, real estate TAXES are a FIRST LIEN.

So, let’s say Home Owner Holly uses PACE to install $30,000 worth of PACE-energy efficient fixtures (with a 5% interest rate on the 20 year PACE Assessment) and enjoys low energy bills.  Two years later, Holly is offered a new job out of town.  She lists the home with Realtor Rick.  Rick is excited because he is an energy efficiency advocate and lists all of the energy upgrades for this fine home, selling for only $249,900.  Bobby Buyer comes along and makes an offer of $240,000.  Holly agrees.  She is thinking the buyer will just take over the house and taxes.

Bobby Buyer applies for a loan of $192,00.  They order title work. The title company and abstractor know that the $28,000 is a first lien along with the taxes.  Holly has not thought to use any of the money saved from her lower electric bills to pay the PACE lien. She thought PACE told her the PACE financing would “stay with the building.”  She never thought she might have to cough up the money at closing.  . Bobby’s lender does not want to be in Second position behind a $28,000 PACE lien, so now the conundrum. Where does that extra $28,000 in PACE money come from at closing?

I’m not saying PACE’s a bad idea, I love energy efficiency! But let’s make sure everyone understands PACE and how it works.

 

 

Education Key for Abstracting Success says Thomas Pryde

Here are some excerpts from Thomas Pryde’s new Blog pertaining to abstractors.  To read the entire article click: Thomas Pryde Blog

I couldn’t agree more.

Independent Abstractors: Well Trained Specialists (Part Three)

There are certainly opportunities to succeed in this market. If independent service providers are going to take advantage of them, they must differentiate themselves from the rest of the market, and nothing sets the independent apart from the crowd better than the fact that they know abstracting, in the context of their local areas, better than anyone.

However, while this is a distinct advantage, there are two critical obstacles to getting that message out to clients and convincing them to use your services. Once the obstacles are understood, the opportunities and challenges become clearer.

Educate

This is really the point of this article. The message that local expertise results in superior results is not making it to the clients. This may be partially due to a lack of marketing and communication from the independent providers, and/or it may be partially due to the fact that the ultimate clients (consumers and lenders) are frequently insulated from the independent provider that is performing the search.

Even where this is understood there is no way to verify or validate genuine expertise, and therein can be found the biggest challenge. Until there is a broadly accepted education and certification process, there is not likely to be any significant traction gained in regards to the one market value that independent providers can best deliver.

Gains can be made in the other two values, and that will be important. However, very few things would positively impact the market for independent providers better than a robust certification program. Such a program would be good for the market as a whole; it would especially benefit consumers, and independent service providers would have the means to communicate the difference between a discount provider and one with genuine local expertise.

What can be done?

  1. Recognize that you are part of a large group of providers that can significantly impact the market, if there is unity.
  2. Participate in SOT and other social media venues (Linkdin has several communities as well)
  3. Contribute to best practices discussions, in particular, and strive to educate your clients as to why commodity searches are inferior.
  4. Join NALTEA or other professional organizations that can provide the structure for increased cooperation and unity.
  5. Speak up on behalf of better education practices for training abstractors, and join efforts to codify that effort in a certification process.

There is much work to be done, but without a unified commitment to these things, the opportunities will be eaten away slowly, until the idea of independent search services is a thing of the past.

 

Info On Home Closing

Home Closing 101: An Educational Initiative of the American Land Title Association