Land Title Technical Stuff

Reimagining Land Records and GIS


An event, “Reimagine Land Records – Join the Conversation” orchestrated by the Legislative Committee of the Minnesota State Bar Association, Real Property Section, took place on October 20th. In attendance were an assortment of County Recorders and other County Officials, Land Surveyors, Abstractors, Attorneys, GIS Specialists, Teachers, Land Records Information Systems (LIS) Software Companies and Title Companies.

The session started out with a slide as to what constitutes land records and it was broken down three general categories and who maintains the records and uses them.

Objects (Improvements – roads, physical easements, buildings, etc.
Land Rights (Ownership, estates, government rights, liens, easements, restrictions, etc.)
People (Title, liens that tie to people, etc.)

Discussion revolved around Layers of Information needed by land title specialists and how they can be mixed and used by all most effectively. We all have a stake in this – Homeland Security; FEMA; DOT; Federal, State and local authorities; and hundreds of other entities. My takeaway of the future from the event is as follows:

CLOSINGS OF THE FUTURE

In the not too distant future, we will feel light-years ahead of today. For those of us who remember typing abstracts on electric typewriters, and getting fax machines in the office, it is truly amazing. Even those who daily toil creating and printing documents, watching people sign, making copies of the signed documents, preparing them for delivery back to the lender and to the respective counties, cutting checks, etc. will see an amazing change.

THERE WILL BE NO PAPER. Documents and closings will be “Born Digital.” They will be created in a secure electronic commerce cyber-system, and emailed to the client through a secure web portal. The closer, a licensed, e-sign notary (perhaps hundreds of miles away from the clients,) will see the clients using a web-cam, review their drivers licenses against the online faces, and e-sign their notary as the clients click through, and e-sign the mortgage, deeds, and other documents.

NO PERSONAL HANDSHAKES when meeting, no paper, no file folders, no copies, no notary stamps or checks, just cyberspace. If owners need information, it will all reside in the cloud, or on their computer or flash drive.

THE FUTURE OF LAND RECORDS AND GIS

The digitally signed documents will then be electronically submitted back to the lender, with digital copies for the title company, and of course an e-signed digital copy will go directly to the appropriate county (with e-fees) where the documents will move though departments to verify, and reside digitally.

Someday, when the owner takes a future home equity line or sells the property, a title searcher will simply go to a computer to look up the digital documents in cyberspace. But there will be only one place to look up all needed information for each piece of real estate.

A Geographic Information System, accessed by a PIN number (a smart number that ties to Sec- Twp-Rng-1/4 -1/4 and parcel) will open up a Pandora’s Box of information. We will be able to access anything you can imagine about real estate – the physical properties of buildings; terrain; topography; zoning; ownership rights, title and interests; roads; utilities; flood information; zoning; Homeland security; layer after layer.

Records from the – Treasurer, Auditor and Assessor that include current and delinquent taxes (Green Acres, etc.); type of property (single family 3BR, 3BA, 2 story, 2300 sq ft….home); Register of Deeds and Registrar office information (with the ownership, restrictions, easements, mortgages, etc.); District Court files (showing judgments, divorces and court filings against the owners); Death and Probate Court documents; Health and Human Services information (maps of wells and lien information); Federal District Court filings; Dept. of Transportation (updates on roads and widening of streets); Department of Natural Resources; Wind farms; Detailed utility information; FEMA flood maps; City zoning data; Trash bills; Photos of the property with GIS overlays and on and on.

And the records will solve problems besides title searches for many – FEMA, 911, DOT, Homeland Security, Minnegasco, Xcel, public utilities, – when a hurricane or tornado blows through, FEMA can overlay the GIS of the hurricane and know the owners names and rough amount of damage to the property. 911 will have better access to helping people,, because they will estimate number of people impacted, where the nearest hospitals are, and fastest routes to get people there. The DOT will estimate road damage will know where to concentrate their efforts. Gas and electric companies will know where the gas and power are out, and how to proceed as quickly and effectively as possible to make needed repairs.

It’s hard to believe, but the pieces are already there, it’s just (just???) that all the pieces need to be joined into one access point. The future of GIS is coming and it will be interesting.

OCC Adds Information for Third Party Vendors

On June 7th, the OCC added bulletin 29 to third-party relationships to clarify the way lenders should interact with third party vendors, to us, that means how lenders deal title and closing providers.

    Get the entire OCC bulletin here

.

As a part of the lengthy bulletin, it stated the lender is responsible for ongoing monitoring.

Ongoing Monitoring
Ongoing monitoring for the duration of the third-party relationship is an essential component of the bank’s risk management process. More comprehensive monitoring is necessary when the third-party relationship involves critical activities. Senior management should periodically assess existing third-party relationships to determine whether the nature of the activity performed now constitutes a critical activity.
After entering into a contract with a third party, bank management should dedicate sufficient staff with the necessary expertise, authority, and accountability to oversee and monitor the third party commensurate with the level of risk and complexity of the relationship. Regular on site visits may be useful to understand fully the third party’s operations and ongoing ability to meet contract requirements. Management should ensure that bank employees that directly manage third-party relationships monitor the third party’s activities and performance. A bank should pay particular attention to the quality and sustainability of the third party’s controls, and its ability to meet service-level agreements, performance metrics and other contractual terms, and to comply with legal and regulatory requirements.
The OCC expects the bank’s ongoing monitoring of third-party relationships to cover the due diligence activities discussed earlier. Because both the level and types of risks may change over the lifetime of third-party relationships, a bank should ensure that its ongoing monitoring adapts accordingly. This monitoring may result in changes to the frequency and types of required reports from the third party, including service-level agreement performance reports, audit reports, and control testing results. In addition to ongoing review of third-party reports, some key areas of consideration for ongoing monitoring may include assessing changes to the third party’s
• business strategy (including acquisitions, divestitures, joint ventures) and reputation (including litigation) that may pose conflicting interests and impact its ability to meet contractual obligations and service-level agreements.
• compliance with legal and regulatory requirements.
• financial condition.
• insurance coverage.
• key personnel and ability to retain essential knowledge in support of the activities.
• ability to effectively manage risk by identifying and addressing issues before they are cited in audit reports.
• process for adjusting policies, procedures, and controls in response to changing threats and new vulnerabilities and material breaches or other serious incidents.
• information technology used or the management of information systems.
• ability to respond to and recover from service disruptions or degradations and meet business resilience expectations.
• reliance on, exposure to, or performance of subcontractors; location of subcontractors; and the ongoing monitoring and control testing of subcontractors.
• agreements with other entities that may pose a conflict of interest or introduce reputation, operational, or other risks to the bank.
• ability to maintain the confidentiality and integrity of the bank’s information and systems.
• volume, nature, and trends of consumer complaints, in particular those that indicate compliance or risk management problems.
• ability to appropriately remediate customer complaints.
Bank employees who directly manage third-party relationships should escalate to senior management significant issues or concerns arising from ongoing monitoring, such as an increase in risk, material weaknesses and repeat audit findings, deterioration in financial condition, security breaches, data loss, service or system interruptions, or compliance lapses. Additionally, management should ensure that the bank’s controls to manage risks from third-party relationships are tested regularly, particularly where critical activities are involved. Based on the results of the ongoing monitoring and internal control testing, management should respond to issues when identified including escalating significant issues to the board.

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.

Read More on this

Air Right Sales Soar To New Heights

You have never seen it all in real estate, as it is a constantly morphing industry.  I just ran across an article in the New York Times on the sale of Air Rights where a developer paid $40 million to a church for its air rights in order to build a 51 story building in New York.

One real estate broker commented

“They’re building what I call a Viagra building, a tall slender tower with great views at a great location.   … What difference does it make if you pay $100 more per square foot if you’re selling condos for over $4,000 per square foot?  But there aren’t many sites where you can do this.”

Read the full New York Times article

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

 

Mobile Notaries – Do You Have the Required Minnesota Closer License

Minnesota is sending out Enforcement Notices to Mobile Notaries reminding them that under Minnesota Law, those who notarize deeds, mortgages, affidavits and other documents to assist a party in buying or selling real estate in Minnesota are required to have a Closer’s Licence from the Minnesota Department of Commerce.

The primary Closer License Laws are MN Statute 507.45 and MN Statute 82.641

The Commerce Department is authorized to penalize those who are not compliant, so please be sure to obtain the proper license. More information about Closer Licensing can be found here on the Commerce Department Website.

Title Companies should also assure that any closing agents they use are duly licensed under the law.

Judge Rules OK to Saw off Half a Garage if on your Property

beseman_garage-630x471

This article reminds us that  “Actual Knowledge of a Problem requires the buyer to take care of the problem!” It also let’s a title company off the hook for claims.

From Minnesota Public Radio Blog.

A judge in Grand Rapids, Minn., has ruled that if someone else’s garage sits partially on your property, it’s OK to saw it in half.

The ruling comes in the case against Roger Weber of Nashwauk who sawed Mark Besemann’s garage in half in April 2013. Besemann had purchased the house from Weber’s sister, unaware that a family feud was raging over the location of the garage.

Besemann sued Weber but Judge Lois Lang has ruled that Weber had a legal right to remove the portion of the garage that sat on his property, Forum News Service reports.

The house Besemann purchased had been owned and lived in for years by Roger Weber’s father, Robert Weber. But after the elder Weber died in 2012, and the home passed to the sister, Roger Weber claimed that half of what had been his father’s garage was in fact built on property the younger Weber now owns.

Sometime between April 22 and April 27, 2013, Roger Weber sawed the garage in half and removed the portion he claimed was on his property.

Besemann discovered the damage April 27, just days after closing on the property, and eventually filed a civil suit asking for $20,000 in damages for the ruined garage and another $20,000 in punitive damages from Weber.

Besemann also has to pay Weber’s legal costs.

“I’m obviously being railroaded by a small group of ‘public servants’ with their own agendas,” Besemann tells Forum. “(He) has destroyed my garage and rendered the house unlivable by damaging the septic system. What’s next? He now has an open ticket out there to do what he wants so it’s anybody’s guess. I have no choice but to keep fighting what now appears to be a losing battle.”

The dispute arose during Weber’s campaign as the endorsed Republican for the District 06 seat in the Minnesota House of Representatives. He lost.

Statute of Limitations on Title Policies

Good case on the statute of limitations for Title Policies.   The case shows that the owner’s claim for breach of their title insurance policy doesn’t start until the title insurer refuses to adequately compensate the owner for a covered loss – Spalding v. Stewart Title Guar. Co., Case No. SC 94580, 2015 WL 2228547 (Mo. May 12, 2015) (affirming amended judgment after jury trial).

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.

Info On Home Closing

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