The Pr
operty Records Industry Association (PRIA) has released its latest whitepaper on GIS and Land Records Integration. Although Geographic Information System (GIS) is a relatively new tool for anyone interested in land records, the recording of property records has been in existence since records were created. The integration of these two systems can help to create modern property record systems. The paper is timely i
n view of the fact that Minnesota and other states are looking closely at the benefits of the technology.
The White Paper can be downloaded from PRIA
Carver County Requires Subsurface Sewage Treatment System Form
Effective January 1, 2018, Carver County requires on all sales a Subsurface Sewage System Treatment Form along with the certificate of real estate value, to be presented to the county auditor’s office. While I think it’s a good idea to handle such things at the time of sale, I am reminded of the problems we had a few years ago, where some recorders were refusing to record deeds without Septic Systems being in compliance.
So along with the law as to what is recordable, MSA 507.24, there is also a law stating that a deed cannot be kept from recording for lack of this document.
RECORDING LAW STATUTE MSA115.55 (7) (c) excerpt
Individual Sewage Treatment System (ISTS) Law
New or replacement ISTS systems; local ordinances:
A local unit of government may not adopt and enforce ordinances or rules affecting new or replacement Individual Sewage System Treatments that are more restrictive than the agency’s rules.
Jeanne Comment: This law was enacted because a few small municipalities enacted local ordinances to stop the recording of documents when sewer systems were not up to local standards. While a good idea in concept, abstractors, title companies, attorneys and banks do not search local ordinances when searching title, so that when a loan closed and the documents were unrecordable for extensive periods of time, the lenders interests were not secured and lenders threatened NOT to place any mortgage loans in those locales. Accordingly, the bar association, in conjunction with the Minnesota land title Assoc. succeeded in passing a law to negate the local ISTS ordinances. It is the author’s opinion that anytime a local unit of government attempts to adopt or enforce an ordinance or rule, when its effect is to prevent or delay recording with the county recorder or registrar of titles, of a deed or other instrument that is otherwise entitled to be recorded, either the law will be expanded, or another law passed to prevent the same problem.
Don’t Believe Those Online e-Notarize Ads
Webcam Nptary Ad
In Minnesota and other states, electronic notarization (e-Notarization) is moving fast. But DO NOT BELIEVE THE ADS. It is complicated. Each state has its own laws, rules, and especially its own legal terminology.
In Minnesota, a notary may perform electronic notarial acts when the affiant (person signing and swearing to a true statement) physically appears before the approved e-notary and the notary is physically in the State of Minnesota at that time. The notary must have specifically applied for and been approved by the state to use that method. The e-Notarization includes all the elements of a paper document notarization except the notary uses a digital signature and seal to the document (a graphic image) instead of an ink stamp. NO webcams!
Many people confuse e-Notarization with I will refer to as webcam notarization, believing they are the same. Webcam notarization involves live, real time audio-visual technology on the Internet, and (depending on state law) the person signing a document or electronic record appears before a notary public from a different physical location. The requirement of the “presence” of a signer is satisfied via the live audio/video connection not physical location. Each state has its own rules here, and in some cases the notary must maintain a physical audio/video of the webcam notary for a period of years. The audio/video is property of the notary and NOT that of the company the notary may work for.
Documents notarized in states allowing webcams ARE legal and recordable in Minnesota. They just can’t be performed in Minnesota. And remember, with a few exceptions, those who are notarizing real estate documents in Minnesota, such as deeds and mortgages require a Closing Agent License in addition to their e-notary commission, and there is a potential $10,000 fine per transaction for notarizing such documents without the license.
First American: Loan Application Defect and Fraud Risk Declines
Press Release 7/31/2016
First American Financial Corporation, a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released theFirst American Loan Application Defect Index for June 2016, which estimates the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications. The Defect Index reflects estimated mortgage loan defect rates over time, by geography and by loan type. It’s available as an interactive tool that can be tailored to showcase trends by category, including amortization type, lien position, loan purpose, property and transaction types, as well as state and market comparisons of mortgage loan defect levels.
“The Defect Index has fallen 5.3 percent over the last three months, and this trend shows no sign of abating. The index has been reaching new lows this year, continuing its long-term trend. Since its inception, the Defect Index has been consistently trending lower, apart from the increases in risk in 2013 and early 2015,” said Mark Fleming, chief economist at First American.
“There are two factors driving the long-term decline in the Defect Index, the impact of improvements to the systems and production standards mitigating risk throughout the lending industry, and the continued strength of refinance application activity due to low mortgage rates. According to the MBA, refinance activity is up slightly on a year-over-year basis. The average rate for a 30-year, fixed rate mortgage was 3.57 percent, compared to 3.6 percent in May,” said Fleming. “Our research finds that refinance applications are inherently less risky than purchase applications, so defect and fraud risk declines as refinance applications become a larger share of the overall mix of loan applications.”
The Defect Index for refinance transactions declined 3.2 percent month-over-month, and is 15.5 percent lower than a year ago. The Defect Index for purchase transactions declined 1.2 percent month-over-month, and is down 11.1 percent compared to a year ago. Since defect risk for both purchase and refinance transactions peaked in late 2013, defect risk on refinance transactions continues to decline much more than defect risk for purchase transactions, declining 40.0 percent as compared to 23.7 percent for purchase transactions.
“We expect the declining loan application defect risk trend to continue into July, as the impacts of ‘Brexit’ and global uncertainty keep rates low, triggering an increase in the volume of lower risk refinance loan applications,” said Fleming.
June 2016 State Highlights
- The five states with the highest year-over-year increase in defect frequency are: Maine (+14.0 percent), North Dakota (+13.6 percent), Missouri (+10.0 percent), Montana (+5.3 percent), and Alaska (+2.8 percent).
- The five states with the highest year-over-year decrease in defect frequency are: Michigan (-31.4 percent), Florida (-21.8 percent), Delaware (-19.5 percent), Connecticut (-17.8 percent), and New York (-17.6 percent).
June 2016 Local Market Highlights
- Among the largest 50 Core Based Statistical Areas (CBSAs), the only one market with year-over-year increase in defect frequency is: St. Louis (+9.9 percent).
- Among the largest 50 CBSAs, the five markets with the highest year-over-yeardecrease in defect frequency are: Detroit (-35.9 percent); Jacksonville, Fla. (-23.5 percent); Miami (-22.7 percent); Louisville/Jefferson, Ky. (-20.3 percent); and Orlando, Fla. (-20.2 percent).
Where in the Application is the Defect Risk?
“In the post-crisis housing finance landscape, the attention paid to the borrower’s ability-to-pay and emphasis on issuing loans that have a reasonable and sustainable mortgage payment has increased. In other words – income matters,” said Fleming. “Within the Loan Application Defect Risk Index, we also measure specific risk categories, including defect, misrepresentation and fraud risk associated with the reporting and documentation of income in a mortgage loan application.”
“If the income is being inaccurately measured or misrepresented intentionally in the loan application, the borrower’s true ability-to-pay and the sustainability of the mortgage are incorrectly measured. Interestingly, the trend in income-related defect risk offers some good news. The risk related to income is down 3 percent over the last three months and more than 10 percent in the last year,” said Fleming. “This beneficial decline in income-related defect and misrepresentation risk is a benefit of the technological and process investments made by the lending industry to meet compliance and regulatory requirements. The result is better measurement at the loan application level of the borrower’s ability-to-pay and more accurate identification of sustainable mortgages.
“Income-related misrepresentation and fraud risk is declining, as loan underwriting standards have become more disciplined and as the lending industry have made compliance and regulatory driven investments,” said Fleming. “We continue to improve our ability to accurately project a borrower’s ability-to-pay and the sustainability of a mortgage — a benefit to consumers and lenders alike.”
Next Release
The next release of the First American Loan Application Defect Index will be posted the week of August 22, 2016.
Methodology
The methodology statement for the First American Loan Application Defect Index is available athttp://www.firstam.com/economics/defect-index.
Disclaimer
Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2016 by First American. Information from this page may be used with proper attribution.
About First American
First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $5.2 billion in 2015, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2016, First American was recognized by Fortune®magazine as one of the 100 best companies to work for in America. More information about the company can be found atwww.firstam.com.
Independent Abstractors: Dying Breed or Valued Specialists?
A post from Thomas Pryde’s Blog, re-printed with his permission.
The prevailing view among some industry leaders seems to be that the independent abstractor is a dying breed, the last vestige of an ancient way of doing business. This is attributed to the rapidly expanding digitization of title documents and new technology solutions that are being designed to quickly and efficiently obtain and deliver those documents to their clients. This is one example where technology has made promises well beyond what it can actually provide.
While it is true that the need for independent title abstractors might actually be eliminated if the idealized descriptions of a technology provider’s capabilities proved realistic, proclamations of the imminent demise of their business may be premature. In fact, the independent abstractor has a real opportunity that seems to have been largely overlooked, but in order to understand and take advantage of this opportunity, we have to first examine the promised market of full digitization and automation.
In this oft-prophesied and idealized market, all archived public documents will be available both remotely and digitally, and the client who needs these documents would be able to simply and efficiently obtain them, removing the need for someone to go to the courthouse, manually obtain documents, scan them, and then deliver them back to the client.
All search-related activities could be performed remotely, and there would be no need for any local expertise. This is the essence of what is promised on the back of technology.
However, if digital availability was ubiquitous, if the digitized documents were perfect, and if all the related data was flawless, such technology might indeed eliminate the need for a skilled abstractor. However, achieving such perfection in the document chain would also virtually eliminate the need for the title insurance industry as a whole.
Of course, the reality is (and will continue to be) far from this ideal, and title insurance companies will continue to thrive on the potential existence of problems that might be found in any given document chain. As long as this is true, local expertise and timely results can work together to offer a value proposition that will ultimately trump a mindless search service offered at rock bottom prices.
Testimonial for “Principles of Abstracting”Online Course
HI Jeanne,
I have to pass on this news to you, as you are a HUGE part of my success.
I found out last week that I passed my exam and am Licensed in SD now!!!
I raved of your courses to the Board of Abstracters. I know I wouldn’t have been successful in this quest so quickly without your help!
(even scored 100% in one of the 5 sections!!)
Thank you! Thank you!!
For whatever reason this industry is difficult to find training on. I wish it were required to have the standard of training you provide for all individuals to be licensed in any state!
Traci Renkly
Office Manager/Closing Agent
Brookings County Title Company
422 4th Street
Brookings, SD 57006
UCC Search Releases $1.5 B Loan in Error
A, perhaps overly conscientious, paralegal pulled three UCC searches when asked to locate a Financing Statement that General Motors had given to secure money from J P Morgan. There were apparently two UCC’s with a balance of $300 million to be paid off, but the paralegal located three UCC’s, and in the course of events, papers were drawn up by the law firm to release all three, including a $1.5 Billion security instrument.
Although the paperwork was checked by JP Morgan, General Motors, and the law firm, the releases were created, signed and filed. Ouch. See more in the abajournal
Moral of the story: as I always say in checking deeds, mortgages and security documents, assume there are always MISTAKES, and your job is to find and correct the error/s. Check, check and double-check.
Notaries Beware: Courts Authorize Serious Jail Time for Notaries
Two seemingly unrelated articles caught my eye today that relate to our everyday title and closing business. First, a CBS Investigative report shows China Flooding the US with Fraudulent Driver Licenses that truly are authentic.
Meanwhile, an article in Law360 tells us that the 9th Circ. OKs Longer Sentences For Notary Seal Forgers
The use of forged notary seals in wire fraud schemes can warrant longer prison sentences, the Ninth Circuit ruled Thursday, upholding a California man’s 10-year jail term over a $5.4 million scam. A three-judge panel found that notary seals can qualify as “authentication features” under a federal law that bars the use of fraudulent identification documents. Judges are allowed to increase the sentences of defendants whose crimes involve authentication features.
The appeals court panel upheld the 10-year sentence of Henrik Sardariani, a Glendale man who pled guilty to wire fraud conspiracy and other criminal charges. Prosecutors say he obtained $5.4 million in loans by pledging properties he didn’t own as collateral.
“In calculating the advisory guidelines range in this case, the district court correctly applied an enhancement for use of an authentication feature under [the] sentencing guidelines,” Ninth Circuit Judge Richard Clifton wrote for the unanimous panel on Thursday.
Moral of the Story: Take a good look at those ID’s when using your Notary Seal. It’s serious business.
Beware of Document Prep, Imperfect Mortgage May Grant a Homebuyer a Free Home
A great article “Mortgage Recording Requirements: Tiny Technical Defect Strikes Again” in Lexology this week by Vicki Harding of Pepper Hamilton LLP, reminds us how dangerous it is for a lender or settlement to make a mistake on a Mortgage Document. While the situation of an errant mortgage is settled in some states (such as Minnesota) where a law or title standard dismisses a recording problem, in other states, a mortgage can give a consumer a “free home” by testing the technical waters in court. Think of the potential costs to those of us that prepare mortgages every day with a careless error. Think again when preparing and reviewing those common documents.
A good quote reads:
There are a surprisingly large number of cases that avoid mortgages based on technical defects. As illustrated by this case, two points to remember: (1) on the one hand, just because a document was recorded does not mean thathttp://landrecs.com/wp-login.php it was properly recorded so that it provides constructive notice, and (2) on the other hand, there may be remedial provisions that lead to the result that once a document is recorded specified defects are no longer relevant.
Schemers Record Deed Under Adverse Possession, Take Title and Lease Property
When you think you’ve seen it all, comes another interesting case, as reported by Carlton Fields Jorden Burt
Interlopers in chain of title recorded a stray deed under the theory of Adverse Possession. They took possession, paid delinquent taxes, and began renting out property and keeping the rent payments. They recorded a quit claim deed to themselves. In the crazy scheme, the legitimate owner of property had to quiet title against the schemers. – See the results at Frazier v. Goszczynski, Case No. 5D14-265 (Fla. 5th DCA Oct. 10, 2014)
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