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MN Dept Commerce Takes Action against Embezzeling Closer

Used with Permission of Robert Franco, Source of Title
The Minnesota Department of Commerce has summarily suspended the real estate closing license, resident insurance producer license and Notary Public commission of Kuntee Singramdoo and charged her with embezzling over $230,000 in real estate closing proceeds and using the money to pay off her own creditors or her family members’ creditors.

Singramdoo, a resident of Lakeville, was an independent closer hired by Walsh Title & Real Estate Services, where she provided real estate closing services, sold title insurance policies and notarized real estate documents. The Commerce Department complaint alleges that Singramdoo engaged in a pattern of misappropriating, converting and/or embezzling settlement proceeds by issuing Walsh Title checks for her own benefit or for the benefit of her family members.

The alleged embezzlement includes at least 184 checks issued between February 2004 and June 2007 to 24 different creditors including $68,109 to U.S. Bank, $48,863 to Wells Fargo, $800 to JC Penney, $4,764 to Macy’s, $6,286 to Goodman Jewelers, $800 to Bloomingdale’s, $6,866 to Honda, $2,734 to American Express and $2,323 to Discover.

Singramdoo admitted under questioning from Commerce Department investigators that she embezzled the funds but at this time has only paid back $10,000 to Walsh Title.

Singramdoo accomplished the embezzlement by entering her own creditors on the HUD-1 mortgage loan form as if the debts belonged to the buyer or seller and subsequently issued checks directly to the creditors in her name. She also changed HUD-1 mortgage loan documents after closings to reflect the fraudulent payments.

“This brazen embezzlement scheme is a warning to everyone to pay close attention to the loan documents you are signing during the closing of a mortgage,” said Glenn Wilson, the commissioner of Minnesota’s Department of Commerce.

Who Has to Sign the Mortgage Documents?

One of the most common sources of confusion at closing seems to be who must sign the mortgage docs. It seems to befuddle even experienced closers of title companies and title agencies. Does the Deed have to match the Mortgage and does the Mortgage have to match the Note? Many are sure that when there is a husband and wife, the closer should prepare the Warranty Deed in both names in joint tenancy, and then prepare the mortgage to exactly match the names on the Warranty Deed. They are not quite sure about signatures on the Mortgage Note, however, because lenders sometimes require others to sign the Note as well.

Truth is, in Minnesota (not necessarily all states) it takes “one to buy and all to sell,” meaning a person can buy real estate without their spouse going into title. There may be good reason for that. Say one spouse has significant financial exposure due to the business she owns. The husband may want to go into title in his name alone, so that should a bad business climate come along and the wife has judgments filed against her, the judgments will not attach to the property.

Also, far as joint tenancy – that may not be the best solution for all spouses. For example, Harry and Mabel, both elderly, have lost their spouses. A winter romance comes along and they decide to be married. They pool their funds and buy a home together. Both wish for their children to inherit their respective halves upon their death. They want to take title not as joint tenants, but as tenants in common.

However, Minnesota, as many states do, has an automatic interest of the spouse in the homestead. Now how do we know if they are living in the property as their homestead? Answer is: we don’t. Therefore, to be prudent, we ask spouses to subordinate any interest they might have, by signing the mortgage. They don’t have to be in title to sign the mortgage. But by signing the mortgage, we have cleared the potential interest.

Best Practice: ALL parties who show in title must sign all mortgages, and rule of thumb is to get their spouses to sign as well. Yes, I recognize that some real estate is unlikely to be homestead, but to be safe, get your underwriter to sign off on not getting the spouse’s signature. After all, that apartment building could also contain the apartment that your client claims as home.

As far as the Mortgage Note, it is simply a personal pledge to repay the full amount of the debt. So if son and daughter-in law, for example, need a little assistance in buying their first home, Mom and Dad may help it happen by, in effect, guaranteeing the loan. Mom and Dad sign the Mortgage Note but do not have to go into title (unless the lender demands it.)

As a disclaimer, this is NOT intended as legal advice, and those who prepare legal documents should be careful to seek legal advise to fulfill the intentions of the title holders. This is merely information from a seasoned closer and title examiner who has seen problems crop up due to misunderstanding how it the documentation works.

First American Title Posts Profit

First American Title Insurance Company posted a $9.3 million profit in the fourth-quarter. Shares of First American were up on Wallstreet about 4% after the announcement. While a small profit, it shows that overhead and expenses have been brought in line with current revenues.  

During a tough year for the title insurance industry, First American Title was forced to cut 1,210 additional workers during the fourth quarter, bringing First American’s cuts to 4,100 in 2008, or about 11% of its staff. Additionally, as would be expected, it reported that revenue for an average title order was down to $1,462, 19% lower than the year before, reflecting significantly reduced sale prices. In spite of that, it made a profit.

More good news: First American reported that it 

”is starting to see an increase in title insurance thanks to low mortgage rates” and is  “encouraged by the federal government’s efforts to shore up the housing market. “

As the fourth quarter is usually a slower time of year for sales and refinances, we hope the announcement is a harbinger of things to come this spring.

See more at the Orange County, CA Business Journal.

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Has Florida Real Estate Finally Made a Turn for the Good

Source of Title comments that there may be some light at the end of the proverbial tunnel in Florida. While home prices have taken a hit, possibly a much needed correction, prices are down and sales have had a serious uptick over the last months. Is it a sign that the bottom prices have been met?  Let us hope so, and let those who have an interest in a very affordable second home consider it now. (Printed with permission from SourceofTitle.com)

Florida’s existing-home sales rose in January, making it the fifth month in a row that sales activity showed increases in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors (FAR). Existing-home sales rose 24 percent last month with a total of 8,450 homes sold statewide compared to 6,810 homes sold in January 2008, according to FL Assoc of Realtors(r).

“Many people are looking at today’s market and seeing opportunities to find the home or business they’ve always wanted,” said Cynthia Shelton, FAR’s president. “With a range of available housing options, historically low mortgage interest rates and affordable prices, buyers who may have been hesitant before should take a closer look at the current opportunities for homeownership.”

Thirteen of Florida’s metropolitan statistical areas (MSAs) reported increased existing-home sales in January while 11 MSAs also showed gains in condo sales; it marks the seventh consecutive month that a number of markets have reported increased sales.

Florida’s median sales price for existing homes last month was $139,500; a year ago, it was $206,900 for a 33 percent decrease.

What does Mortgage Modification mean to the Title Industry?

The Title Insurance industry has slowed to a crawl. Most of the business at the closing table is either a foreclosure or a short sales. And with Congress’ plan to modify existing mortgages, even that pittance will be drying up. 

Congress plans to modify existing mortgages to lower rates so borrowers can afford their monthly payments.  How does this affect the title industry you ask? In the past, when mortgages were modified, title policies were still in the picture, because intervening liens were a concern. For example, let’s say Sam Smith wanted to modify the terms of his loan by increasing the loan amount. You were the first mortgage lender. If you modified the loan, you had to worry about what that would do to your 1st lien position. If there was a second mortgage or a tax lien on the property, changing the terms of your loan might bump you into second place or third place. The title industry therefore stepped forward with updates to the policies. we checked for intervening liens, we got subordination agreements from the secondary lien holders, we recorded lots of documentation, and endorsed the policy with matching fees for our work.

So, how is this different? Think about it. Titles on all of these troubled loans have already been insured. But this time, they likely won’t need to be insured again. The new loan modification law will generally decrease the interest rate and that will be an advantage to any secondary lien holders, putting them in a stronger position. Therefore, the modification should stand on its face, and no endorsements should be needed. So, there won’t be any need for that title review, or an endorsement to the policy, or new title insurance premium fees. Their might be a pittance for sitting down with the consumer to sign the modification agreement and record it (and with the new RESPA law, title companies won’t even be able to mark up the recording fee.)

Loan modifications are good for the consumer, and good for the economy. They help neighborhoods. They keep banks out of the painful REO business. But they provide little role for title companies. Ouch – another big ding for an already hurting industry.

The Homeowner Affordability and Stability Plan

Moody’s Economy.com estimates nearly 13.8 million of the 52 million U.S. homeowners, almost 27 percent, owe more than their homes are worth after many months of declining prices. So what does the Obama plan say and how will that affect title insurers?

The Homeowner Affordability and Stability Plan anticipates slowing 7-9 million foreclosures. One part of the plan would be to refinance mortgages on primary residences insured by Freddie and Fannie whose values have sunk below the mortgage balance. The plan would make the lender responsible to lower interest rates so that a borrower’s monthly mortgage payment is no more than 38 percent of his income. The government would then pay to lower that even further, down to 31 percent of the borrower’s income for a period of five years. The rate would then progressively increase to the original respective loan rate. The program would not be available to real estate speculators, for second homes, investment properties or “flipped” houses.

 

Benefits For the Borrowers:

This would significantly reduce monthly payments. Under the plan, not only will the borrowers amortize their loans quicker, but they will also receive an incentive for making timely payments, receiving principal balance reductions up to $1,000 each year for 5 years for good credit habits.

 

Benefits For the Lenders/Servicers

·         Servicers could receive up-front fees of $1,000 for each eligible modification meeting guidelines

·         They would also receive “pay for success” fees — awarded so long as the borrower stays current on the loan — up to $1,000 each year for three years.

·         Another incentive offers mortgage holders $500 paid to servicers, and $1,500 to mortgage holders, if they modify at-risk loans before the borrower falls behind in  payments.

·         A $10 billion quasi-insurance plan will insure lenders against falling values on modified loans, linked with declines in the home price index, as an incentive for lenders not to jump the gun on foreclosures due to fear of the continuing drop in home values.

·         Clear guidelines and rules for loan modifications for all loans owned or guaranteed by the Feds, including Ginnie, Fannie, Freddie, FHA, VA, etc. would be established

 

Congress is also considering allowing bankruptcy judges to rewrite terms of mortgages so long as the homeowners commit to make payments and stay in their homes.

So what does that mean for a title insurer? My bet is the regulations will provide that mortgage modifications will not require any type of endorsement to existing loan policies, leaving title companies with either no role in the process, or simply that of a loan modification signing agent.

 

Source: White House Press Office

 

County Anticipates New Public Notice on Foreclosures

A good article in a local newspaper  the Record-Bee reminds us that unfinished homes are a problem for communities and counties that want to collect unpaid fees. One county is working to create a public notice to make it easier for title companies, abstractors and buyers of the problems. It is difficult enough to search various locations for all the problems and unpaid fees in this time of heavy foreclosures, but especially on new construction. The recording of these problems and delinquencies in a prominent location is a wonderful idea that will help both the public and private sectors, and I hope it catches on.

LAKE COUNTY, CA The Lake County Community Development Department’s building division is proposing a measure that would address problems that arise when unfinished homes go into foreclosure…”What happens is that with the housing market the way it is, a lot of people just walk away from these homes. … this is something that will allow us to put notice on the public record …to make things more clear to the downstream person who gets the property,”

It's up to YOU to Protect your Privacy

Here is an adaptation from Wesley Darity’s PrivacyGurus Newsletter. It is a good reminder that we often don’t think when giving out private information that could turn into a huge problem!

“…(It is important for) everyone from senior citizens to grammar schoolers to stay aware and alert. After all, the U.S. Constitution does not provide any explicit right to privacy so we have to take it into our own hands.

There are four general areas of privacy: bodily, territorial, communications, and information.

  • Bodily Privacy- We expect that our bodies are private, unless we as a society have agreed otherwise. For example, if we are in an airport security line and the metal detector beeps as we walk through the scanner. We expect to be searched. Or if we agree to having drug tests as a condition of employment. Or if we are renewing our driver’s license and agree as a condition of having that license to submit a thumb print.
  • Territorial Privacy- We expect that our homes are private. However, when we walk into a convenience store or up to the ATM, we know or should know that we are being video-taped. Or  we are at an intersection with a red light traffic camera there to record violators of the red light.
  • Communication Privacy- We expect that our personal conversations are private. But our expectation changes, or should change, if we are on a cell phone versus a land line. We expect that our letters signed, sealed and mailed with the postal service are private but our expectation changes, or should change, when sending email. It is not in any way “private”.
  • Information Privacy- We expect that our financial information at the bank and the health concerns we discuss with our doctors is confidential. However, anyone can watch what our work-out routines are at the fitness center and we expect that a number of people will know what we buy at the store. The act of purchasing is a public act, for which there is no reasonable expectation of privacy.

It is important for each parent/guardian of a school-ager, from elementary school through college, to provide them with ways to protect their privacy while out in the world. It is becoming as critical as not accepting rides from strangers.

Privacy Rule 1- You have rights. Know and let your child know that it is a good idea to say NO to requests for unnecessary information. Schools, athletic teams and pediatric offices routinely request Social Security Numbers for registration purposes. Before giving that information, always ask if it is this required and by whom. If you do not like the answer, then decline to provide the data. Remember: Social Security cards are not a form of identification.

Rule 2- Always Beware. The best way to protect your/ your child’s identity is by teaching them that documents containing their personal information, such as social security cards, bank statements, and passports, should be locked up in a safe place rather than carrying them around everywhere.

As always, be aware and alert as to the information you divulge online. Assume that none of it is confidential unless overtly stated in the website’s privacy policy. Know that your every move online may be tracked by sophisticated technology poised to collect your data.

Thanks, Darity, We will try to remember and pass on your good advice. Darity can be reached at [email protected] 

 

RESPA – On Again, Off Again… Another Lawsuit Filed

According to Builder Online, HUD has delayed the implementation of RESPA that was to go into effect on Jan. 16th by 90 days. HUD agreed to the delay to assemble info it needs to defend against another lawsuit , this one brought  on by he National Association of Home Builders (NAHB) and other plaintiffs, including 13 large builders and their affiliated lenders and title companies.

HUD’s published final rule eliminates builders from offering home buyers incentives if the buyers are linked into using an affiliated title company, mortgage company, or other affiliated service provider. The NAHB suggests that dismantling these affiliations will not help the consumer and will additionally lead to job losses.  

HUD is also dealing with a lawsuit filed by the Mortgage Brokers Association (MBA) in December that is trying to block a rule requiring lenders and mortgage brokers to provide buyers with a “good faith estimate” that discloses loan terms and yield-spread premiums on the HUD-1 settlement statement.

Surprisingly, at this time, there seems to be no interest by the American Land Title Association (ALTA) to commence a lawsuit against the very unpopular required disclosure on the HUD-1 of the premium split between title agencies (that receive the vast majority of the premium) and title underwriters (who receive very little.) HUD has required the disclosure based on recommendations from the Government Accountability Office that has been critical of the industry practice.

Info On Home Closing

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