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Annual Principles of Abstracting Class slated for May 4-5

The annual Minnesota “Principles of Abstracting and Land Records Management” two day course is being offered on May 4th and 5th in St Paul, MN at the Country Inn and Suites. The course is designed for County Recorders, Title Insurers, Abstractors, and those who deal in land titles. Participants have included Homeland Security professionals who place towers on various sites, Dept of Transportation professionals who deal in Right of Way projects, Bureau of Indian Affairs, and various Utility companies that place easements such as Excel Energy and  Comcast.

The two day course will help prepare attendees to improve their land title search skills, stay in touch with changes in laws, or prepare for the state abstractor licensing examination.  Topics this year include foreclosures, short searches and comprehensive name searching. You can register by mail or online at http://www.landrecs.com/pages/seminar-list.php

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.

Are Abstractors to Blame for Offshoring?

by Robert Franco | 2008/11/26 | Source of Title, Used with Permission

A couple of recent (Source of Title) posts regarding offshoring have stirred up some controversy.  Sunil Ojha started a blog defending the practice of searching titles from India.  In Misunderstanding and Clearification (sic) of Same and Resolved Your Real Issue, OJha explains why offshoring makes good business sense and how it can be done effectively.  Whether you agree or disagree, the real question is why is anybody offshoring to begin with?  There is no doubt that offshoring cuts costs and that is attractive to companies looking for any advantage in today’s business environment.  But, abstracting was always a localized practice that required a particular knowledge of state and local real property laws to produce a reliable product.  Why would anyone trade quality for savings?  More importantly, have they? 

Source of Title Blog ::

Let’s start with a basic premise that it is possible to reliably search an online title plant.  I am the first to say that I have some doubts about online records, but it is possible.  The real problem that I have with online records is that not all of the information we search is available electronically; thus, the so called “thin-title” plants are incomplete.  However, title plants are the norm in some parts of the country, and even required in some places.  If they are complete, there should be no problem using them for abstracting purposes.

So the real difference between searching a title plant from India and searching a title plant locally, is the skill and knowledge of the abstractor.  As I have stated many times, there are vast differences between the states that have a huge impact on the status of title.  I believe that I have a strong understanding of the real property laws in Ohio, but I would never even consider tyring to do a search in another state. 

Some of the biggest differences between the states could be dower, community property laws, state Medicaid recovery laws, recording statutes, etc.  Anyone can find deeds, mortgages and liens, and report their volumes and pages, and recording dates.  That is the simple part.  But, understanding how those documents affect title is what makes the local examiner such a value to the industry.

I think it is a given that just as I would not be competent to abstract in any state other than Ohio, a searcher in India could not be competent to search multiple states.  It is conceivable that an Indian searcher could learn one or two states, and develop a sufficient level of competence.  Varun Sharma points out that this is exactly what they do in India (see comments).

There are different teams working on different states doing online title searches all at the same time and they are trained on state specific laws and nuances because they are experience in conducting searches in that particular State only.

Even then, it takes several months or even years of on-the-job training to really develop the necessary skills to become a competent, professional abstractor.  I would imagine it would require even more time for someone in another country, who is completely unfamiliar with our laws and culture, to grasp the concepts.  Based on a previous statement made by the head of an Indian outsourcing company, I have my doubts about the quality of training they receive.

Just when Mr Kanth was wondering about the next steps, he met the president of a title company based out of Baltimore in 2003-2004. He told Mr Kanth that there was a refinance boom in the US which resulted in a huge backlog in terms of production. Incidentally, his brother M Sujay Kanth, who is now the COO of ESS, happened to be in the US to explore business opportunities. They took up this opportunity. This was their first break. They met with the title official and looked at the process. “Initially, we had no clue of what was going on and it was very hard to grasp. We took it as a challenge and Sujay got trained in their office for about 40 days after which we started the transition to my India office from 2004,” the doc said.

 

Forty days of training is hardly suffient.  Regardless, to assume that searching titles from India is worse than using local abstractors, it must also be assumed that all local abstractors are well trained and educated in their state’s real property laws.  I believe that is a fallacy.  Basically, there is no difference between a search completed by an unqualified local abstractor and one completed by an unqualified Indian abstractor – except the latter is cheaper, of course. 

Before I continue, let me first acknowledge that there are still some very knowledgeable, local abstractors who provide very valuable services in this industry.  However, I believe that has become more the exception than the rule.  Many abstractors learned to abstract by trial and error, an online course, or from another searcher that doesn’t have the proper knowledge of abstracting.  I believe that this started with the “equity loan,” or “current owner,” searchers.  Once upon a time, they were used to provide very basic information for non-insured products.  Then, they slowly began to expand into “full searches” used for issuing title insurance.  I will never forget the first time I heard one of these searchers say “a full search is nothing more than a really good current owner with a chain of title.” 

Soon, the title industry began embracing current owner searches for title insurance purposes.  Current owners were much cheaper because these searchers, mostly out of ignorance, were taking shortcuts that a professional abstractor would never consider.  As the title industry began to lower the standards for its search requirements, the unskilled searchers flourished.  For better or worse, these over-simplified searches became the norm and everybody wanted them cheaper and faster.  The demand for skilled, professional abstractors dropped dramatically. 

Today the line between “searcher” and “abstractor” is blurred and the two terms have become interchangeable.  I wonder how many abstractors are really qualified to provide reliable title evidence. 

With the modern technological advance of electronic imaging, a title plant can be used to search titles from anywhere in the world.  If the local abstractors are really just finding documents and copying down pertinent information on a report, without a true understanding of the impact of those documents on the title, why not have that function done in India?  It is certainly cheaper… and since they can search around the clock, it is probably faster.

I do not agree with the practice of offshoring.  As Pat Scott said (see comments), “The title search is the foundation of the industry.  It is not a clerical task to be outsourced.” However, it would seem that the depth of knowledge of the local abstractors is not what it used to be.  If the industry were to suddenly stop offshoring and begin demanding quality abstracts, there would be a lot of local abstractors out of work, just the same.  The problem is that there is no way to know which ones are well qualified.  Because there are very few states with any sort of meaningful licensing, anyone can call themselves an abstractor. And, many who probably believe themselves to be professional abstractors just don’t know how much they don’t know.

My basic point is that the level of skill and knowledge between the average local abstractor and the Indian abstractor are probably not as far apart as you may think.  Title searching has been dumbed-down for so long that there are probably few left who care to educate themselves beyond what is necessary to copy recording information from filed documents.  There being little difference between the services provided here in the USA and overseas, it is not that hard to see why so many companies are offshoring title searches.  By failing to maintain a superior knowledge, the abstractors have probably made the offshoring decision much easier for those who chose to embrace it.  It basically turns on an issue of costs and profits.

Again, I am not saying that there aren’t still good, local abstractors out there.  I am merely pointing out that many of them have noticed that they are losing work to cheaper, untrained, incompetent competition; not just in India, but right there in there own counties.

Robert A. Franco
SOURCE OF TITLE

Thorny Issue In Deed

Monday, November 17, 2008

By CARL ROTENBERG

Times Herald Staff

 

NORRISTOWN — The “Uniform Municipal Deed Registration Act,” which takes effect on Dec. 8, basically pits the officials of 29 Pennsylvania townships and municipalities against the real estate title insurance industry, the lawyers who preside over residential “settlements” of sales and even county officials who are required to “record” a deed after the sale.  

 

This article demonstrates the ongoing battle between city, county and private sectors, all with the very best interests of the public, but each looking at issues from only their respective viewpoint. The same battle has been forged elsewhere, and undoubtedly will be again, but looking at the BIG picture, the documents must go of record immediately after closing, or lenders will not lend, and the lack of money available for sales will be a much bigger problem for the city than some  repairs. Read Times Herald full article by clicking here and post your thoughts.

Title Underwriters Sue Widow to Recoup Money from Fraudulent Mortgages

A Connecticut Judge has thrown out claims that Hayley Kissel assisted her deceased husband, Andrew Kissel, a wealthy real estate developer, in fraudulently obtaining mortgage money according to a new WTHN news and a Hartford Paper article. 

Mr. Kissel was murdered in 2006, leaving an estate that owed more than $20,000,000 to several banks, based on the fraudulent mortgages.  Kissel initially took out legitimate mortgages on properties, but then created and recorded fraudulent releases.  He would then go to another bank to borrow money, and repeat the process.  The lawsuit claims Mrs. Kissel was aware that her husband was forging and recording bogus releases to obtain more funds, but kept quiet to maintain her lifestyle. And, because she did not speak up, Kissel was able to repeat the scam, causing losses to the title companies.

Both Chicago Title and Fidelity National Title Insurance companies, which insured title for the lender’s, are suing Mrs. Kissel. They allege that because she was aware of her husband’s conduct, she was complicit in the activity by not reporting it.  The judge disagreed.  A jury will now have to decide if Mrs. Kissel, who has significant assets, has been unjustly enriched by her husband’s theft and is therefore responsible for some of the losses incurred by the title underwriters.

Author comment:  Granted, I have not seen the documentation, but this appears to have all the red flags signs of  perpetrated fraud.  Honestly, when is the last time the title person legitimately saw a large mortgage paid off  PRIOR to a mortgage closing, as it appears to have been in this case.  

RESPA Transaction Fees and Admin Fees in the News Again

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B.J. Ostergren knows more about you than you think

From the Source of Title Blog, used with their permission.

Maybe you’ve never heard of B.J. Ostergren, but she knows a lot about you. She knows where you live and how much you pay to live there. She has your driver’s license number, your signature, credit card and bank numbers and she has your Social Security number. Likely as not, she has the goods on your parents and children as well. She gathered it all from government websites.

The Virginia Watchdog wants the state to stop displaying your private data online but a new law in Virginia says government agencies have an exclusive right to display private data contained in public records online. Now Ostergren is taking her battle to federal court.

Ostergren has gleaned from online government records the Social Security numbers of many prominent people — Jeb Bush, Colin Powell, Porter Goss and Tom DeLay among them — and posted the documents on her own Web site to demonstrate government’s failure to protect individuals’ privacy.

“I’m not going after the little guy, I’m going after people of prominence that could have some power to do something about this,” Ostergren said.

Ostergren’s website, TheVirginiaWatchdog.com advocates against making personal information available on the Internet. The website includes public records obtained by Ostergren from government websites that include the Social Security Numbers of public officials. By posting these documents, Ostergren hopes to illustrate the type of information available on government websites, and to prod officials to take action.

Perhaps most offensive to Virginia officials are the links Ostergren posts on her site that document just how easy it is to find documents containing Social Security numbers and other private data belonging to Virginia’s own legislators, judges and county officials.

In March, Virginia legislators reacted to Ostergren’s website by amending a state law prohibiting anyone except government agencies from posting private data online. Under the previous law, individuals were prohibited from disclosing Social Security numbers obtained from private sources, but millions of public records containing Social Security numbers and other private information are available in Virginia on the state’s own websites.

Government websites have become a rich source of data needed by terrorists, identity thieves and stalkers.

Experts say terrorism and identity theft go hand in hand. The al-Qaida training manual US troops found on a laptop computer in Afghanistan includes provisions for trainees to leave camp with five fake personas, says Judith Collins, an identity theft expert, who uses a copy of the manual to train law enforcement officials. Terrorists are regularly schooled in the art of subsisting off credit card fraud while living in the United States, Collins says. The manual also instructs would-be terrorists on the easiest way to find the information they need.

According to former Secretary of Defense Donald Rumsfeld, speaking on January 15, 2003, the al Qaeda training manual tells its readers, “Using public sources openly and without resorting to illegal means, it is possible to gather at least 80 percent of all information required about the enemy.”

The concept of document security by paid or free subscription to government websites has also proven deadly for at least two young women. Amy Boyer and Rebecca Schaeffer both lost their lives as a result of stalkers accessing their information through government websites. The 1989 murder of TV actress Rebecca Schaeffer resulted in the often-ignored National Driver Protection Act which makes it illegal for companies to buy driver records from state governments. Cases abound of government websites failing to protect constituents when publishing private data contained in public records online.

In an advisory dated August 8th, 2006, Ken Schrad, Director of Virginia’s Division of Information Resources announced that the State’s Bureau of Insurance Website published the Social Security numbers of every insurance agent licensed in the state. He advised the state’s 202,000 agents, many of whom sell identity theft insurance, to watch for any unusual activity on their bank or other financial accounts that might result from the massive breach.

Under the new law, Virginia citizens are prohibited from repeating the state’s mistakes by publishing copies of public documents containing Social Security numbers on private websites or Blogs. But the law allows Virginia’s “official” websites to continue trafficking in identities with almost complete abandon. Virtually anyone– anywhere in the world with an internet connection and twenty five dollars for a subscription to the county website may be granted remote online access to your Social Security number and other private data.

Earlier this month, the American Civil Liberties Union of Virginia filed a lawsuit on Ostergren’s behalf in federal court in Richmond. Ostergren is challenging the law that targets her website on grounds it violates the First Amendment’s protection of freedom of speech.. She has launched a federal lawsuit that questions who if anyone, has the right to distribute your private/public papers online for the entire world to see. At issue is who has the right to traffic in your identity.

When Virginia Governor Timothy M. Kaine signed the bill on March 11, he and others touted the bill as an effort to curb identity theft, suffered by an estimated 9 million Americans each year. But even the lawmaker behind the bill (Sen. R. Edward Houck) acknowledged that stopping people like Ostergren from publishing the Social Security numbers — not protecting Virginians from identity theft — was the true goal of the legislation.

Ostergren says her tactic of bringing bold and personal awareness to elected officials has worked in other states, such as Vermont, New York, New Mexico, California, Ohio and Florida, where she has fought to get personal information removed from online records. Only in her home state have lawmakers responded by unanimously passing legislation making Ostergren’s tactics illegal and punishable by a $2,500 civil penalty.

Ironically, the questioned statute takes effect on July 1, the same date by which circuit court clerks across the state are required to make all land records available on the Internet. Land records consist of deeds and mortgage documents, but may also include legal judgments, such as divorce decrees and probate, that often contain Social Security Numbers and other personal information. The ACLU is seeking an injunction prohibiting the state from enforcing the law against Ostergren.

“The ACLU is an advocate for laws that prevent the government from allowing Social Security Numbers to appear on publicly accessible websites,” said ACLU of Virginia Executive Director Kent Willis, “but when the government puts records online that do contain the numbers, it can’t then turn around and prevent the public from disseminating them.”

“Instead of the Virginia General Assembly dealing with the real problem of Social Security numbers being put on Web sites by circuit court clerks, they decided to target me because I posted theirs,” Ostergren told the Washington Examiner.

“This is a wrong-end-up law that attempts to conceal the fact that Virginia’s lawmakers have failed to prevent Social Security Numbers from being placed online in the first place,” added Willis. “If Social Security Numbers were removed from public records when they are placed online, there would be no need for this law.”

While Virginia already has a law requiring Social Security numbers to be redacted from documents posted on the Internet, the legislature failed to fund the privacy statute. Redaction efforts in other states have proven to be largely ineffective and extremely expensive.

The ACLU lobbied against the passage of Virginia’s new law prohibiting anyone except the government from posting Social Security numbers online and asked the Governor to veto it.

When she found out in 2002 that every locality in Virginia would begin posting personal information online, she started The Virginia Watchdog from her Hanover County home.

The lawsuit, which alleges that the law violates Ostergren’s First Amendment rights, points out that shutting down Ostergren’s website will do nothing to protect Social Security Numbers, since all of the documents on the site are also available on government websites. In the 1989 case The Florida Star v. B.J.F., the Supreme Court observed that “where the government has made certain information publicly available, it is highly anomalous to sanction persons other than the source [government websites] of its release.”

Today millions of people from all over the world routinely search and seize our most sensitive documents from government websites. The records can then be used by international criminals to take your property, homes – even your life. Surely this wasn’t what the framers of the constitution had in mind when they promised in the Fourth Amendment, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated…”

ACLU of Virginia Legal Director Rebecca K. Glenberg is providing legal representation to Ostergren. A copy of the ACLU’s complaint can be found online at http://www.acluva.org/docket/pleadings/ostergren_complaint.pdf.

Interested parties can Contact Kent Willis or Rebecca Glenberg at 804/644-8022

Laws Change to Protect Consumer When Recording Deeds

A Philidelphia online Newspaper, RoxReview has a must read story about title theft and how they plan to combat the bad guys. Here is an excerpt about the ploy:

…thieves find houses that are vacant and obviously have not been looked after.

They use public records to learn when taxes and water bills have last been paid to make sure the properties’ owners have had little involvement or have not been paying any attention to them…
(then) a house thief simply gets some legal stationery, types up a deed and gets the property transfer notarized … He then presents that paperwork to the city’s Records Department, pays some fees and in a matter days becomes listed as the owner of record.

The article suggests title insurance as a protection from the problem, but it wants the government to do more. Learn what laws or regulations Philadelphia is considering to curb the growing problem.

Title Insurers Insure Closings

In the midst writing the 2nd edition of Title Insurance for Real Estate Professionals, I recognize how things have changed in the last couple of years for the title insurance industry. At the moment, I am working on closings.

Title Underwriters have been forced by demands from the market to begin insuring the closing process, a dangerous and expensive endeavor in today’s market. This was never part of title insurance. It is not something that was accrued for in planning and reserving money for claims. And where does closing liability end? Will closers and title companies be sued because someone claims they didn’t understand their loan documents – or worse yet, say the lender was in cahoots with the title company and closed the loan for the title premium and fees? Similar to the recent lawsuit by a buyer that they paid too much for their house because they were advised to do so by their real estate agent.

And the liability becomes worse – over the past years, closings have become more and more complicated. New types of loans—variable-rate, adjustable-rate, balloon mortgages, growing equity mortgages, interest-only loans, construction financing, reverse-annuity mortgages, and others—have moved into the market. These complex documents must be explained to the borrowers, a very difficult task, particularly evident is the lack of understanding of these documents in the real world, where foreclosures have run rampant the last years and the reality of the documents hits home.

Complications of closing also include dealing with heavy legislation pertaining to Federal Laws such as the Patriot Act, Truth in Lending (TIL) laws, the Real Estate Settlement Procedures Act (RESPA) and the Gramm-Leach Bliley Act (GLBA) dealing with privacy rules and closing. New local and federal legislation related to the sub-prime market and poor quality loans are making, and will continue to make, closings even more difficult by requiring additional documentation.

Independent “signing agents,” which are a fairly new phenomenon in the U.S., are unknowns in closing. Signing agents typically have no relationship with a title underwriter. They go to a home, bringing the documents with them for closing (frequently used in re-finance transactions.) Some signing agents see themselves strictly as notaries public, who witness signatures with no responsibility other than verifying the identity of the signers. Other signing agents are very knowledgeable about the documents and may thoroughly explain them – but do they have errors and omissions coverage? What if an error is made, who is responsible?

Is it appropriate for title companies to give a Closing Protection Letter, in effect insuring the closing? The State of New York says NO. It has specifically prohibited the practice in NY, citing the fact that the practice is a form of insurance, and potential claims are not being accrued for. What do you think?

MILITARY IN FORECLOSURE

Bloomberg recently said:

In the midst of the worst surge in mortgage defaults in seven decades, foreclosures in U.S. towns where soldiers live are increasing at a pace almost four times the national average, according to data compiled by research firm RealtyTrac Inc. in Irvine, California.

As I read on, my blood is flowing. I am angry. I come from a very strong military family. My brother served in the military, my three uncles (brothers) are buried in military graves, my father-in-law and sister-in-law served, I have cousins, nieces, nephews all currently serving or recently having served in the military. It is a difficult life, moving every couple of years, it is a sacrifice for our country. And I believe a sacred trust. America is still the greatest country on earth. with all its flaws (and yes, there are many), we are still the best of the worst.

Istock.com pointed out that

Active-duty military members have a permanent change of station once every two years. That is, they are reassigned to a different location on a permanent basis every 24 calendar months. Of course with the War On Terror going, they could be deployed at any point in time, and that doesn’t change where your family lives – but a permanent change of station order does.

Read these articles, it is a travesty that needs correcting and we have a duty to correct, just as these brave soldiers feel a duty to their country.

Info On Home Closing

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