Title Insurers

Who is Responsible for Who Gets Paid?

Whos on FirstWho to pay?  It starts to feel a little like “Who’s on first, What’s on second and I-don’t-know is on third” when we start to look at complicated mortgage transactions these days. We have mortgages, deeds of trust, lenders, assignees, beneficiaries, lender’s servicing agents, trustees, securities, exchange securities, and more.  

Here, as happens, title companies are charged with collusion in a complicated Ponzi scheme. I question how we legitimately know who should be paid in some of these complicated transactions.  Should the check for a payoff go to the Lender holding the Mortgage or to the Servicing Agent, in hopes it will be properly credited? Did the title company know the scheme?

From Lexology Title Insurance Article by Carlton Fields, an interesting read:

Escrow Agent: Where payments are disbursed to lender’s servicer and escrow agent has not knowledge of servicer’s scheme to defraud lender, lender fails to state a cause of action against escrow agent — Fazeli v. Williamson, No. H036951 (Cal. App. March 27, 2014) (affirming escrow agents’ objections)

Are Title Insurers Better Prepared for 2011?

In a new article from National Mortgage News, there is a discussion about the relatively immediate future of the title industry – i.e. in 2011 as compared to past years. It should be noted that a contributing author to the articles quoted is the American Land Title Association, certainly providing a skewed perspective, meaning that the ALTA lobbies to put the best spin on the industry. For example the quote

“In addition, while the title insurers could see a very slight increase in expenses in conjunction with increased legal activity involving foreclosures, we believe it will be limited in nature and have no real impact on the bottom line. With respect to actual claims arising from the enhanced scrutiny around the foreclosure process, the title insurers have been clear in their belief that any issues involving the lenders will not result in claims for the industry,” …

This is  clearly a one-sided comment. It does not address the real cause of the increase in claims.  From my perspective, the real cause of claims is that  the quality of the product has declined significantly.  Searches of simply the last-record-owner forward to write title policies is commonplace.  Indeed it has become the norm, I hear from my students.   Getting the product out quicker and cheaper has become much more important than the elimination of potential or even clearly outstanding title issues that used to be the norm. This means the consumer is getting a lesser quality product.  Additionally the policies that ALTA has put out cover more and more potential title issues (building code issues, etc) that should cause claims.  I also have concern about the quality of those doing the title searches. Sending the work overseas as a cost savings clearly has costs in quality.  I am amazed at the effort it takes to stay on top of changes in the marketplace that impact real estate abstracting and examining.  I am not sure the title insurers care.  It seems to be more important to sign a big agent than the quality of the work the agent can do.  Certainly that means claims.

I do think title companies have laid off staff to reach the demand, but as the article points out, hiring competent staff when the market turns will be a significant problem.  And as the A.M.Best report says “Loss activity stemming from agent-, consumer- and bank-related fraud activity still remains a concern. Such activity typically goes up during periods of reduced cash flow and generally involves embezzlement of funds held in escrow, potentially resulting in severe losses,” …   I hope that we as an industry will work to carefully educate and bring back the quality of title title work the consumer deserves.

Minnesota Title Insurance Agent Goes to Prison for Fraud

October 7, 2010 – (RealEstateRama) — A 61-year-old Alexandria man was sentenced earlier today in federal court in Minneapolis on charges connected to a scheme to defraud mortgage lenders and others out of more than $800,000. United States District Court Judge Joan N. Ericksen sentenced Dale Charles Dodge, Jr., to 34 months in prison on one count of wire fraud and one count of engaging in a monetary transaction with property derived from unlawful activity, commonly referred to as money laundering. Dodge was indicted on September 15, 2009, and pled guilty on May 12, 2010.

In his plea agreement, Dodge admitted that from 2002 through 2005, he operated a title closing company under the names Premier Title & Abstract, Inc., and Verity Title & Abstract. As part of that operation, he maintained an escrow account, into which mortgage lenders regularly deposited loan proceeds for distribution at closings pursuant to the terms of the real estate agreements. He also contracted the services of a title insurer, who underwrote most of the real estate transactions closed through his company. Title insurers, often called underwriters, are liable to lenders, borrowers, and others if escrow and other transaction funds are improperly disbursed.

The plea agreement goes on to state that between 2002 and 2005, Dodge executed a scheme to defraud mortgage lenders and others out of large sums of money by diverting loan proceeds from the escrow account at his title company. The money was used for his personal benefit as well as the benefit of his company and others involved in the scheme. Specifically, Dodge fraudulently removed the funds or caused the funds to be removed from the escrow account to pay his salary and the salaries of company employees in addition to other non-escrow business expenses. Frequently, those expenses were paid through wire transfers from the escrow account to other accounts under Dodge’s control. Furthermore, Dodge admitted concealing those actions from his title insurer and mortgage lenders as well as from property sellers and purchasers.

Dodge’s fraud scheme caused losses of more than $800,000. Approximately $844.561.60 is owed to one specific mortgage lender, who mistakenly deposited money into Dodge’s escrow account. An additional amount is owed to First American Title Insurance Company, Dodge’s title insurer, which was required under law to pay certain outstanding escrow obligations for which Dodge was unable to pay.

Following today’s sentencing, Jose M. Martinez, Acting Special Agent in Charge of the Internal Revenue Service-Criminal Investigation Division’s St. Paul Field Office, said, “By taking deliberate steps to divert escrow monies and conceal these actions from others in the real estate and mortgage industries, Mr. Dodge committed mortgage fraud. This sentencing shows that this type of activity can have criminal consequences including a felony conviction and a prison term to serve.”

This case was the result of an investigation by the IRS-Criminal Investigation Division, the U.S. Postal Inspection Service and the Federal Bureau of Investigation. It was prosecuted by Assistant U.S. Attorney Tracy L. Perzel.

New York Times Article on Foreclosures and Title Insurance

The New York Times has an excellent article on foreclosure issues and the predicament that both the Public and title insurers find themselves in. They clearly understand the problems and clearly state some of the “What if’s” This is a must read article for all dealing with foreclosures. See NY Times article.

Title Examination Seminar September 13-14

Jeanne Johnson & Associates present:

“Title Examination for Title Insurers”
September 13-14, 2010
St. Paul, Minnesota $495.
Exam Title from A-Z For More information click here: Title Exam Class

Who Should Attend?

The class is best suited for people with several years experience in the Real Estate or Title Industries who
• Want to build confidence in full and complete title examinations (Patent to present)
• Want to expand their current skills in Abstracting, Searching or Closing with a full understanding of both the Title Examination process, the resulting Title Commitment and Problem solving
• Wish to expand skills into a Title Examiner position

This hands-on course runs through the core elements of real estate law and how to examine title searches. It covers ALL types of liens – how they attach and how they can be removed. It discusses coverage under the 2006 ALTA Policy and use of the Title Standards.® We use practical hands-on examples, examine real world title problems and end by a doing a complex title exam.

As a result of this seminar, participants will be able to:

• Define, explain and apply the “thirty and forty-year laws” to a full title exam
• Anticipate necessary exceptions to title based on the legal description
• Recognize problems encountered within a chain of title
• Recognize what title issues are acceptable using Terms of the Policy and Title Standards®
• Write concise instructions as to how to clear title
• Identify Title Problems – from everyday matters to complex issues
• Identify 50 ways to clear title problems and select the best solutions for problems
• Describe and give examples of appropriate “special guarantees”
• Recognize and give examples of inappropriate “special guarantees”
• Examine title to a reasonably complex Abstract of Title from Patent
• Explain due diligence in examining title for the Underwriter
• Recognize Red Flag areas that require special review by experts

Title Insurers Financial Outlook Improves

Better than expected and much welcome news in the Financial area today for the Title Insurance industry. News reports show Old Republic Turns To Profit In Q2  More at RTTnews
Reports also show National Financial, Inc. Beats Analyst Expectations; FNF More at LearningMarkets
And finally, Analyst Research on PMI Group and Radian Group — Home Mortgage Insurers Produce Positive Gains More at Trading Markets

Fidelity Settles FTC’s Complaint of Anti-Competition Due to Purchase of Title Plants, Subject to Public Comment

July 17, 2010
WASHINGTON, July 16 — The Federal Trade Commission issued the following news release:
To settle Federal Trade Commission charges that its 2008 acquisition of three LandAmerica Financial, Inc. subsidiaries was anticompetitive, Fidelity National Financial, Inc. will sell several title plants and related assets in the Portland, Oregon, and Detroit, Michigan, metropolitan areas, and in four other Oregon counties.
Title plants are databases used by abstractors, title insurers, title insurance agents, and others to determine the ownership of, and interests in, real property in connection with underwriting and issuance of title insurance policies and for other purposes.

According to the FTC, Fidelity’s acquisition of the LandAmerica assets was anticompetitive in several local markets for the provision of title insurance information services by title plants.
The FTC’s complaint charges the acquisition reduced competition in six geographic areas: 1) the Portland, Oregon, metropolitan area, consisting of Clackamas, Multnomah, and Washington counties; 2) Benton County, Oregon; 3) Jackson County, Oregon; 4) Marion County, Oregon; 5) Linn County, Oregon; and 6) the Detroit, Michigan, metropolitan area consisting of Oakland, Macomb, and Wayne counties.
In the Portland, Oregon, area, the complaint alleges the acquisition left Fidelity with a controlling interest in the title plant that is the sole provider of title insurance information services. In the three other Oregon counties, the acquisition reduced the number of independent title plants from four to three.
In the Detroit metropolitan area, the FTC contends the acquisition may give Fidelity the power to affect the competitive significance of Data Trace, an independent title services provider, and the only firm in these counties other than Fidelity with a complete and up-to-date title plant.
The FTC’s proposed settlement order will replace the competition lost through Fidelity’s acquisition of LandAmerica’s title insurance subsidiaries. First, it requires Fidelity to sell part of its ownership in the joint title plant in Portland, Oregon, to Northwest Title. This will ensure Fidelity does not own a majority of the only title plant serving the Portland market.
Second, it requires Fidelity to sell a copy of the data from each of the title plants serving Oregon’s Benton, Jackson, Linn, and Marion counties to Northwest Title. This will restore the number of independent title plant owners in each county to four – the same number as before the acquisition.
Third, the proposed order requires Fidelity to sell a copy of the title data in the three Detroit-area counties that LandAmerica provided to Data Trace before the acquisition to an FTC-approved buyer. This will limit Fidelity’s ability to affect the competitive significance of Data Trace, an ability that Fidelity gained through its acquisition LandAmerica’s assets.
Finally, the order requires Fidelity to notify the FTC before acquiring 50 percent or more of any joint title plant in California, Colorado, Nevada, New Mexico, Oregon, and Texas – states where Fidelity’s acquisition of LandAmerica’s subsidiaries has increased Fidelity’s ownership interest in title plants.
The FTC vote approving the complaint and proposed settlement order was 5-0. The order will be subject to public comment for 30 days, until August 16, 2010, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. To submit a comment electronically, please click on: https://public.commentworks.com/ftc/fidelitynationalfinancial.
NOTE: The Commission issues a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.
Copies of the complaint, consent order, and an analysis to aid in public comment can be found on the FTC’s website at http://www.ftc.gov The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

Creditor’s Right Endorsement

The American Land Title Assoc. Form 21 Endorsement, commonly referred to as the “Creditors’ Rights Endorsement” was de-certified by ALTA, moving the risk back from title insurers to the insured, which may force prudent lenders to perform additional due diligence to understand the financial creditworthiness of its borrowers.
See more at Lexology (registration)

Title Insurers Staff Down 11.4%

According to a report issued by the U.S. Bureau of Labor Statistics, Title Insurers are showing a very slight improvement by adding ly 1,000 jobs, bring the estimated jobs to 69,300.  However, year-over-year numbers has seen an 11.4% decline in title insurance jobs.

Another Short Sale Fraud Uncovered

Title Insurers and Closers, beware. CNBC has picked up yet another RESPA violation.  It would seem that some second mortgage lenders are asking for “payments on the side – i.e. off the closing statement,” (clearly illigal under RESPA) in order to release liability under the second mortgage.   Their leverage is, if you don’t pay, we won’t release, and you will have to go into foreclosure- wreck your credit – Your choice. Pay us, or we blow your short sale.  Read the full  CNBC Article here.

Info On Home Closing

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