magnifying glass looking at an aerial view of a neighborhood

Legal Descriptions: Wait! I Can’t Locate My Real Property 

In the automotive world, each vehicle is uniquely identified by a vehicle identification number (VIN), a distinct code used by the car industry. This identifier is used in various ways, such as for insurance and department of motor vehicles records, ensuring each vehicle is clearly and accurately tracked.

There is a similar concept that applies in the area of real property, and it’s not the parcel identification number shown on a county appraisal district or a property appraiser or assessor’s website. The true identifier for real property is the property’s “legal description.” However, errors with a property’s legal description can lead to complex issues affecting transactions. Let’s discuss some common issues and strategies to prevent and address these problems.

Legal descriptions come in various types, such as metes and bounds, or plats, just to name two. The legal description is created by a professional surveyor and is used to locate and identify the real property it describes. This information is located on deeds, deeds of trust, mortgages, and other instruments pertaining to real property. Without a legal description, it is nearly impossible to determine where a property is located and the boundaries of the property on the ground. Absent a legal description, it is also extremely difficult to determine who holds title to the property, who can convey title, what property is being pledged as collateral to secure a loan, and much more.   

At Alliant National, the claims team regularly sees cases involving legal descriptions. Here are just a few of the more common issues:

  • the legal description is not included with the recorded deed, mortgage, or deed of trust;
  • the legal description is incomplete;
  • the legal description has typographical errors;
  • the legal description references an incorrect subdivision or references an erroneous plat book or page; or
  • ownership of property is being challenged due to a gap in the property or an overlap of the property’s legal description with that of a neighboring property owner.

When a legal description is missing or not correctly identified in an instrument, it may result in a title claim involving intervening conveyances or liens on the real property. In some cases, a person may not be able to convey title to property they believe they own, or they may face challenges from others who believe they have better title.

Legal description issues can be timely or difficult to cure. In some states, there are statutes that permit certain legal description errors to be corrected through the use of a correction affidavit. However, states that have such corrective statutes generally limit their use and have certain requirements that must be met before a correction affidavit may be utilized. If the situation is not covered or the requirements are not met under the statute, then a correction affidavit is not available. In those cases, it may require a corrective instrument be obtained from a party or costly litigation. Even though it is not an exhaustive list, the Resources section below includes links to a few states’ corrective statutes.

Familiarizing yourself with your state’s laws is crucial to understand if there are corrective statutes relevant to legal descriptions, along with their specific limitations and requirements.

Happily, experience teaches that attention to detail can significantly reduce the occurrence of legal description issues. Here are a few tips for avoiding legal description headaches:

  • Purchase Contract and Addendums. If parties make changes to the purchase contract’s legal description, make sure to have those changes incorporated into your real estate closing platform to ensure, when it is time to print documents, that the documents properly reflect the accurate legal description.
    • For example, the parties may have originally contracted for Lots 1, 2 and 3, Main Plat. Subsequently, through an addendum, the contract now only dealing with Lots 1 and 3, Main Plat. Make sure the documents reflect only Lots 1 and 3, Main Plat.  
  • Who else should know of changes? Let your team and any third-party vendor know of any changes made to the legal description since the last time products were obtained and request that the products be revised, and new products issued to reflect the change. Then, distribute the revised products to the proper parties.
    • Remember to let the lender know of any changes to the legal description as soon as you know. Lenders may use this information to obtain an appraisal of the property to determine its value and may have to adjust the lender’s underwriting review.
    • In some cases, if the lender prepares the deed of trust or mortgage, it may pre-print the legal description on the instrument.  Review the instrument prior to closing for accuracy of the legal description. If the legal description is inaccurately reflected, contact the lender immediately to discuss.
  • Review and ask questions. If a survey was purchased or a prior survey is being reviewed showing the property’s legal description, review the survey for any differences shown in the seller’s vesting deed (and those in the chain) against what is being prepared to be conveyed. If there are differences, ask questions and review with the surveyor and the parties to clear up any discrepancies and document your file indicating how the parties addressed and resolved the situation. 
  • The parties. Review all documents prior to the closing to ensure they accurately reflect the legal description the seller intends to convey and the buyer intends to purchase. Don’t forgot to review and compare any legal description changes that the parties agreed to in the contract or purchase contract addendum.
  • Recording. When sending the instrument to the county recorder’s office, remember to include the correct legal description with the instrument.
  • Policies. When a final title policy is issued, review to make sure the correct legal description is included in Schedule A before sending it to the recipient.

Taking a moment to thoroughly address a property’s legal description can greatly reduce potential errors that could lead to claims. If you have questions, please feel free to reach out to me or any member of the Alliant National claims team. We’re eager to help!

Resources:

Colorado Revised Statutes Title 38, Sec. 38-51-111 – https://leg.colorado.gov/colorado-revised-statutes

Florida Statutes, Title XL, Sec. 689.041 – http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0689/Sections/0689.041.html

Texas Property Code, Title 2 – Conveyances, Chapter 5 – Conveyances, Sec. 5.027-5.031 https://statutes.capitol.texas.gov/Docs/PR/htm/PR.5.htm

This blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on this blog.

illustration of a woman holding HELOC paper in front of a house

A Claims Tale: All Mortgages Are Not Created Equal – HELOC Mortgage Payoff

Dealing with mortgages and deeds of trusts in a transaction seems fairly easy to address at a closing, you would think. On occasion, we see a security instrument known as the Home Equity Line of Credit (HELOC) Mortgage or Deed of Trust – a revolving credit line secured by the home’s equity – that is not treated the same way as a traditional mortgage. HELOC instruments may require additional steps to shut down and release the lien from the property.

Let’s consider a scenario:

Mr. and Mrs. Smith are the previous owners of property located at 123 Main Street, Anywhere, USA.  The owner has two loans secured by the property: a $150,000 traditional mortgage and a $300,000 HELOC mortgage. Mr. and Mrs. Smith sell the property to the buyer, Tim Jones, for $475,000. As part of the closing process, the title company sends the payments to the lenders by wire transfer.

Two years later, Tim Jones receives a notice of foreclosure from the home equity line of credit lender. The lender asserts that Mr. and Mrs. Smith’s HELOC loan has a balance and was never closed. The HELOC loan once again has a balance of $300,000, and the loan is now in default. Tim Jones submits a claim.

The Lesson:

A HELOC loan typically includes a clause that gives the borrower the ability to “borrow, repay, and reborrow” from time to time, up to a maximum credit available, through a maturity date.  

In our scenario, the lender may have applied the payment on the HELOC loan as a “pay down” on the loan and did not close down the account and cancel the loan two years earlier. 

For a HELOC loan, the lender may require additional steps be taken to close out the loan and have the lien released from the property. In certain cases, the lender requires that the borrower execute a “Close out / Close Down” letter. Not only does the borrower(s) have to sign the letter authorizing the account to be closed, but the signed letter has to be delivered to the lender instructing the lender to do so. In some cases, a lender may even have a specific form to be used to effectuate the closing of the account.

Practice Points:

If you are planning to mail or wire payoff funds to a HELOC lender, as a best practice, if you see that the loan is a HELOC –

  • carefully review the lender’s instructions to close out the account; 
  • ask questions to ensure all requirements are met;
  • deliver the borrower’s signed close down the account letter concurrently with the payment; and
  • keep a copy of the letter along with evidence on how and when you sent the “close out / close down” letter to the lender. 

Even if there is a zero-dollar ($0) balance on the borrower’s account on the day of closing, you still want to ensure that the account is properly closed, and the lien released. 

When you come across a HELOC mortgage, be aware that only requesting a loan payoff statement from a lender may not be enough to obtain a cancellation and release of the HELOC mortgage. By recognizing that there is a difference between a traditional mortgage versus a HELOC mortgage when it is time to pay off the loan, you will be well on your way to having the lien properly cancelled from the property.

Crime Watch Banner with computer hacker in the background and people celebrating in the foreground

Alliant National’s Crime Watch Program Caps Off Another Successful Year

Alliant National’s Crime Watch Program is a great example of the old saying that the best defense is a good offense. Designed to incentivize Alliant National’s policy-issuing agents to detect and prevent fraud, the program had a banner year during 2023. Working together, Alliant National’s network of agents prevented scores of fraudulent transactions from going forward over the past 12 months. These efforts not only protected against sizable losses but helped promote a safer and more secure industry. Now that the year has wrapped up, let’s dig into the numbers.

A problem of incredible scope

With property information readily available with a click of the mouse, it is easier than ever for bad actors to research and identify potential targets. The result has naturally been a huge uptick in criminal activity over the last few years. In fact, FBI data indicates that “more than 13,000 people were victims of wire fraud in the real estate and rental sector in 2020, with losses of more than $213 million — an increase of 380% since 2017.”[i]

Fighting fraud requires all hands on deck

To help empower independent agents and assist the title industry in combating fraud, Alliant National initiated its Crime Watch Program several years ago. The initiative rewards agents $1,000 each time they prevent a fraudulent transaction – and the results have been impressive. Year after year, Alliant National’s agents have helped stem the tide of criminals targeting the industry, identifying fraudulent behavior and saving consumers from financial loss and unnecessary stress.

During the program’s lifespan, we’ve seen a number of best practices to help prevent fraud:

  • Never accept wire instructions over email.
  • Double-check all contact information. Then, check it again.
  • Always send wire instructions through a secure, encrypted communication channel.
  • Pay particular attention to any last-minute changes with a transaction, especially with wire transfer information.
  • Speak directly to clients to make sure they are who they say they are.
  • Become as familiar as you can with the history of the property you’re working with and watch for any irregularities.
  • Stay current with all continuing education classes to remain apprised of the latest developments in title fraud and cybercrime.
  • Trust your gut when something feels off and work closely with colleagues to have a unified front against fraudsters.
  • Use real world examples of fraudulent activity to educate colleagues or employees on how to spot fraud.
  • Have a response plan in place if a fraudster is able to get around your agency’s defenses.

2023 was a successful year of fraud busting

For Alliant National’s Crime Watch Program in 2023, past successes were prelude to a tremendous year of fraud busting. Collectively, agents identified and prevented over 25 instances of fraud, totaling more than $280 million in proposed liability. The agents involved in stopping these fraudsters came from a variety of states – including Florida, Missouri and Texas – and the specifics of each fraudulent transaction also ran the gamut. Some of the top schemes encountered by agents included:  

  • Business email compromise
  • Seller impersonation
  • Fraudulent contracts
  • Fraudulent documents like passports
  • Fraudulent cashiers’ checks

Let’s stop fraudsters in 2024

Everyone has their own New Years’ resolutions, but for the title insurance industry, one of the most important should be taking all available actions to detect and ultimately prevent fraud. Since the inception of Alliant National’s crime watch program, we have seen how powerful it is when agents proactively address suspicious transactions. While not all fraud can be prevented, the program is a testament to what the industry can do when it unites against criminals.

Want to learn more about Alliant National’s crime watch program and how your agency can get rewarded for stopping fraudsters? Start here.


[i] Wire Fraud (nar.realtor)

Crime watch banner above a picture of Florida's Cherie Breitenbecker and Gina Preston Brick City and Alliant National's Chris Yates.

Fraud Busting with Brick City Title

Brick City Title, a full-service title insurance agency, is a loyal member of the Ocala, Florida, business community and dedicated to protecting the integrity of its customers’ transactions. This commitment served them well recently when a fraudulent transaction came across the desks of two of the agency’s title professionals. By working together and proactively communicating with other transaction stakeholders, the agency foiled the fraudster and received recognition through Alliant National’s crime watch program, which offers a $1,000 reward to agents who help prevent a fraudulent transaction from closing.

A suspicious package

When the package first arrived from the buyer, Brick City Title’s Gina Preston and Cherie Breitenbecker felt like it was a step in the right direction. For some time, their agency had been attempting to collect a deposit from a cash buyer of a residential property who claimed to be conducting the deal through a trust.

Any positive feelings quickly dissipated, however, once they opened the parcel. While the sales contract for the transaction was included, there was no form of currency. Instead, the buyer had tucked several postal stamps inside the package.

Alarm bells

Naturally, receiving such a bizarre item immediately set off alarm bells for Preston and Breitenbecker, especially since Brick City Title had repeatedly clarified to the buyer about which forms of payment the agency could accept. “If we feel or suspect anything unusual, we dig into available resources to resolve any possible fraudulent dealings,” said Preston, reflecting upon the incident. The next step for both professionals was to get on the horn to the buyer’s agent and reiterate which forms of payment were permissible – including a bank wire or a cashier’s check. A three-way call between the agent, Brick City Title and the buyer followed shortly after.

Any title agent who has been in Preston’s and Breitenbecker’s shoes will likely be able to predict what happened next. The buyer was incensed about being called out for the package and that Brick City Title was asking for more information about the trust involved in executing the transaction. After some back and forth, the buyer clammed up and ended the call. Preston, Breitenbecker and Brick City Title then took stock of what happened. A consensus quickly emerged that the whole transaction was highly suspect. The experience of other parties in the transaction further supported this view, with both the agent and seller having their own misgivings about the buyer’s behavior and demeanor.

The final step taken was to send the transaction materials to Alliant National and to subsequently cancel the transaction – much to the relief of all involved. “The seller wasn’t surprised this buyer was fraudulent,” said Preston when discussing the aftermath, “and was glad that we uncovered what we found and cancelled the transaction so that [they] could move on.”

Lessons learned

As with any fraudulent transaction, the experience of Brick City Title provides important takeaways. It showcases how agents must not only adhere to their companies’ policies and procedures but also follow their gut instincts. In this case, the buyer’s behavior alone was a clear red flag. “I had a couple of conversations with the buyer and the conversations were not pleasant,” Preston explained. “This person had a very demanding and insulting demeanor which put me on guard.” Brick City Title’s experience also highlights how successful anti-fraud efforts are bigger than the actions of a single party. Instead, having a strong working relationship with every transaction stakeholder is the key to safe and secure transactions.

Through interfacing with its partners in the transaction, Brick City Title gained additional information that backed up their original assessment. The transaction was indeed fraudulent, and the way it was prevented is an essential reminder of how stopping fraud requires all hands on-deck.

Learn more about Alliant National’s crime watch program.

Crime Watch graphic honoring Brianna Steel, Escrow Officer with Florida’s Coastal Title Services

Fraud Prevention in Action: Coastal Title Thwarts Deceptive Seller

Brianna Steel is a seasoned escrow officer, having worked for a variety of title companies throughout Florida. Her years of experience served her well recently when a suspicious transaction came across her desk at Coastal Title Insurance. By trusting her instincts, collaborating with her team, and following best practices, she was able to stop a fraudulent deal from going forward. She was recognized by Alliant National through its crime watch program, which incentivizes anti-fraud efforts by offering agents a $1,000 reward.

Numerous red flags

At first, the transaction in question appeared to be a normal purchase order. Initiated by someone claiming to be “a representative” of the property owner, Steel and the rest of the Coastal Title team got started on the file as soon as they received a request from the lender.

Yet according to Steel, it didn’t take long for red flags to emerge:

  • Red flag 1: The contract was missing a signature. The representative promised both Steel and Coastal Title that it was coming, but excuses kept piling up, such as the seller being unavailable. While this was suspicious, Coastal Title continued working on the file to ensure that there were no delays, while repeatedly asking the representative to complete the paperwork.
  • Red flag 2: Steel and Coastal Title were asked to “split” the proceeds with non-owners/non-lien holders.
  • Red flag 3: Document signatures did not match other signatures available in the public records – a huge warning sign.
  • Red flag 4: All communication was conducted through one person claiming to be “assisting” the parties involved in the order.

Further complicating matters was questionable behavior on the part of the transaction’s so-called “representative.” For one thing, the representative instructed Coastal Title to wire the transaction payment to several different accounts – including one belonging to the representative – which Steel responded that they couldn’t do.

All these suspicions were eventually confirmed when Steel made a call to the supposed seller. The property’s owner informed Coastal Title that the person who had been claiming to be her representative had been terminated and had no authority to speak for her on anything.

A strong team and the right policies

In reflecting on this experience, Steel had several insights. She noted that fraud can only be prevented through productive collaboration.

“At the end of the day, it comes down to talking with everyone in your office and sharing any concerns or even weird feelings about a file,” Steel said. “We are also very strict on following the rules and guidelines for preventing fraud.”

Steel listed some of Coastal Title’s fraud prevention policies:

  • Never accept wire instructions via email.
  • Never send unsecured wire instructions. No exceptions. If a client gets upset, explain that the policy exists for their protection.
  • Call all clients and speak with them directly for introductions. This helps ensure communication with the correct person. Steel noted that a lot of fraud takes place via email and fraudsters try to not answer the phone.
  • All employees must complete annual Continuing Education classes on fraud, even if they are not licensed.
  • Inform colleagues when a phishing email is received. This helps all staff members avoid accidentally opening a malicious email.
  • Show bogus emails to other employees so they can see things in real time. This has advantages over simply looking at fake emails in lender portals.

Another integral part of this collaboration involves Alliant National.

“Sometimes we are on autopilot and overlook the small red flags and warnings,” Steel noted, adding that Alliant National’s Crime Watch program “incentivizes people to take a closer look at their day-to-day tasks.”

Fighting Fraud: Challenging and Rewarding

As we’ve seen, beating fraudsters at their game is not easy, and it is often only possible through strong collaboration. Yet the time, effort and energy are worth it in the end. Thinking back on her experience, Steel noted that fraud isn’t always obvious.

“It’s surreal and infuriating […] but it’s also not as black and white as we would like to think.” Steel said. “Florida has an aging population and a lot of vacation homes. It is not uncommon for someone to be ‘helping’ a seller through the process. But it is also extremely rewarding to stop these transactions and to protect the real seller and future buyers.”

That’s one reason why Steel was eager to participate in this blog. By sharing information on best practices for protecting transactions, she can continue the collaboration far beyond the walls of Coastal Title. When asked if she had any final advice for title professionals involved in anti-fraud efforts, she shared:

  • Trust your gut and talk with your team.
  • If you have an intake person or processor complaining they can’t get a seller on the phone, listen to them.
  • Look at the signatures on the contract and the last recorded document. If it was e-signed, make sure the email address on the verification is the same you are using.
  • If you have a suspicious file, ask for someone else in your office to look at it and see if they notice the same inconsistencies.
  • Don’t “call out” the person that you’re concerned about; instead, ask questions and play dumb. See if you can trip them up. If fraud is confirmed, share the information with your whole office and all your underwriters.
  • At the end of the day, knowledge and awareness are key and will make all the difference.

If you want more information on how Alliant National incentivizes agents to detect and prevent fraud, check out our crime watch program.

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