By Martin R. Ufford Member
Hinkle Law Firm,LLC
I’ve had the privilege of representing title insurance companies and their insureds for the past ten years.
Each claim represents a unique challenge. With the benefit of hindsight, I have reached some conclusions that may assist agents and local counsel in avoiding claims.
Looking to avoid title claims related to unpaid mortgages and deeds of trust? We offer 4 tips
Our Claims Team has received various claims related to unpaid mortgages and deeds of trust. Here are two scenarios we have seen arise in the context of a claim:
The agent receives a payoff statement from the seller. The seller sends an email requesting the payoff from the lender and copies the agent on the email.
The agent relies on the email and the payoff statement to wire funds to the lender.
Later, it is discovered that the email address for the lender is fake, and the bank account receiving the payment was held by the seller, not the lender.
The agent reaches out to the lender for a payoff statement. However, the closing date is approaching, and the lender has not responded.
The seller provides the agent with a printout showing a zero-balance owed on the account. The agent contacts the lender once again for a payoff statement.
The lender confirms over the phone that a zero balance is owed. The agent closes the transaction based on these representations.
Later, it is determined the original lender confirmed a zero-balance due because the loan had been sold to another lender.
An assignment of the mortgage had been recorded, and the current holder of the notes filed to foreclose.
Here are 4 tips to help you avoid these types of claims:
- Always obtain a payoff statement directly from the lender. Do not rely on payoff statements provided by other parties. Your request for a payoff should include a letter of authorization from the borrower, the loan number, the property address, the borrower’s name and your fax number or email address.
- Only rely on a payoff statement sent by the current holder of the note. Check the MERS system, (if the mortgage is a MERS loan), and the public records for the last assignee.
- Be mindful of working with hard money lenders – hard money lenders may assign their interests off the record. (See Bulletin 2017-02 and Claims Title Tip dated September 18, 2017 discussing hard money lenders .)
- Obtain separate payoff statements directly from each lender with an interest in the property being sold or refinanced. Do not rely on representations from the borrower or other institutions regarding the balance of a loan.
By Scott A. Malm
Many lawyers representing creditors record their money judgments and let escrow companies collect the judgment amount for them when the debtor sells real property.
But after a recent published opinion in Arizona applying its homestead protection laws, that practice may soon come to an end if the real property is protected by the homestead statutes.
In Pac. W. Bank v. Castleton, No. 1 CA-CV 17-0667, 2018 WL 6815531 (Ariz. Ct. App. Dec. 27, 2018), the Arizona Court of Appeals considered the effect of a $5.2 million recorded judgment on a subsequent conveyance of a personal residence by the judgment debtor to a third-party buyer.
After the close of escrow, the judgment creditor sought to collect its judgment against the buyer by filing a judicial foreclosure complaint.
Such action triggered coverage under a title insurance policy (not an Alliant National policy!) because the judgment was not listed in Schedule B.
The Arizona Court of Appeals had to decide the purely legal question: Is a recorded judgment a lien that encumbers homestead property? If so, the insured would lose its property.
In our continued effort to keep our agents and escrow officers apprised of trends in the Title industry, our claims counsels and administrators have provided the following claim summaries. It is our goal to share these stories and help you avoid similar scenarios in the future. In this article, we will focus on Naked Releases.
A naked release is a release of a lien or mortgage that is not done in connection with a sale or refinance transaction. These releases are a red flag and merit further investigation. Naked releases often involve forgery which are expensive to resolve and cause significant losses.
Here’s how it played out:
In our continued effort to keep our agents and escrow officers apprised of trends in the Title industry, our claims counsels and administrators have provided the following claim summaries.
It’s our goal to share these stories and help you avoid similar scenarios in the future. In this installment, we will focus on Quit Claim Deeds. Here’s how it played out: