As borrowers struggle with increased prices for almost everything, it’s no surprise that making monthly mortgage payments has also been an issue. In the last few years, it has been reported that foreclosures have steadily increased.[1] Thus, lenders have sought to exercise their rights granted under either a mortgage, security deed, or deed of trust to force a sale of the collateral due to the non-payment of the debt.
In many cases, whether it is a purchase money loan or a refinance, the lender may purchase and obtain a loan policy of title insurance to protect the lender’s interest from a variety of covered risks.
As a lender prepares to initiate a foreclosure either by a judicial foreclosure or a non-judicial foreclosure, it may run a title search on the property to determine ownership along with other liens, judgments, encumbrances, and easements involving the property and the borrower. Title matters that present themselves involving the validity, enforceability or priority of the insured mortgage lien that were not excepted or excluded from coverage, and occurred prior to the date of the title policy, may lead the lender to submit a notice of claim to the title insurer seeking a coverage determination under the title policy.
The top seven title issues submitted by lenders to the Alliant National claims team include:
Unreleased prior lien or mortgage;
Spousal marital status is missing or is incorrect on mortgage;
Spouse does not execute the mortgage;
A notary acknowledgment issue;
Error in the legal description or the legal description is missing;
The mortgage was not timely recorded; and
A complete copy of the mortgage was not recorded (i.e., missing a page).
Happily, strong post-closing procedures and attention to detail can easily prevent each of these issues. Let’s look at a scenario and use it to analyze a few different situations.
Scenario
An unmarried couple – we’ll call them the “buyers” – enter into a purchase contract with John Doe (the “seller”). The sale is scheduled to occur in 30 days. The buyers let you know that they are so excited as they are getting married in two weeks and that this is going to be their first home. The seller has two mortgages or deeds of trust on the property, as well as a recorded monetary judgment. All are properly indexed in the county land records. The parties are ready to close on schedule.
First situation: Thirty days later, the buyers are now married; however, the prepared deed to vest title to the buyers, and the new mortgage or deed of trust shows them as unmarried. What do you do?
Of course, one should not proceed with having the documents executed until they are corrected to reflect the proper marital status as of the date of closing. It is also important to mention here that one should also verify the proper names of the parties (including business names, trust, etc.), and that the names are correctly spelled.
Second situation: The closing occurs. The documents are executed but the notary misses acknowledging one of the pages in the mortgage or deed of trust for one of the buyers. The instrument is then recorded.
In this case, it’s important to have the mortgage or deed of trust re-executed, re-acknowledged and then recorded in the county land records. However, in some states, there may be an option to have the notary execute a Notary Affidavit. Check with your state to see if the latter is available and the cases for which it is appropriate.
Third situation: The closing occurs. The instruments are not sent to the county land records for recording until 60 days later.
Because of the delay in recording, it’s possible for another interest holder or lienholder to record an instrument in the “gap period,” the time between the closing date and the recording date. Keeping the gap period small lowers the risk that someone else will record an instrument that could challenge the lender’s priority.
Fourth situation: The closing occurs. The lender prepared the mortgage, and it identifies that an Exhibit A will be attached to show the property’s legal description. The mortgage is recorded without Exhibit A being attached.
In this case, it’s important to promptly have the mortgage or deed of trust re-executed, re-acknowledged and attach Exhibit A with the legal description; and then record in the county land records. In a few states, there may be an option to remedy the matter with a correction affidavit. Check with your state to see if the latter is available.
Fifth situation: The closing occurs, and the funds are disbursed. No additional review or follow up with the prior lenders or judgment creditor is conducted for the recorded release or satisfaction of the lien. One year later, these have not been released in the county land records. The current lender is now foreclosing, and the new foreclosure title search shows the items as unreleased in the county land records.
We understand that there may be challenges in getting the respective party (lender or creditor) to record a release or satisfaction if it is on that party to do so; however, this is part of the post-closing process. Being persistent and diligent will help ensure that the county land records accurately reflect the status of the mortgage or lien. There are several states that have enacted statutes that impose on lenders and creditors a prescribed time limit to record a release after payment. Also, in a few other states, a title company or a title insurer may have the ability to execute a release if certain requirements are met and if the lender or creditor fails to do so. Check with your state to see what options are available.
As you can see, title companies can impact the lender’s foreclosure process in a big way. By taking the time to catch the “little” things, you can help reduce the likelihood of claims submitted by lenders under loan policies.
If you have any questions, we’re here to help! Please feel free to reach out to me at: mhawkins@alliantnational.com.
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.
[1] Bates, M. (2024, April 11). ATTOM: Foreclosure Filings Increased 3 Percent in Q1
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!
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.
Unless you’re a spring chicken, most real estate and title insurance professionals know that as the weather begins to heat up a bit, so does the market. But seizing on business opportunities during this time is not something that happens by accident. Instead, it requires thoughtful, well-executed marketing strategies. Here’s how you can ensure you’re ready for action now that spring has sprung.
Hope Springs eternal
Starting a new marketing campaign is always an exciting and even hopeful time, especially during the spring selling season. Time and time again, the turning of the seasons brings increased buyer demand, as house hunters and sellers look to make a change and start fresh. Agencies that get proactive about their marketing can capture greater market share and solidify their position as the go-to-resource. It all starts by taking a good, hard look at your current marketing programs and making improvements where necessary.
Spring into action
Nearly everyone has heard the expression “look before you leap,” but it merits repeating whenever contemplating a marketing overhaul. Reviewing your previous marketing activities and taking stock of what has (or hasn’t) worked in the past is an essential first step before embarking on a new campaign.
To do this correctly, spring into action and go channel-by-channel. Assess whether your current strategies have brought you closer to your goals. If you started a social media feed to bring people to your agency’s website, dig into Google Analytics and review acquisition numbers. If your drip emails are intended to promote your offers, inspect click-through rates to determine if they’ve moved the needle.
Apply the principle across the entirety of your marketing output. Only by understanding the historic results of your marketing can you plan for future success.
Spring is in the air
When spring is in the air, put the season at the heart of your marketing and freshen up your copy. Begin with your most important digital asset: your website. Consider rewriting important sections of your site to emphasize the concepts of rebirth. Intertwine these ideas with the real estate market and communicate how your company can keep buyers and sellers safe as they embark on this new beginning. If you can, consider offering a spring-themed promotion. You may also want to create an entire landing page that can act as a hub for your spring campaign and which includes a clear, compelling call-to-action.
Build thematic, impactful campaigns
Once your website has been polished and freshened up, turn your attention to the channels you want to use to promote your products or services. The best part about spring is how well it lends itself to content and social media marketing. Here are a few examples of marketing actions you can take to raise awareness and convey your value:
“Spring cleaning”: Build an educational campaign to get people thinking about how they can ensure a smooth buying or selling process. Instruct aspiring buyers and real estate agents to keep an eye out for anything that may mar title. Frame your copy around the concept of “spring cleaning.” Emphasize how important it is to have all paperwork organized and accounted for prior to proceeding with a transaction.
Hit the road: Spring often brings an up-tick in in-person real estate events, which are prime opportunities for title agents to hit the road and network. Doing this can potentially lead to greater brand visibility and leads, but only if you’ve prepared ahead of time by doing things like practicing your agency’s elevator pitch.
Out with the old in with the new: Leverage the beginning of spring by timing the release of any new products or services you may be unrolling. Doing so dovetails perfectly with the season’s focus on renewal.
Expand your social media: Let’s face it: Title insurance isn’t exactly known for its visual qualities. The spring selling season, however, offers plentiful opportunities to change that. Push as much visual content as you can during this time. Even doing small things like profiling your employees or asking your followers to share their favorite spring memories is a great way to grab eyeballs during a time of increased demand.
Let’s welcome the return of spring
As winter reaches its last legs, what exactly “springs” to your mind? For real estate and title insurance professionals, spring is all about the sales. Carefully reviewing your marketing and leveraging the spirit of the season can help you capture new business and success throughout the year. In short, April showers may bring May flowers, but it can also bring a windfall of increased opportunity and profitability to your firm.
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.
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) on Feb. 7 to expand its efforts on a permanent basis to combat and deter money laundering through the residential real estate sector.
According to the FinCEN announcement, the proposed rule would require professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real estate to legal entities and trusts.
“Illicit actors are exploiting the U.S. residential real estate market to launder and hide the proceeds of serious crimes with anonymity, while law-abiding Americans bear the cost of inflated housing prices,” said FinCEN Director Andrea Gacki. “Today marks an important step toward not only curbing abuse of the U.S. residential real estate sector but safeguarding our economic and national security.”
Expansion of GTO efforts
Since 2016, FinCEN has issued multiple Geographic Targeting Orders (GTOs) requiring title insurance companies to file reports on all-cash purchases having specific dollar thresholds in designated geographic areas. These GTOs last for six months at a time. The most recent GTO was issued in October 2023 and expanded the list of affected venues.
According to FinCEN’s proposed rule, expanded reporting requirements would apply on a permanent basis across the entire country, without limit to specific geographic locations or a dollar threshold. The agency will accept comments on the new proposed rule for a 60-day period following its publication in the Federal Register, scheduled for Feb. 16. According to the American Land Title Association’s (ALTA) blog of Feb. 8, FinCEN has proposed that the final rule become effective one year after it is issued.
“We are still reviewing the proposed rule and will work to ensure that FinCEN considers the information they are collecting under the new Beneficial Ownership rule, among other things, so as not to be unnecessarily duplicative and also provide clarity regarding the obligations of all real estate parties under the rule,” said Diane Tomb, ALTA’s chief executive officer. “We also appreciate, and intend to continue, the ongoing dialogue with FinCEN to craft a tailored approach limiting the transactions that must be reported to those of the greatest concern and providing avenues to help reduce the compliance burden on title and settlement companies.”
Proposed reporting structure
The proposed rule would require reporting on transfers of single-family houses, townhouses, condominiums, and cooperatives, as well as buildings designed for occupancy by one to four families. Going a step beyond the GTOs, it would also require reporting on transfers of vacant or unimproved land that is zoned, or for which a permit has been issued, for occupancy by one to four families. Furthermore, both purchasing entities and transferee trusts are reportable unless a specific exception is applicable.
ALTA’s Feb. 8 blog summarizes reportable information under the proposed rule to include (but is not limited to) the following:
Name, address and taxpayer identification number (TIN) for the transferee and transferor.
Beneficial owner information for the transferee and anyone signing the transfer documents. (names, date of birth, addresses and TINs for those individuals).
Name, DOB, address and TIN for all transferors on title or the beneficial owners if the seller is an entity.
Address and legal description of the property.
information about the payments made by or on behalf of the transferee.
Information about any hard money or other lender not subject to anti-money laundering rules. That participated in the deal.
Individuals representing the transferee entity or transferee trust.
The business filing the report.
For a more detailed summary of requirements and exceptions under the proposed rule, please see the Fact Sheet published by FinCEN. At Alliant National, we are committed to keeping you updated on legislation and regulations that affect your business. Stay tuned for more, as the comment period progresses.
