Posts Tagged ‘real estate’

business person with fingers crossed behind their back

Foreclosure Rescue Scams Can Spell Trouble For Title Agents

Foreclosure rescue scams were rampant during the Great Recession as homeowners found themselves underwater with their mortgages facing foreclosure. As economic conditions slow and home prices decline in some regions, now is the time to watch for properties being sold under the guise of a foreclosure rescue. Here is a quick overview of different types of foreclosure rescue scams and a few tips on what to do if you suspect your transaction may involve a foreclosure rescue.

Foreclosure rescue scams

Foreclosure rescue scams can be as simple as taking money from a distressed homeowner promising to negotiate an agreement with the servicer or lender and then failing to provide any meaningful assistance. Some schemes require the homeowner to make mortgage payments to the scammer, who promises to manage the payments on their behalf, but instead, takes the money and disappears.

The scams that title agents must watch out for are those that result in a transfer of title to a foreclosure rescue company or investor. Insuring the title in a foreclosure rescue scam transaction may result in a claim when the new owner attempts to evict the tenant – the original owner of the property – and gets sued by the tenant. Becoming a party to a lawsuit could lead to reputational damage for your agency and other potential harm.

Here are a few such scenarios.

Bait and switch: The homeowner is asked to sign documents purportedly to bring the mortgage current, but the owner unknowingly signs a deed transferring the ownership to the fraudster. The homeowner is told they can remain in the property while the details are being worked out with the mortgage company. When the ownership transfers, the property is sold to someone else by the fraudster, and the unsuspecting former owner is evicted by the new owner.

Rent-to-own: The homeowner signs a deed transferring ownership to the scammer under a rent-to-own agreement believing they will be able to buy the home back. The scammer promises the homeowner they will not record the deed, but the deed is recorded. As with the scenario above, the home is then sold to someone else without the knowledge of the original owner.

Equity skimming: The owner signs a deed to the scammer who promises to share a portion of the profit from the home sale. Instead, the scammer rents out the home, pockets the proceeds, fails to make mortgage payments, and may record a deed back to the original owner. When the home foreclosure is finalized, the owner is on the hook for the debt and has lost ownership of the home.

Some rescue services are legitimate, but even in those cases, the owner may not understand that they have lost ownership of their home.

Foreclosure scam Red Flags

Transactions involving foreclosure rescue scams often have similar details. Here are some Red Flags to keep in mind:

  • A recently recorded deed from the owner to the investor
  • An investor who brings an already executed deed to the title agent and asks the agent to record the deed
  • An existing mortgage by the prior owner is in foreclosure
  • The prior owner is still living in a property being sold by an investor or foreclosure rescue company (Scammers may call them “tenants” and ask that you do not disturb them as a condition of the sale).

Thankfully, if you spot one of more of these Red Flags, there are steps you can take to help determine whether the transaction is legitimate.

Trust but verify

A title search will show if there is a notice of foreclosure against the property. If this is the case, and the prior owner still resides at the property, a good first step may be to call or write that person to determine:

  • Why they are still residing at the property
  • If they understand they have transferred ownership of their home to the investor
  • Whether they are aware that their home is now being sold to someone else.

Be wary of an investor attempting to steer you away from contacting the previous owner of the property or the lending company. It is best that you communicate directly with all parties, the prior owner and the lenders, letting them know about the impending transaction.

Open communication is also critical in the case of a simultaneous flip.  The original owner may not be aware of the second sale for an increased amount.  The new lender may include a requirement in the closing instructions that property flips be disclosed or that they are prohibited.  Disclosures should be in writing. It is also best to communicate directly with the lender, and not just a mortgage broker.

Here are a few more things to keep in mind in the fight against foreclosure rescue fraudsters:

  • Trust your instincts if you are feeling uneasy over a pending transaction or uncover unusual circumstances.
  • Watch out for odd or unusual requests from the buyer, seller, or investor.
  • As the neutral third party, it’s best to communicate openly with all parties to the transaction. Do not shy away from asking questions.
  • Be wary of any party to the transaction requesting secrecy.

Final note

At Alliant National, we invite agents to share their stories and thoughts on how we can all help prevent fraudulent transactions. Please email us at: fraudhotline@alliantnational.com.

In addition, agents who prevent a fraudulent transaction from being insured by Alliant National may qualify for a reward through Alliant National’s Crime Watch Program. Learn more at: https://alliantnational.com/title-claims/crime-watch-program/

A conceptual graphic showing the interconnectedness of the banking and housing industries.

Banking Turmoil Deepens Recession Concerns, Clouds Mortgage Lending Outlook

As if there wasn’t enough uncertainty coming into 2023, the failure of three banks in March has darkened the outlook for an economy that otherwise seemed to be holding its own in the first quarter.

The banks affected had significant exposure to technology and cryptocurrency, and included:

  • Silvergate Bank (cryptocurrency) announced on March 8 it was winding down due to losses in its loan portfolio
  • Silicon Valley Bank (technology-start up lender) taken over by California regulators after experiencing a run on the bank due to its failure to raise needed bank capital
  • Signature Bank (cryptocurrency) closed by bank regulators, citing systemic risks

Although state regulators, the FDIC and the U.S. Treasury Department all stepped in quickly to attend to the failed banks and reassure the entire banking system, there were plenty of investors, industry pundits and business owners with the jitters in the weeks that followed.

The question for the housing industry is, how might the banking industry problems affect the long-term outlook for real estate sales in general and interest rates in particular?

Credit tightening

The most immediate concern highlighted by many industry analysts is that nervous banks may tighten their credit standards, affecting every aspect of lending, from consumer credit and auto loans to residential and commercial mortgage loans.

Susan M. Wachter, Wharton professor of real estate and finance, said bank investors are anxious about real estate lending because commercial real estate lending has become “unattractive” due to rising vacancies.

Speaking on the Wharton Business Daily radio show that airs on SiriusXM, Wachter said, “Banks are likely to respond to their investors’ distress by lending less, and this is not a good thing for real estate.”

But she quickly qualified her remarks by noting that an “economy-wide credit crunch” would most likely be avoided, given the federal government’s quick response that quelled fears within the banking industry.

The real estate industry is also keeping its eye on what this all means for the economy in general and further potential interest rate escalation.

Looming recession

Responding to stronger-than-expected economic data, Fannie Mae’s Economic and Strategic Research (ESR) Group revised upward its first quarter 2023 GDP forecast in its latest monthly commentary, projecting a modest recession to begin in the second half of 2023, rather than in Q2 as previously forecasted.

“While uncertainty has risen following turbulence in the banking sector, the ESR Group noted that bank failures often foreshadow economic downturns,” Fannie Mae stated. “As such, the ESR Group believes that the recent events may act as the catalyst that tips an already precarious economy into recession, primarily via the combination of tighter lending standards among small and midsized regional banks and weakened business and consumer confidence.”

In its March 2023 release, the Conference Board mirrored Fannie Mae’s outlook, saying U.S. GDP growth defied expectations in late 2022, and early 2023 data has shown unexpected strength. The Conference Board said this is due to the fact that consumers have resisted the dual headwinds of high inflation and rising interest rates.

In light of this, they upgraded the Q1 2023 forecast to 1 percent growth. However, they also continue to forecast that the U.S. economy will slip into recession in 2023 and expect GDP growth to contract for three consecutive quarters starting in Q2 2023, largely due to persistent inflation and Federal Reserve hawkishness.

Minutes from the March Federal Open Market Committee (FOMC) meeting released on April 12 also indicated that the potential economic effects of the recent banking-sector developments would most likely result in the economy falling into a mild recession starting later this year. But given the underlying economic fundamentals, the participants saw this as short-term, with a recovery over the next two years.

Inflation and interest rate outlook

Inflation dropped from a high of 9.1% in June to 6.5% in December, but then slowed its pace of decline, easing only a half-percent to 6% over the course of the first two months of 2023. This slower pace did not impress the Federal Reserve, and so in spite of the banking crisis that was evolving during its March meeting, they raised the federal funds rate another 25 basis points.

However, the March numbers were more encouraging, with the CPI rising only 5% over the last 12 months, according to the April 12 release by the U.S. Bureau of Labor Statistics. This represents the smallest 12-month increase since the period ending May 2021, and shows that inflation is continuing to cool off in the wake of dramatic increases in interest rates.

More than half of respondents in Bankrate’s First-Quarter Economic Indicator poll said the all-important federal funds rate is likely to peak at 5-5.25%, indicating they believe the Fed will only raise rates one more time. Slowing inflation, the banking crisis, and recessionary indicators could all play into the Federal Reserve’s decision to put an end to rate hikes for the remainder of 2023.

In that same survey, more than 80 percent of respondents said the Fed was unlikely to make any move to cut interest rates until 2024, in an attempt to give the economy more time to cool down.

Lawrence Yun, chief economist of the National Association of Realtors, said he believed the Federal Reserve would take into account the banking crisis and its overall effect on the economy in considering further rate hikes, opining in an interview for Realtor Magazine, “The Silicon Valley Bank failure, along with a few other banks, means that the Federal Reserve cannot be so aggressive in raising its short-term interest rates. Therefore, mortgage rates will decline.”

In the final analysis

The economy has consistently reacted in non-traditional ways since the onset of the pandemic, constantly surprising pundits with its persistently healthy fundamentals. The unexpected strength in the employment sector in the first quarter of 2023 and the better-than-expected growth in GDP were acting together to moderate recessionary concerns until the March bank failures reawakened those fears.

The same can be said for the real estate industry. In spite of high mortgage rates, real estate sales showed some improvement in February, and homebuilder sentiment has been on the upswing with new permits on the rise.

But the banking crisis has added another element of uncertainty into the mortgage and real estate industry for the foreseeable future. While it could precipitate lower interest rates as Yun suggested, tightening lending standards could well offset any gains realized.

Only time will tell how all of this will play out as the industry continues to keep a watchful eye on how the Federal Reserve handles both the banking crisis and interest rates in the coming months.

suspicious businessman standing in a vacant lot

Beware the Vacant Property Scam: Criminals Leave Plenty of Clues

Title agents across the country have seen an uptick in vacant lot scams over the past year, where criminals pose as the property owner and attempt to sell a property to unsuspecting buyers.

This is not a new scam, but it is once again on the rise, and we need to remain hypervigilant.

To help you identify and thwart these fraudulent property sales, we’ve pulled together information about how the schemes are conducted, red flags to be aware of, action steps you can take to verify property ownership, and documentation and proofs you need to verify the seller has the right to sell the property.

In January, ALTA issued an advisory outlining the scheme.

The Scheme

According to ALTA, these scams often begin with a fraudster searching public records to identify real estate that is free and clear of mortgages or other liens. They focus on property not occupied by the owner. This can include vacant lots, out of state ownership, or rental properties where the owner does not live on premises. In addition, elderly owners are often targeted.

After gathering the pertinent information from the public records, the fraudster, posing as the owner, contacts a real estate agent to list the property for sale.

The fraudster often lists the property below the current market value to realize a quick sale. Once the transaction is concluded, the funds are then transferred to the criminal. The ownership discrepancies are often not identified until the documents are filed with the county.

Red Flags

Fraudsters often use several tactics to keep the professionals handling the transaction at arm’s length from the seller. Here are a few potential red flags that may alert you to a fraudulent transaction:

  • Communications are conducted through email and digital means, never in person.
  • The fraudster seeks to push the sale through quickly.
  • Often, a preference for a cash close is indicated.
  • The scammers refuse to sign in person but demand a notary closing, often insisting on making those arrangement themselves with “their favorite notary.”
  • Sales proceeds are directed to be disbursed to someone other than the person in title.  ​

Always follow your instincts if something seems unusual in a transaction involving vacant or unoccupied property and ask plenty of questions.

Jean E. Bailey, Vice President and Southwest Regional Underwriting Counsel for Alliant National, noted that the Texas Land Title Association has started a fraud task force after a single agent in the state reported several cases of fraudulent sellers, including one that involved a property worth $2.8 million.

“All the usual elements were there – only communication through email or text, no phone calls, or if there were phone calls, they were from burner phones,” she said. “They also included mail out closings or remote/e-closings, even if the owner resided in the same area as the property.”

An Ounce of Prevention

Agents can take steps to ensure a vacant land sale is legitimate, including making an effort to investigate the property, research the owner of record, and verify the identity of the seller and their forms of identification.

Investigate the Property

Early in the process, it’s a good practice to determine whether the property being sold is vacant. The preliminary title report will show if the property is mortgage and lien free. Contact the real estate agent to ascertain if they have been to the property or met with the owner in person.

Recently, a title agent became suspicious of a transaction and took the precaution to drive to the vacant property and interview neighbors. She discovered that the true owner was not trying to sell the property and reported the scam to the police.

In one reported case, the true owner discovered potential buyers walking through her vacant lot and inquired what they were doing. When they informed her they were buying the lot, the property owner assured them it was not for sale. If a property owner contacts you or the real estate agent about a suspected fraud, take the report seriously and conduct your own investigation.

Inspect Suspicious Deeds

Sophisticated fraudsters will sometimes record fraudulent deeds, transferring property to themselves or a shell company to maintain their anonymity. They often target property that is obviously not being maintained, left vacant or not properly transferred to heirs after the death of the owner.

Often the “new owner” will attempt to sell the property quickly, so a recently recorded deed is a predictable red flag in these transactions.

Establish Seller Identity

It’s worth the effort to independently research the identity of the seller, especially by trying to locate a picture of the owner of record or establishing the age of the seller.  

One recently reported scam was discovered because the title agent working on the transaction identified the owner as an elderly woman, while the seller who had contacted the real estate agent was much younger, raising suspicions about the legitimacy of the seller.

An Alliant National agent in Ocala, Florida, became suspicious when asked to close a transaction for a half-acre plot of vacant land. They contacted the owner of record directly about the sale and instructed them to call their office if they were not, in fact, selling the property. The agency’s suspicions turned out to be correct, as the owner called back immediately, provided two valid forms of photo identification and scheduled a video conference call to discuss the matter. Conversely, the fraudulent seller was asked for the same items and never responded, putting an end to the transaction.

Verify Identification

Review a purported seller’s signatures on all documents, including the listing agreement and disclosures, making sure they are consistent with documents of record.

If the seller is a foreign owner, and a passport is used for identification, check with the country’s passport agency to verify the legitimacy of the passport.

If you are suspicious, you may want to consider requiring a second form of identification when conducting the closing.

Manage All Notary Closings

Be wary of a request by a seller to choose their own notary. It’s a best practice to insist upon using your trusted closers or closing attorney. You may also want to consider requiring a remote online notarization. If the seller refuses to agree to this form of closing, that may raise a red flag as well.

Report Suspicions to Management and Underwriter

If you suspect a transaction is not legitimate you should contact your manager or agency owner immediately. Based on the facts of the transaction, they may determine it is appropriate to alert other closers and staff to make them aware of other possible schemes they may encounter.

Remember that while you may suspect fraud, until that is proven in a court of law it is only a suspicion and you should not share your concerns outside of the office.

Bailey said this is especially true when dealing with the real estate agent or lender handling the transaction.

“We should not tell a real estate agent or lender that we think there may be fraud in the transaction, because that could result in a claim for slander,” she explained. “It may be sufficient for the underwriter to decline to insure and to have the agent then decline to insure. If a commitment has been issued, the agent should rescind all issued commitments.”

While you must avoid discussing suspicious situations you encounter with the real estate agent or lender, Bailey said you should immediately alert the underwriter.

“It is important to tell the underwriter all the details of the fraud, including the names of all parties and real estate agents, the property address, and any other pertinent information,” she advised. “In addition to alerting the underwriter on the specific transaction, it is advisable for the agent to contact all the underwriters on which they issue policies. The more people who are made aware of these transactions, the more likely fraud can be stopped.”

Bailey noted that the Alliant National underwriting counsel may be able to offer assistance in investigating the parties involved, to ascertain if they are active entities and if the persons purporting to be acting for the entity are actually involved with the entity.

“We may be able to perform credit checks or other searches on the parties that may yield additional information,” she said. “In addition, we may already have knowledge of the scheme, or the persons involved, and be able to inform the agent whether they are right to be suspicious. Sometimes we can even let them know that the transaction appears to be legitimate.”

If there is actual evidence of fraud, the agency owner or manager should contact local law enforcement, especially if fraud is active in their area or they have had more than one occurrence.

County Alert Systems

Vacant lot fraud has been particularly rampant in Florida and Texas. Many counties in those states have established property fraud alert systems, for example the Tarrant County, Texas, Property Fraud Alert, which encourages property owners to request notification from the county recorder if any documents are filed against their property. New deeds, liens or other legal documents would trigger an alert to the owner. As Tarrant County points out on their website, the system will not prevent fraud from happening, but does offer an early warning system that will allow property owners to take appropriate action should they believe fraudulent activity has occurred with their property.

In Florida, several counties have also implemented a similar fraud alert system.  Check with the county in which the property is situated to see if this program is available.  In addition, Florida is currently considering legislation that would make these alerts mandatory for all property owners.

Follow Your Instincts

Title agents are skilled at ferreting out fraud of all kinds in real estate transactions. Often, the number one indicator is your own instinct that something is off. It could be a buyer who is overjoyed at getting a phenomenal deal on a property that raises your suspicions. Sometimes it is the odd way in which a transaction is progressing. Anything out of the norm should be investigated to ensure the validity of the transaction.

At Alliant National, our underwriting team is here to assist you in thwarting any suspicious activity. Call us if you have any questions or uncertainty about a transaction so that we can work with you to verify the facts at issue.

Man standing between 2 houses looking up at stormy, dark sky with 2023 in the clouds

Economic And Real Estate Outlook Cloudy, But Not Stormy

Forecasters Remain Cautious Given Inflation, Interest Rate Uncertainty

The real estate market has cooled over the past quarter, as buyers face mounting economic pressure from inflation, bloated housing prices, and escalating interest rates. But the question in most forecasters’ minds is what will happen in 2023 with inflation and interest rate projections in – as yet – unknowable territory.

Although experts are all over the map when it comes to predicting interest rates – projections for 2023 are currently ranging from 5% to 9% – everyone agrees that it largely depends on the Consumer Price Index and the Federal Reserve’s interest rate decisions that result from that data.

Economic predictions are often based on “the way it happened in the past,” but economic fundamentals are rarely exactly the same mix as in the past. Such is the case today, where economic fundamentals are largely stable and housing inventory remains tight – a promising recipe for a decent, albeit softer, purchase market in 2023.

Rodney Anderson, Executive Vice President, National Agency Manager with Alliant National, noted on a recent October Research webinar that while we are currently experiencing a slowdown in the market, it’s difficult to say what portion of that is seasonal and how much is interest rate-related.

“We’ve had a sellers’ market for a long time, and now, we are returning to equilibrium,” he said. “But if you look at the number of houses on the market, we are still in a sellers’ market, with a lot of regions experiencing only a 3-months’ supply, so there is continued support for prices to remain fairly stable.”

Although there remain a lot of unknowns, many economic forecasters retain a sense of cautious optimism based on what we do know, while lenders and real estate professionals are facing the reality of lower sales and originations in 2023.

Key Factors: CPI and FOMC

The Federal Reserve’s battle against inflation remains one of the key factors in the overall economic outlook for next year, as well as the outlook for the real estate markets, since with each incremental rise in the interest rates, a new segment of buyers will be priced out of the market.

The Federal Reserve has maintained a hard line with regard to inflation, and Federal Reserve Chairman Jerome Powell did not soften his tone during his Dec. 14 presentation following the December meeting of the FOMC, where he announced the Fed would be raising the interest rate another half percent.

“Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy,” Powell said at the outset of his speech. “Without price stability, the economy does not work for anyone and without price stability we will not achieve a sustained period of strong labor market conditions that benefit all.”

In addition, Powell said he anticipated that “ongoing increases would be appropriate in order to attain a stance of market stability that is sufficiently restrictive to return inflation to 2% over time.”

One positive indicator in December was the Consumer Price Index, which showed inflation had slowed to 7.1%. While that stat was encouraging, Powell said it was not enough to deter further interest rate hikes.

“It will take substantially more evidence to provide confidence that inflation is on a sustained downward path,” he said.

With the target federal funds rate range now at 4.25-4.5% and Powell suggesting further hikes, it is now anticipated that the federal funds rate could rise to 5.5% in 2023, adding some further deterioration to the pool of potential buyers.

Federal Reserve reports stable economic activity

The Federal Reserve’s Nov. 30 release reported economic activity was flat or up slightly across most of the districts, a sign that the economy continues to hold its own despite the known headwinds of inflation, high interest rates and global issues.

Reports across sectors were uneven. Not surprisingly, lending, home sales, apartment leasing and construction all exhibited slowing trends while improving inventory in the auto industry has resulted in an increase in sales in some districts. In addition, spending was up in travel and tourism, and as well as in restaurants and hospitality. Manufacturing was also up slightly on average.

Employment numbers remain steady

Total nonfarm payroll employment increased by 263,000 in November, and the unemployment rate was unchanged at 3.7%, according to the Dec. 2 release from the U.S. Bureau of Labor Statistics. Notable job gains occurred in leisure and hospitality, health care, and government. Employment declined in retail trade and in transportation and warehousing.

Consumer confidence concerns were largely allayed by record Black Friday and Cyber Monday spending. Although inflation has taken its toll on consumers, low unemployment has kept spending steady across many sectors, including mortgage and rent payments, a factor that is keeping foreclosures contained.

Employment is also a major factor in keeping foreclosures down, and while labor demand is weakening, according to the Federal Reserve, businesses are expressing a reluctance to lay off due to hiring difficulties. Most importantly, most districts reported a fairly positive outlook, pointing to stable or slowing employment growth and at least modest further wage growth moving forward.

Real estate and lending projections

While the economy overall appears to be stable, the real estate market continues to decelerate.

According to the National Association Realtors (NAR) Nov. 30 report, pending home sales slid for the fifth consecutive month in October, falling 4.6%. Three of four U.S. regions recorded month-over-month decreases, and all four regions recorded year-over-year declines in transactions.

While there are always seasonal declines in the fall, the year-over-year number was more dramatic, with pending transactions down 37%.

“October was a difficult month for home buyers as they faced 20-year-high mortgage rates,” said NAR Chief Economist Lawrence Yun. “The West region, in particular, suffered from the combination of high interest rates and expensive home prices. Only the Midwest squeaked out a gain.”

On the upside, Yun was hopeful that the upcoming months will see buyers returning to the market if mortgage rates moderate, as they have in the past few weeks.

Taking a hard look at the numbers, Freddie Mac, in its most recent analysis, noted that home sales have fallen to a forecasted 5.4 million units at a seasonally adjusted annual rate in the third quarter of 2022 from 7 million earlier this year. The GSE forecasts that home sales activity will bottom at around 5 million units at the end of 2023.

“We expect house prices to decline modestly, but the downside risks are elevated,” Freddie Mac noted. “As the labor market cools off, housing demand will remain weak in 2023, potentially resulting in declines in prices next year. However, home price forecast uncertainty is wide due to interest rate volatility and the potential of a recession on the horizon.”

Freddie Mac predictions include:

  • Overall originations are expected to hit $2.6 trillion in 2022 and slow to $1.9 trillion in 2023
  • Mortgage originations will end the year at $1.9 trillion and slow to $1.6 trillion
  • Refinance originations slowed to $747 billion and will deteriorate to $310 billion in 2023

The Wild Card: Consumer confidence

Data can certainly tell us a lot, but at the end of the day, consumer experience and assessments can impact the long-range reality, and consumer confidence is decreasing, according to the Conference Board Consumer Confidence Index.

While not dramatic, the index backtracked to 100.2 from 102.2 in October. In addition, consumers assessment of the current conditions decreased to 137.4 from 138.7 last month, and consumers’ short-term outlook declined to 75.4 from 77.9.  

Consumer confidence can keep the economy and the real estate market moving forward, while hubris can take us into unsustainable territory, as we learned in 2008. A little reality check may not be a bad thing as we all continue to keep tabs on the data and plan for a softer market in 2023.

stick man figure chased by 5 threatening stick figures

Claims Prevention: Five Types Of Claims That Cost The Most … And How To Avoid Them

The relationship between an independent title agency and its title insurer is a unique one; we rely on each other for our mutual success. So when a claim occurs, it’s no fun for anyone. Claims are a fact of life for any insurer, but thankfully, some of the costliest claims are entirely preventable if time is taken to appropriately review and analyze information that is part of the transaction.

What are these costly and preventable claims? Based on our experience at Alliant National, the top five categories for claim files over the last three years have been in the following areas:  

  1. Missing or erroneous legal descriptions,
  2. Lack of capacity or authority to convey title or release a lien,
  3. Unreleased mortgages or deed of trust,
  4. All other unreleased liens and judgments, and
  5. Unpaid taxes and assessments. 

To take this a step further, when we compared all of our closed claim files against closed claim files classified as “agent error,” we found that claims involving “agent error” tend to be more costly, particularly when it comes to the top five claims categories.

You ask, what can I do to reduce these preventable claims and thereby reduce the costs and other impacts of claims? Based on our experience, here are a few items to consider in every transaction:

  • Carefully read documents. Real estate transactions involve a lot of detail, and all those details are important. Take time to carefully read what the prepared instruments and documents say. This includes those that may have been delivered to you by a party to the transaction, a third-party or within a lender’s package. Do not assume anything. Here’s one example. Let’s say the lender does not include a spouse or a co-titleholder’s name on the mortgage or deed of trust. In several states, if the borrower is married, the spouse must join on the mortgage or deed of trust. Just because their name was not originally included, the lender may fall back on what the closing instructions required. In this case, it would be important to take a minute to contact the lender and make the necessary adjustments.
  • Do not be afraid to communicate. We’re all in a hurry, but it’s important to take the time to ask questions and be willing to ask for clarification when something is not clear. Then, of course, we need to listen to what is being said. In some cases, there may be disclosures of matters – not known until that moment – which can alter the transaction. Also, it’s helpful to consider whether everyone is using the same terminology to describe the same thing. We use a lot of jargon in this industry, so be careful not to think that “everyone uses this term” or that they understand things the same way you do. 
  • Avoid being solely persuaded by the seller or borrower not to collect funds required at the closing. We oftentimes hear that the seller or borrower told the closer that the delinquent taxes, mortgage, or homeowner assessment was already paid outside of closing and to just disregard any payoff or estoppel letter that was previously collected. Experience tells us that you should not just take the person’s word but instead contact the creditor, lienor, or lender that is owed the funds, at a properly verified number, and confirm whether a payment has resolved or made current an amount owed. If appropriate, it may be good practice to hold back those collected funds until a certain time has passed, and it is confirmed that the account is current and/or the lien has been satisfied or released.
  • Spend time in understanding the subject of the closing. This includes the parties in the transaction and the property. Understanding the intricacies can help you spot types of fraud involving the conveyance of title or unpaid liens and taxes. With a critical eye, review the person’s ID and other documents that are presented since a number of fraudsters and imposters are impersonating others in transactions.
  • Promptly discuss concerns and matters with the underwriting and claim teams. We at Alliant National are always ready to review and discuss issues and matters of concern with our agents. Please don’t hesitate to call us. Waiting until the last minute or after closing to discuss a known issue may cause problems. In some cases, it may be too late to deal with an issue brought to the title underwriting team after the closing, as a claim may now exist.

Everyone is excited when a closing occurs and funds are disbursed, but this enthusiasm can quickly change to concern when a title matter is submitted involving that transaction. Thankfully, taking time to review, understand and analyze transaction information can reduce the possibility of errors and help avoid those top-five pesky and preventable title claims.

If you have questions, please contact the Alliant National claims team.

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