By Carleton Burch
Anderson, McPharlin & Conners LLP Lawyers
Protecting against the stale HELOC and mitigating losses.
Home equity lines of credit (“HELOC”) secured by Deeds of Trusts are a fixture of modern consumer finance. According to an article appearing in the Washington Post, an estimated 10 million homeowners will open a HELOC between 2018 and 2022.
For the title insurer, the revolving nature of the HELOC, coupled with the fact there is no universally accepted procedure for closing a HELOC and reconveying the Deed of Trust in connection with a subsequent transaction, creates a unique problem.
With property values on the rise, there appears to be an uptick in foreclosures of HELOC loans.
Thus, downstream owners and lenders are faced with issues relating to not only the validity, but the amount and priority of the HELOC.
This article discusses ways to protect against the stale HELOC and how to mitigate losses.
From the underwriting perspective, never assume that an earlier refinance, sale or conveyance resulted in the release of the HELOC Deed of Trust unless there is a Full release of record.
More often than not, it happens that a HELOC was paid down through a refinance, but the HELOC was not closed and the borrower continued to draw down.
Where a subsequent lender intended its loan to pay the HELOC and be secured as a first priority Deed of Trust but there is no release (or subordination agreement), a lien priority dispute may arise.
To protect against such a situation, as part of the closing there should be express instruction signed by the borrower to close the HELOC and there should be a full release Deed of Trust or subordination agreement executed by the holder of the HELOC Deed of Trust.
Recent case law confirms the need for caution. The California Court of Appeals decision Bank of New York Mellon v. Citibank, N.A. 8 Cal.App.5th 935 ( 2017) in which the court found that the HELOC was not automatically extinguished as a result of the loan being “paid off” or “paid down” absent express instructions to the lender to close the line of credit and reconvey the security.
The court held that a subsequent owner took subject to the lien of the prior HELOC.
To avoid the unique issues that come with an outstanding HELOC claim, be mindful of any open HELOC Deeds of Trust. Be sure to provide express written instructions to the lender, signed by the borrower, instructing the lender to close loan and reconvey the property.
If you have any questions when working to close out a HELOC Deed of Trust please contact Alliant National’s underwriting department.
What began as a law office that also did a bit of title work in rural Kansas has transformed into Tallgrass Title, a thriving title insurance agency serving three counties in Northeast Kansas.
Jake Pugh, owner of Tallgrass Title, is happy to share the long history of this successful family business. Jake’s grandfather started the law office in the 1940’s, Jake’s father joined the business in the 1980’s and Jake joined “a few years later,” in 2006. “Title insurance wasn’t even a thing back in the 1940’s,” recalls Jake. “But the law office did dabble in probate, title work and routine real estate items.”
Jake’s father saw an emerging market in title insurance in the 1980’s and opened a title business, Wamego Title, in the back office of the law firm. It became a successful business among the locals, but outside of the town of Wamego, no one knew about it. Fast forward to 2017 and Wamego Title wanted to grow and serve clients in the Northeast Kansas region.
Through a successful relationship as an independent agent with Alliant National Title Insurance Company, Wamego Title rebranded as Tallgrass Title. Jake began the process by collaborating with Alliant National’s Director of Marketing Nikki Smith in conjunction with Alliant National’s partner David Hafleigh from Future Works.
Nikki and David worked closely with Jake, sharing knowledge based on market research and experience with helping other independent agents grow their title insurance businesses. Together, they chose a regional-based name for the business: Tallgrass Title, a name that’s inspired by the area’s rolling prairie hills, valleys and rivers. Nikki and David were extremely insightful, helping Jake with a new website, advertising and other branding material, as well as event planning for a grand re-opening under the Tallgrass Title name.
While Jake loved the rebranding efforts, one marketing practice he felt adamantly against was blogging. He didn’t need to do such a thing, and nobody in the area would know about or seek out his blogs, and if by chance they did read his blogs, they’d be bored with the content. Or, so he thought. Nikki was insistent that Jake needed to blog.
Jake wrote a few blogs and posted to Tallgrass Title’s website. And then, he cross-posted those blogs to the company’s social media sites and shared them via email newsletters. They also used details from the blog to put into educational presentations. Then, he went about his business, attending networking events and being active in his community. But, something was different. Realtors would approach him and talk about his blog. They’d ask follow-up questions, and also request topics for him to write about in future blogs. They appreciated his knowledge and wanted more blogs!
Business opportunities are growing for Tallgrass Title in the Northeast Kansas region and every day, Jake is grateful that he found Alliant National Title Insurance Company.
As a title agent, are you obligated to ensure your service providers are in compliance? And if so, how?
The Gramm-Leach-Bliley Act (GLBA), enacted in 1999 (codified as amended at 15 U.S.C Chapter 94: Privacy), establishes basic privacy standards for “financial institutions,” which includes not only lenders, but also title insurers, title agents and settlement/escrow agents.
The CFPB expects lenders to oversee their service providers to make sure that they are in compliance with the law to protect consumer interests; this was expressed in CFPB Bulletin 2012-03, published April 13, 2012. This duty extends to title agents and settlement service providers.
While title agents and settlement service providers are third-party vendors to lenders, those who provide services to title agents and settlement service providers are fourth-party vendors to lenders. The requirement to evaluate, review, and monitor qualifications and performance extends as far down the service chain as necessary to make sure that everyone is in compliance with the rules protecting customers.
So what can you do as a title agent to make sure that your vendors are in compliance?
You can make sure that your vendors are contractually aware of their responsibilities. There are some great sample provisions regarding “rights and responsibilities” and “confidentiality and security,” in the FDIC’s Financial Institution Letters, Guidance for Managing Third-Party Risk, which you may choose to include in your vendor contracts.
- You can establish good vendor selection and management practices:
- Designate someone within your company to provide oversight as the “vendor manager.”
- Perform background and reference checks.
- Provide due diligence questionnaires and checklists.
- Implement non-disclosure agreements.
- Train vendors on their consumer protection obligations.
- Monitor and score performance, and provide feedback; sight visits can be particularly useful.
- Provide a communication matrix or plan, and include provisions for reporting in the event of a perceived security threat or security breach.
This information is not legal, business or financial advice. It is intended only to be helpful to you and to increase awareness. There may be many ways to approach this issue, and it is always best to consult with legal counsel and subject matter experts to develop a plan that is right for you.
A sense of community is at the heart of it all for Ellis County Title Company’s Executive Vice President Erik Barnard.
Erik first worked at Ellis County Title Company in 1994 as a high school student, 10 years after his father Harold purchased the company with close friend Jim Pitts. Harold and Jim purchased Ellis County Title Company, seeking a job that would allow them to provide for their families and serve their community at the same time. Through the years, Ellis County Title has thrived, serving thousands in this cozy Texas community of Waxahachie and Ellis County by helping them invest in home ownership.
Soon after Erik Barnard completed college at the University of Mary-Hardin in Baylor, he returned to Ellis County Title, eager to join the family business and serve his community. The thing Erik enjoys most about his role at Ellis County Title is “helping people realize their investment and home ownership goals.” He adds that, “many of the people I help are friends and neighbors, as well as families that I have known my entire life.”
Ellis County Title’s business model is based on serving their small community through strong and lasting relationships. He adds that all of the company’s employees are “like family” and they interact outside of work, as well as in the office. The average tenure for an employee is 15-20 years. Since putting the community first is the priority, which also includes home buyers and sellers, employees and strategic partners, Ellis County Title actively looks for partners who make people a priority. That’s one of the reasons Ellis County Title Company enjoys working with Alliant National Title Insurance Company.
Harold, Jim, Erik and their team work closely with Alliant National’s Craig Dunbar, and have for over a quarter of a century. Erik said Craig’s commitment to their business and their shared mindset of “treating others as you want to be treated, having high values and always doing the right thing” is one reason they’ve worked so well together for so long.
Along with his community fellowship in Waxahachie, Erik enjoys spending time with his wife Laura and children (Nolan and Knox), cheering on his kids in their sporting events, golfing and running. While he’s not one to brag, Erik has quite a running history. He is a marathon and half-marathon runner!
Erik summarizes his work/life balance by sharing that he’s been blessed with a wonderful community to serve, caring employees and talented partners like Alliant National to aid in Ellis County Title Company’s continued success.
Contact Ellis County Title Company
Kerr County Abstract & Title Company (Kerr County Abstract) was recently awarded $1000 from Alliant National Title Insurance Company to donate to charity. Kerr County Abstract chose to give back to their community by donating the $1000 to Hill Country Veteran Center.
“Kerr County has a large population of veterans and spouses of veterans,” said Bekah Dunks, escrow assistant for Kerr County Abstract. “They are near and dear to our hearts, and we wanted to give back to them.”
The $1000 award came about through a marketing workshop that Alliant National conducted in Dallas in the Fall of 2017. Bekah Dunks and Caroline Wilson from Kerr County Abstract attended the workshop.
All attendees learned about the “Four R’s for Success.” Nikki to add a description here. Each of the 80 title companies in attendance were challenged to try at least one of the four R’s. Kerr County Abstract accepted the challenge and implemented the following:
- Retain Customers – Kerr County Abstract showed appreciation for their existing customers by sending 50 handwritten thank you cards to them.
- Revamping – Kerr County Abstract reviewed their existing marketing strategy and revamped it based on marketing tactics learned in Alliant National’s workshop.
Kerr County Abstract & Title Company is the original title company in Kerrville, Texas, having opened in 1924. Since 2001, the company has been owned by Bob and Diane Green. Diane has long been a familiar face at Kerr County Abstract and began her career as the company’s receptionist.