Several clients have called recently regarding a letter they received from Illinois Deed Provider, Inc. Illinois Deed Provider, Inc. proposes to obtain a certified copy of your deed for $89.50. My advice, save your money, or donate it to a worthy cause.
The letter claims that a certified copy of your deed "provides evidence that your property was transferred to you." It does no such thing. As a real estate attorney, I can assure you that it is absolutely unnecessary to have a certified copy of your deed. Deeds are not like the title to your car–you do not need your deed--original or copy--to sell your real estate or otherwise to prove ownership. One deed, standing on its own, is meaningless.
It is necessary to follow the chain of title to determine ownership. In other words, I could give you a deed to the Centennial Bridge, and it could be recorded, and you could obtain a certified copy of that document. However, unless I owned the Centennial Bridge, and the person who deeded the property to me owned it, and the person before that person, etc., you just received a deed to nothing. No amount of certification changes this simple fact.
Further, those documents are part of the permanent record at the Recorder’s Office, and you can obtain copies anytime you like. So, if it ever turns out for some peculiar reason you need a copy, it can be obtained with one visit to the Recorder’s Office. By the way, the Recorder's Office charges $49.00, there is no parking fee, and you only need to go there once, contrary to what the Illinois Deed Provider folks might try to tell you.
Their letter claims that the U.S. Government recommends that you have "an official or certified copy" of your deed. I looked at the page they say recommends this. It says nothing of the kind. The page contains a list of documents you should consider keeping in your safe deposit box. In the section regarding what you should keep in your safe deposit box, it says, "If applicable, you should have official or certified copies of documents for your safe deposit box" [emphasis added]. Since, in Illinois and Iowa at least, it is unnecessary to have a certified copy of your deed, I would state unequivocally that this recommendation is not applicable with regard to deeds.
The company appears to owned by an Illinois licensed real estate broker by the name of Barry Joel Isaacson. Mr. Isaacson is not an attorney, even though he is giving legal advice by explaining the legal effect of documents to others. In my opinion, this is the unauthorized practice of law.
If you receive this letter, please, please, please, just ignore it. If you are deadset on giving away money, please consider a donation to the Animal Aid Humane Society or the Quad City Animal Welfare Center instead of Mr. Isaacson. At least then it will be for a good cause.
www.thomasmoens.com
Friday, August 10, 2007
Thursday, March 29, 2007
Tenancy by the entirety
For a primer on tenancy by the entirety, visit
http://thomasmoens.com/tenancy_by_the_entirety.html
I had the misfortune of witnessing a good example of ineffective counsel regarding tenancy by the entirety yesterday. I was at a real estate closing where the buyers were moving here from the East Coast. They still owned a home on the East Coast. Unfortunately, the attorney they hired is not known for his brilliant legal acumen. He simply told them that tenancy by the entirety was the "best" way to take title. Here is just a small sampling of what he failed to ask to determine whether this was best for them:
Oh, and he misspelled "entirety" on the deed.
www.thomasmoens.com
http://thomasmoens.com/tenancy_by_the_entirety.html
I had the misfortune of witnessing a good example of ineffective counsel regarding tenancy by the entirety yesterday. I was at a real estate closing where the buyers were moving here from the East Coast. They still owned a home on the East Coast. Unfortunately, the attorney they hired is not known for his brilliant legal acumen. He simply told them that tenancy by the entirety was the "best" way to take title. Here is just a small sampling of what he failed to ask to determine whether this was best for them:
- Were they married? Sure he assumed they were, but if they were not, they cannot be tenants by the entirety. Of course, this is not as bad as another genius in the area who routinely vests title in unmarried people as "each an unmarried person, as tenants by the entirety."
- Were they planning to occupy this house as their residence? Again, he assumed, but if they did not, they cannot be tenants by the entirety. Perhaps they were planning to remain on the East Coast for a few weeks or months.
- Was their home on the East Coast owned by them as tenants by the entirety? Let’s say it was, and there was a judgment against the husband in the state from which they moved. It is possible that his haste to foist this tenancy upon them made that judgment immediately enforceable.
- Did either of them have any reason to believe they may become disabled?
- Did either of them have any reason to believe they were more likely than the average person to be sued?
Oh, and he misspelled "entirety" on the deed.
www.thomasmoens.com
Tuesday, March 13, 2007
Section 9 Violations and Foreclosures
Due to the increased number of foreclosure, there are a lot more banks selling foreclosed property. Many of these entities require their own addendum to the purchase agreement, sometimes ten to twenty pages long. One provision almost all include is something along the lines of, "Seller shall select the closing agent," sometimes even, "Buyer shall pay for all title insurance from the title company selected by Seller." Apparently, these banks, and the attorneys who prepare these addenda are not familiar with RESPA Section 9 (12 U.S.C. § 2608). It states:
(a) No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company.
(b) Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance. 12 U.S.C. § 2608.
Even where the seller specifies the closing agent, leaving the selection of title insurer ostensibly up to the buyer, there is a Section 9 violation. The key word in the statute is "indirectly." Here’s the train of thought:
1. The purchase agreement specifies that the seller shall designate the providers of title and escrow/closing services. (This may be interpreted as a direct requirement that the buyers utilize the title company selected by seller.)
2. The buyers’ lender will require a mortgagee’s policy of title insurance.
3. This lender will also require an insured closing protection letter (CPL).
4. In order for the CPL to be effective, the same company must issue both the CPL and the mortgagee’s title policy.
5. Since the seller is specifying the closing agent, the seller is requiring, at least indirectly, that the buyers purchase the mortgagee’s policy from a particular title insurance company.
Therefore, this requirement violates Section 9 of RESPA. Additionally, these title companies are often from out of town, and the fees are, to put it politely, exorbitant. Often, they will utilize the out of town title company, which then will hire a local title company to act on its behalf. This, of course, smacks of illegal kickbacks. But that’s a different article.
Some bank’s attorneys then try to make the argument that if the purchase agreement specifies that the buyer is getting a conventional loan, not a federally related mortgage loan (FRML), then Section 9 does not apply. While I would not be surprised for someone who is not an attorney to make such a mistake, it is a bit disappointing when someone "in the business" is not aware of the definition of FRML, and does not take the simple effort to learn the definition. Specifically, FRML is defined as:
[A]ny loan (other than temporary financing such as a construction loan) which—
(A) is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families, including any such secured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property; and
(B) (i) is made in whole or in part by any lender the deposits or accounts of which are insured by any agency of the Federal Government, or is made in whole or in part by any lender which is regulated by any agency of the Federal Government, or
(ii) is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by the Secretary or any other officer or agency of the Federal Government or under or in connection with a housing or urban development program administered by the Secretary or a housing or related program administered by any other such officer or agency; or
(iii) is intended to be sold by the originating lender to the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, or a financial institution from which it is to be purchased by the Federal Home Loan Mortgage Corporation; or
(iv) is made in whole or in part by any "creditor", as defined in section 1602 (f) of title 15, who makes or invests in residential real estate loans aggregating more than $1,000,000 per year, except that for the purpose of this chapter, the term "creditor" does not include any agency or instrumentality of any State. 12 U.S.C. § 2602.
By golly, that’s fairly well every mortgage loan given in this country today. If the loan is to be secured by residential property, the accounts of the lender are insured by a Federal agency (FDIC), and the lender sells its loans to FNMA, then it is a FRML. Therefore, even though a loan is a conventional loan and not an FHA or VA loan, it falls within the RESPA definition of FRML and is both a conventional loan and a FRML. In addition, even assuming paragraphs (i), (ii), and (iii) do not apply, there are very few lenders of any substance which do not fall under the definition contained in paragraph (iv). Four quarter million dollar loans and RESPA applies. And before you ask, creditor under section 1602 (f) of title 15 is defined as:
(f) The term "creditor" refers only to a person who both
(1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and
(2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. 15 U.S.C. § 1602.
So, the moral of the story: If you are a seller and you require the buyer to use your favorite title company or closing agent, you are probably violating Section 9 of RESPA.
www.thomasmoens.com
(a) No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company.
(b) Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance. 12 U.S.C. § 2608.
Even where the seller specifies the closing agent, leaving the selection of title insurer ostensibly up to the buyer, there is a Section 9 violation. The key word in the statute is "indirectly." Here’s the train of thought:
1. The purchase agreement specifies that the seller shall designate the providers of title and escrow/closing services. (This may be interpreted as a direct requirement that the buyers utilize the title company selected by seller.)
2. The buyers’ lender will require a mortgagee’s policy of title insurance.
3. This lender will also require an insured closing protection letter (CPL).
4. In order for the CPL to be effective, the same company must issue both the CPL and the mortgagee’s title policy.
5. Since the seller is specifying the closing agent, the seller is requiring, at least indirectly, that the buyers purchase the mortgagee’s policy from a particular title insurance company.
Therefore, this requirement violates Section 9 of RESPA. Additionally, these title companies are often from out of town, and the fees are, to put it politely, exorbitant. Often, they will utilize the out of town title company, which then will hire a local title company to act on its behalf. This, of course, smacks of illegal kickbacks. But that’s a different article.
Some bank’s attorneys then try to make the argument that if the purchase agreement specifies that the buyer is getting a conventional loan, not a federally related mortgage loan (FRML), then Section 9 does not apply. While I would not be surprised for someone who is not an attorney to make such a mistake, it is a bit disappointing when someone "in the business" is not aware of the definition of FRML, and does not take the simple effort to learn the definition. Specifically, FRML is defined as:
[A]ny loan (other than temporary financing such as a construction loan) which—
(A) is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families, including any such secured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property; and
(B) (i) is made in whole or in part by any lender the deposits or accounts of which are insured by any agency of the Federal Government, or is made in whole or in part by any lender which is regulated by any agency of the Federal Government, or
(ii) is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by the Secretary or any other officer or agency of the Federal Government or under or in connection with a housing or urban development program administered by the Secretary or a housing or related program administered by any other such officer or agency; or
(iii) is intended to be sold by the originating lender to the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, or a financial institution from which it is to be purchased by the Federal Home Loan Mortgage Corporation; or
(iv) is made in whole or in part by any "creditor", as defined in section 1602 (f) of title 15, who makes or invests in residential real estate loans aggregating more than $1,000,000 per year, except that for the purpose of this chapter, the term "creditor" does not include any agency or instrumentality of any State. 12 U.S.C. § 2602.
By golly, that’s fairly well every mortgage loan given in this country today. If the loan is to be secured by residential property, the accounts of the lender are insured by a Federal agency (FDIC), and the lender sells its loans to FNMA, then it is a FRML. Therefore, even though a loan is a conventional loan and not an FHA or VA loan, it falls within the RESPA definition of FRML and is both a conventional loan and a FRML. In addition, even assuming paragraphs (i), (ii), and (iii) do not apply, there are very few lenders of any substance which do not fall under the definition contained in paragraph (iv). Four quarter million dollar loans and RESPA applies. And before you ask, creditor under section 1602 (f) of title 15 is defined as:
(f) The term "creditor" refers only to a person who both
(1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and
(2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. 15 U.S.C. § 1602.
So, the moral of the story: If you are a seller and you require the buyer to use your favorite title company or closing agent, you are probably violating Section 9 of RESPA.
www.thomasmoens.com
Friday, March 9, 2007
Yikes
Freddie Mac is planning to toughen its standards regarding sub-prime loans. We had reports of one sub-prime lender failing to fund loans this week, and we had personal experience with another which did not fund a loan for three days. Delinquencies are way up, which I would attribute, at least in part, to the current adjustments of adjustable rate mortgages. Several years ago, when rates were very low, many lenders put people into adjustable rate mortgages. Many of those people barely qualified at those "introductory" rates, and now that the rates are adjusting, they simply cannot afford their payments any longer. We are aware of several individuals who were told by their loan officers that they would refinance them "no problem" before the adjustments started. Their loan officers are not returning their calls now.
Apparently Freddie will only buy 2/28 and 3/27 (fixed for 2 and 3 years respectively, and adjustable for 28 and 27) loans if the borrowers qualify for the highest rate the loan could ever have, i.e., the ceiling. Which is what they should have been doing all along. But what do I know...
www.thomasmoens.com
Apparently Freddie will only buy 2/28 and 3/27 (fixed for 2 and 3 years respectively, and adjustable for 28 and 27) loans if the borrowers qualify for the highest rate the loan could ever have, i.e., the ceiling. Which is what they should have been doing all along. But what do I know...
www.thomasmoens.com
Thursday, March 8, 2007
National Compliance Summit
It was, to be succinct, excellent. About 200 individuals representing lenders, title companies, title agencies, and law offices were in attendance. Yours truly was the only one from Illinois, and no one from Iowa! Honestly, I was not that surprised by this revelation. Seems most people are reactive rather than proactive with regard to compliance. Since Illinois and Iowa have not seen the wrath of HUD for the most part, it seems avoiding RESPA and loan fraud are not high on the list. Yet.
It would seem that 2007 may be the year of compliance. HUD has hired an outside company to assist in investigating the hundreds of complaints they receive every year. WATCH OUT if you have an affiliated business arrangement (AfBA). While some are legitimate, and may even benefit consumers through economies of scale, many are sham arrangements established for the sole purpose of illegally funnelling money to referring individuals or entities. There is a ten point analysis used to determine whether an AfBA is a sham or not. Get some advice if you are not sure. More later...
It would seem that 2007 may be the year of compliance. HUD has hired an outside company to assist in investigating the hundreds of complaints they receive every year. WATCH OUT if you have an affiliated business arrangement (AfBA). While some are legitimate, and may even benefit consumers through economies of scale, many are sham arrangements established for the sole purpose of illegally funnelling money to referring individuals or entities. There is a ten point analysis used to determine whether an AfBA is a sham or not. Get some advice if you are not sure. More later...
Monday, February 26, 2007
Closing agents, joint tenancy, tenants in common
In every transaction, we ensure that our clients take title in a manner appropriate to their circumstance. Title companies cannot assist you with this. If they attempt to, they are engaged in the unauthorized practice of law. Not only is the advice you are receiving suspect, but if they are wrong, you will have little recourse against any insurance coverage they have, since most policies have exclusions for illegal activities.
For example, if the seller's attorney prepares the deed without stating how the purchasers are taking title, which is a common occurrence, the new owners are deemed to be tenants in common. If one of them dies, the survivor would keep his or her interest, but the half interest of the person who died would go to his or her heirs and would probably need to go through probate before anything could be done with the property. In the case of unmarried couples purchasing real estate, this would likely mean that the decedent's family would get half the house.
Even for married couples this can be tricky, since their children would have an interest, and a guardian may need to be appointed to effectuate any title transfers or mortgages. In the case of married couples with children from other marriages who take title as tenants in common, the resultant problems could fill a book. In all of these situations, this form of ownership can be financially disastrous for the survivor.
There are three different ways to take title in Illinois, and each situation is different, and requires careful consideration and discussion. If you close at a title company without an attorney representing you, you will get no advice regarding the appropriate way to take title. Any advice you do get should be disregarded, for the reasons previously stated.
www.thomasmoens.com
For example, if the seller's attorney prepares the deed without stating how the purchasers are taking title, which is a common occurrence, the new owners are deemed to be tenants in common. If one of them dies, the survivor would keep his or her interest, but the half interest of the person who died would go to his or her heirs and would probably need to go through probate before anything could be done with the property. In the case of unmarried couples purchasing real estate, this would likely mean that the decedent's family would get half the house.
Even for married couples this can be tricky, since their children would have an interest, and a guardian may need to be appointed to effectuate any title transfers or mortgages. In the case of married couples with children from other marriages who take title as tenants in common, the resultant problems could fill a book. In all of these situations, this form of ownership can be financially disastrous for the survivor.
There are three different ways to take title in Illinois, and each situation is different, and requires careful consideration and discussion. If you close at a title company without an attorney representing you, you will get no advice regarding the appropriate way to take title. Any advice you do get should be disregarded, for the reasons previously stated.
www.thomasmoens.com
Thursday, February 22, 2007
Class Action for referrals to in-house Title Co
An interesting class action lawsuit was filed recently. The lawsuit alleges that a Minnesota real estate firm has been providing incentives to its agents to refer their clients to an affiliated title company. The title company apparently has some of the highest fees in the area. The agents provided the bare minimum required disclosure, but did not disclose that the were not exactly getting the best price in town. Rather than focus on RESPA disclosures, the case seems to pivot on the breach of fiduciary duty the agents and brokers owed to their clients. Basically, the agents did not represent their clients' best interests because it knowingly steered them to the most expensive title option. This should be a very interesting case to watch.
Wednesday, February 21, 2007
National Compliance Summit
I will be attending the National Compliance Summit next week. This seminar promises to provide valuable information regarding review of real-life compliance “train wrecks” and how your business can avoid them, discussion of approaches to staving off mortgage fraud, trends in RESPA and state anti-kickback statutes, strategies for building and competing through compliant affiliated business arrangements, and an update on Department of Labor regulations having an impact on title businesses.
I will file a full report when I return.
I will file a full report when I return.
Monday, February 19, 2007
Bogus appraisals, et al.
Our client was planning to sell his rental property to a buyer who would be getting her financing from a company which does a great deal of advertising in this area. He wanted to sell the property for $80,000. The loan officer came up with the great idea that we could raise the purchase price to $120,000 and the seller could give the buyer a check after closing for the $40,000 difference. He even wanted us to prepare two different purchase agreements--one that accurately reflected the transaction, and one he would give to his lender. The buyer thought this was great, since she would have $40,000 worth of spending money. The real purpose, of course, was that the loan officer wanted to increase his commission. We told the loan officer point blank that this was loan fraud, RESPA fraud, money laundering, and wire fraud. He replied that it was no big deal, since he and his closing agent did this "all the time." Even though the seller purchase the property just a couple years ago for $60,000, the assessed value according to the county was $76,000, and all the very similar houses in the neighborhood sell for plus or minus $80,000, somehow the loan officer found an appraiser that said it was worth $120,000. When we explained to the seller and buyer that committing this fraud could result in significant fines and imprisonment, that the buyer's house payment would be more than $300 higher per month, and that the seller would be responsible for the excess capital gains, revenue stamps, and title fees, the parties agreed to stick with the legitimate $80,000 purchase price. Perhaps this loan officer found someone else to make his boat payment for him that month.
Being fed up with transactions like this occuring in this area, I contacted the Attorney General's office, the FBI, the Department of Justice, the Department of Financial Institutions, HUD, and probably a few initials I have forgotten. Basically, I was passed from office to office, with nothing being done. This lender has a reputation for this type of fraud, and other types as well, so I thought this would be a perfect opportunity to catch them in flagrante delicto. Everyone I talked to agreed this was fraud, but no one seemed to know, or care, who was responsible for prosecuting it. If you know, please pass along contact information.
Being fed up with transactions like this occuring in this area, I contacted the Attorney General's office, the FBI, the Department of Justice, the Department of Financial Institutions, HUD, and probably a few initials I have forgotten. Basically, I was passed from office to office, with nothing being done. This lender has a reputation for this type of fraud, and other types as well, so I thought this would be a perfect opportunity to catch them in flagrante delicto. Everyone I talked to agreed this was fraud, but no one seemed to know, or care, who was responsible for prosecuting it. If you know, please pass along contact information.
Real Estate Law
Thomas O. Moens is a real estate attorney, licensed in Illinois and Iowa. He has a great deal of experience in residential and commercial real estate transactions. This blog will provide you with information regarding real estate law, as well as the current epidemic of mortgage and RESPA fraud. More information is available at our website:
www.qcattorney.com
www.qcattorney.com
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