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.

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.

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.

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: