Wednesday, April 23, 2008

Not funny, but it kind of is...

Have you heard about the latest spam scam? Those pesky scammers are targeting attorneys, and hitting us where we live (some attorneys anyway). Right in the ego.

Starts out with the usual professionally polite nearly sychophantic introduction, commenting on how the attorney was referred to the scammer by some lofty individual or organization. My recommendation came via the U.S. Chamber of Commerce, so they said. The story goes that Mr. Scammer is owed significant sums of money by some nefarious deadbeat located in the attorney's jurisdiction. But of course, since Mr. Scammer is located in some foreign locale, it is very difficult for him to try to collect. Because of the attorney's stellar reputation, Mr. Scammer is just certain the attorney could obtain that money.

For those simple individuals that took the bait, here's what happens. The attorney sends a demand letter to Deadbeat, Inc. (or Mr. Deadbeat, as the case may be). Deadbeat, Inc., due in no small part to the attorney's aggressive tactics, stellar reputation, and impressive legal acumen, immediately forwards a certified check to the attorney via overnight courier. Mr. Scammer is so grateful, and requests the attorney to please wire the funds and of course keep a healthy, nay, HUGE fee for the valiant efforts in bringing Deadbeat, Inc. to justice so quickly. Without breaking a sweat. Before tee time!

Here's where it gets comical/sad. The check was a forgery and Mr. Scammer and Deadbeat, Inc. are in cahoots (if not the same individual). The attorney gets to pony up the shortfall in his trust account.

Seriously, if it sounds too good to be true.........

Tuesday, April 22, 2008

Certified Checks at Closing

I just got yelled at, and likely lost a client, because [competitor's names deleted] don't require certified funds at closing.

We were acting as closing agent for a large Midwestern Bank located in the US (get it?). The buyer was getting ready to give me a $35,000 personal check at closing. Attorneys in Illinois and Iowa are required to obtain certified funds or wire transfers if they are planning to disburse before check clearance. Makes sense, don't you think? I wonder why the same isn't required of title companies. And even more curious, why would a title company even want to accept personal checks. [The good funds act now requires this.]

Sure, most people's checks will clear. Ignore for the moment those that don't. Banks now put a three to ten day hold on personal checks before the funds are available. That means, if a closing agent disburses at closing or shortly thereafter, they are disbursing money that belongs to someone else. The money for that transaction won't be available for a week or more, but here they are ponying up money that belongs to someone else. At some point, that little house of cards is doomed to collapse, whether it's because there is not enough float, or funds don't arrive on time, or business slows down to the point they don't have enough money to cover YOUR closing.

The excitement which would ensue for a check which did not clear really does not require discussion.

I asked the buyer on which bank the check was drawn, hoping it was nearby so she could just zip over there to get a certified check. She told me it was Bank A, and passed a check over to me drawn on Bank B. I pointed this out, and she rifled through her purse and announced that she did not have the checks with her for Bank A--the bank where money was located! So, yes, her check would have bounced. I try to follow the rules, and I get yelled at and lose a client.

So, I put it to you: Would you want to have your closing for your purchase or your sale at a closing agent's office who accepts personal checks and is using money that belongs to someone else to fund your closing? Or would you prefer to close at a title agent who diligently obtains good funds from all parties so there are no, um, "complications" which can occur when it is time to divvy up the money?

Tuesday, April 1, 2008

Iowa Delay of Sale in Foreclosures

Iowa's foreclosure laws have some unusual quirks. One is the ability to request a delay of sale. Make no mistake--requesting a delay of sale does nothing except delay the date of the sheriff's sale. Here is a brief overview of how delay of sale works:

A foreclosure petition is filed.

The borrower/mortgagor/defendant (will call this person the borrower from here on out) files a demand for delay of sale.

If the property is not the residence of the borrower, the sheriff's sale will be delayed two months from the date the foreclosure decree is entered.

If the property is the residence of the borrower, and the lender is seeking a deficiency judgment, the sheriff's sale will be delayed twelve months from the date the foreclosure decree is entered. A deficiency judgment is best explained with an example: The borrower owes $100,000 on the mortgage. The lender only gets $80,000 when it sells the property after the foreclosure. The $20,000 difference is the deficiency. If the lender is going to try to get that difference from the borrower, the lender is seeking a deficiency judgment.

If the property is the residence of the borrower, and the lender is NOT seeking a deficiency judgment, the sheriff's sale will be delayed six months from the date the foreclosure decree is entered.

Remember, these delay periods only apply IF the borrower demands a delay of sale.