A banker friend of mine told me he had a conversation with a real estate agent who was complaining that I was not "flexible" about how something should be done in a real estate transaction. He knows how I operate, and he asked, "Well, was he right?" To which the real estate agent responded, "I guess so. Technically....." I was so proud.
Speaking of flexibility, I came across the following press release from the Department of Justice District of New Jersey website.
http://www.usdoj.gov/usao/nj/press/press/files/pdffiles/cart0813%20rel.pdf
Here is a brief quote:
"According to the Indictment, the borrowers attended closings at a Garfield law office where Gebbia worked. There, at the closing attorney’s direction, Gebbia prepared fraudulent HUD-1 Uniform Settlement Statements that were signed by the borrowers, Ugwu and others reflecting deposits that had never been made. The closing attorney then allegedly distributed proceeds of the fraudulently-obtained mortgage loans to the conspirators by checks made payable to companies controlled by Eliasof, who in turn paid kickbacks to Carti, the closing attorney and others. "
I can only hope they did not name the closing attorney because they have something really "special" planned for him/her. Not only do attorneys have a lot to lose by playing these games, they violate their duty to their clients by allowing these transactions to go through this way. Perhaps if a few more attorneys would have stood firm, we might not be in the mess we are in right now. Sure, some real estate agent might complain that we are "not flexible," but isn't that our job?
Tuesday, August 19, 2008
Monday, June 30, 2008
This is a bad thing, isn't it?
Then why didn't it get more publicity? This is lifted right from the Office of United States Attorney District of Arizona's website.
PHOENIX - The United States reached a civil settlement with Wells Fargo Bank and Ticor Title Agency of Arizona. In the settlement, Wells Fargo Bank has agreed to pay $4,046,786 and Ticor Title has agreed to pay $265,370.
Under certain circumstances, the Federal Housing Administration’s "pre-foreclosure sales" program allows homeowners with federally-insured loans to avoid foreclosures by listing their homes for sale. If a sales price is not enough to pay-off a loan, then the lender submits an insurance claim to the Federal Housing Administration which will pay the lender the balance owing on the loan.
The United States contends that Well Fargo Bank submitted more than 70 false claims to the Federal Housing Administration under the pre-foreclosure sales program and that Ticor Title prepared inaccurate escrow documents which allowed lenders to submit false claims to the Federal Housing Administration. The United States contends that it suffered $2,156,078 in losses. Wells Fargo Bank and Ticor Title deny the United States’ contentions but agreed to pay the amounts listed above.
The investigation leading to the settlement was conducted by the U.S. Department of Housing and Urban Development, Office of Inspector General.
RELEASE NUMBER: 2008-165(Wells Fargo settlement)
Unless I am completely misunderstanding this, Ticor Title and Wells Fargo were in cahoots to lie to the government--OUR government--about the sale price of properties that were in foreclosure but not yet owned by Wells Fargo. This is the way I understand it, and please someone correct me if I am mistaken: Homeowner owes Wells Fargo $100,000, stops making payments, and foreclosure is commenced. Homeowner tries to sell house before foreclosure sale, but can only get $80,000 for the place. The FHA's pre-foreclosure sale program would allow Wells Fargo to recoup that $20,000 (which is darned nice of us taxpayers). But that's not enough for Messrs. Wells and Fargo. They somehow get Ticor to prepare a HUD-1 that says the property only sold for $50,000, so now Wells Fargo can get a $50,000 shortfall (rather than the $20,000 to which they are entitled) from the government, as well as the $80,000 from the sale of the house. This would net them $130,000 rather than the $100,000 they were owed.
Wow.
PHOENIX - The United States reached a civil settlement with Wells Fargo Bank and Ticor Title Agency of Arizona. In the settlement, Wells Fargo Bank has agreed to pay $4,046,786 and Ticor Title has agreed to pay $265,370.
Under certain circumstances, the Federal Housing Administration’s "pre-foreclosure sales" program allows homeowners with federally-insured loans to avoid foreclosures by listing their homes for sale. If a sales price is not enough to pay-off a loan, then the lender submits an insurance claim to the Federal Housing Administration which will pay the lender the balance owing on the loan.
The United States contends that Well Fargo Bank submitted more than 70 false claims to the Federal Housing Administration under the pre-foreclosure sales program and that Ticor Title prepared inaccurate escrow documents which allowed lenders to submit false claims to the Federal Housing Administration. The United States contends that it suffered $2,156,078 in losses. Wells Fargo Bank and Ticor Title deny the United States’ contentions but agreed to pay the amounts listed above.
The investigation leading to the settlement was conducted by the U.S. Department of Housing and Urban Development, Office of Inspector General.
RELEASE NUMBER: 2008-165(Wells Fargo settlement)
Unless I am completely misunderstanding this, Ticor Title and Wells Fargo were in cahoots to lie to the government--OUR government--about the sale price of properties that were in foreclosure but not yet owned by Wells Fargo. This is the way I understand it, and please someone correct me if I am mistaken: Homeowner owes Wells Fargo $100,000, stops making payments, and foreclosure is commenced. Homeowner tries to sell house before foreclosure sale, but can only get $80,000 for the place. The FHA's pre-foreclosure sale program would allow Wells Fargo to recoup that $20,000 (which is darned nice of us taxpayers). But that's not enough for Messrs. Wells and Fargo. They somehow get Ticor to prepare a HUD-1 that says the property only sold for $50,000, so now Wells Fargo can get a $50,000 shortfall (rather than the $20,000 to which they are entitled) from the government, as well as the $80,000 from the sale of the house. This would net them $130,000 rather than the $100,000 they were owed.
Wow.
Thursday, June 26, 2008
Oooo, you're in trouble....
And it's about time. Of course, I won't mention that I contacted her office about three years ago concerning rampant mortgage fraud in the Quad Cities by a couple of bad apples (no offense intended to apples), and got absolutely nowhere. Apparently it wasn't a glamourous crime at that time. Anyway, I'm glad we're getting after it now.
Here's the link to the press release:
http://www.illinoisattorneygeneral.gov/pressroom/2008_06/20080625.html
If you have scads of time on your hands (it's 81 pages), you can download the complaint here:
http://www.illinoisattorneygeneral.gov/pressroom/2008_06/countrywide_complaint.pdf
From the Illinois Attorney General's website:
ILLINOIS ATTORNEY GENERAL MADIGAN FILES LAWSUIT AGAINST MORTGAGE GIANT COUNTRYWIDE
Alleges Company Deceptively Sold Risky Loans Despite Borrowers’ Inability to Pay
Chicago – Attorney General Lisa Madigan today filed a lawsuit in Cook County Circuit Court against Countrywide, the nation’s largest mortgage lender and servicer. The complaint alleges that Countrywide Home Loans, Inc., and its parent company, Countrywide Financial Corporation, engaged in unfair and deceptive conduct on a large scale in creating, originating, marketing and servicing unnecessarily risky and costly mortgage loans for Illinois homeowners.
The complaint also names as defendants Countrywide’s subprime lending unit, Full Spectrum Lending; the company’s servicing arm, Countrywide Home Loans Servicing LP; and Angelo Mozilo, the co-founder and former CEO of Countrywide Financial whose name has become synonymous with the excesses of the subprime mortgage industry. The lawsuit is the result of a nine-month probe by Madigan’s office into the lending practices of Countrywide.
Madigan’s complaint alleges that Countrywide, in a single-minded quest to dominate the nation’s mortgage market, sold risky and costly loan products to borrowers who could not afford them. The lawsuit also details how, as failure rates on Countrywide loans began to escalate, the company intensified its originations of unaffordable and poorly underwritten loans to satisfy its obligations to Wall Street investors.
“Countrywide created risky and costly loan products and marketed them to borrowers who could not afford them,” Madigan said. “Countrywide’s unfair lending practices have harmed tens of thousands of borrowers who’ve been placed in unaffordable loans and, as a result, our communities are now being destabilized by a skyrocketing number of home foreclosures.”
Countrywide’s Major Role in the Foreclosure Crisis
Madigan’s complaint comes in the midst of an unprecedented foreclosure crisis. In May 2008, there were 9,670 foreclosure filings reported in Illinois, up nearly 42 percent from May 2007, and the delinquency rates on Countrywide loans in Illinois from 2005 through the first half of 2007 are even higher than Countrywide’s national rates.
Countrywide’s delinquency rates are having a devastating impact on Illinois homeowners because of the company’s massive presence in the market:
By 2007, Countrywide was both the nation’s largest originator of prime and subprime mortgage loans.
In the first quarter of 2008, Countrywide originated $73 billion in mortgage loans nationally.
At its peak, Countrywide operated approximately 100 retail branches in Illinois and was the largest mortgage lender in the state from 2004-2006, selling approximately 94,000 loans to Illinois consumers in that period.
Countrywide also was the largest seller of high-cost, or subprime, home loans in the Chicago area in 2006, according to a 2007 Chicago Reporter study.
Moreover, Countrywide is unique among lenders for its involvement in virtually every segment of the mortgage industry. Countrywide sells, purchases, services and securitizes mortgage loans.
“At the start of our investigation, we knew that Countrywide was a major player in the rapidly collapsing subprime mortgage market,” Madigan said. “Through the investigation, we have learned the larger story of how Countrywide created and implemented a corporate strategy that resulted in widespread loan failures by luring Illinois homeowners into unfair and unaffordable loans.”
Countrywide Relaxed Underwriting Standards and Placed People into Unaffordable Loans Madigan’s complaint outlines the Countrywide practices that put borrowers into unaffordable home loans, including relaxing underwriting guidelines to qualify borrowers with insufficient income and assets; inflating borrowers’ income on loan applications; and underwriting borrowers for less than the full amount ultimately owed—a practice that counted on borrowers refinancing when payments became too expensive. Madigan further alleges that the company combined lax underwriting standards with products containing multiple layers of risky features, thus ensuring that loans would fail.
As one example of Countrywide’s practice of placing borrowers into unaffordable loans, the complaint describes how Countrywide lessened its underwriting standards to place more subprime borrowers into reduced document loan products, which were faster and easier for Countrywide to sell, but came with higher costs for borrowers and higher delinquency rates. The complaint alleges that Countrywide sales employees and independent brokers selling its products used reduced document loans to inflate incomes of borrowers who otherwise wouldn’t qualify for a loan.
“Countrywide repeatedly qualified borrowers for mortgage loans based on salaries that were significantly higher than what they really made,” Madigan said. “As a result, Countrywide put borrowers into loans that they could never afford, leading to high failure rates.”
Moreover, the complaint alleges, even as Countrywide was increasing sales volume with reduced document loans based on inflated incomes, the company was also ramping up its sales of “affordability” products that exposed borrowers to unnecessarily high risk of foreclosure or loss of home equity. “Affordability” products are loans with low payments that last for only an initial period. Madigan alleges that Countrywide routinely qualified borrowers for affordability loans based on the initial low payment amount, even though the company knew that the borrowers would not be able to repay the loan after it reset to a higher rate.
One example of these risky products is Countrywide’s popular hybrid adjustable rate mortgage (hybrid ARM). These loans typically have a two- or three-year fixed rate, followed by 28 or 27 years in which the rate varies. Countrywide’s hybrids usually had discounted interest rates during the short fixed-rate period. After that period, the rate would reset upward every six months to a year, resulting in higher monthly payments. Most of the Countrywide borrowers who qualified for the lower fixed-rate period would not have qualified at the higher payment amounts after reset. Nonetheless, the company put borrowers into these unaffordable loans, assuming that borrowers would refinance the loan or sell the home before the payments increased.
Countrywide Used Unfair and Deceptive Sales Techniques to Lure Borrowers
Madigan also alleges that Countrywide relied on a host of unfair and deceptive sales techniques to push its unaffordable loan products on unsuspecting borrowers. Specifically, the lawsuit alleges that Countrywide enticed borrowers with promises of the best loan terms, low monthly payments, low interest rates and no closing costs but failed to disclose the loan’s true costs, affordability and risk.
The lawsuit alleges that Countrywide’s deceptive sales techniques were due in large part to a compensation structure that encouraged sales employees to place borrowers in risky loans by tying their compensation to the volume of loans sold. Madigan further alleges that Countrywide incentivized its vast network of independent mortgage brokers to sell home loans that were riskier and costlier than necessary, to the exclusion of other products.
Countrywide’s Conduct Violated Illinois Law
Madigan’s complaint alleges that Countrywide violated Illinois law by engaging in unfair and/or deceptive practices that included:
Originating mortgage loans that borrowers could not afford;
Relaxing certain underwriting guidelines, particularly through the company’s reduced documentation loan program, dramatically increasing the risk that borrowers would be unable to pay;
Originating mortgage loans that exposed borrowers to an unnecessarily high risk of foreclosure or loss of equity, particularly through risky products like pay option ARMs;
Originating unnecessarily costly loans to borrowers;
Engaging in unfair and deceptive marketing and advertising practices to lure borrowers into risky loans;
Incentivizing employee and broker misconduct and the use of unnecessarily costly and risky loan products; and
Engaging in deceptive practices in the servicing of mortgage loans, resulting in greater risk of foreclosures.
“Countrywide used egregiously unfair and deceptive lending practices to steer borrowers into loans that were destined to fail,” Madigan said. “As the nation’s largest originator of mortgage loans, Countrywide’s conduct has had and will continue to have a devastating financial impact on tens of thousands of families and many communities in Illinois.”
Madigan’s lawsuit asks the court to rescind or reform all Countrywide loans originated with the use of unfair and deceptive practices. This includes providing financial relief to borrowers who lost their homes to foreclosure, refinanced, sold, or have loans currently being serviced by Countrywide, even if that requires Countrywide to repurchase loans from current investor owners. For those loans currently being serviced by Countrywide, Madigan requests that the court allow the Attorney General’s Office 90 days to review any loans in foreclosure or moving toward foreclosure that were originated using the unfair and deceptive practices alleged in the complaint to determine if the loan can be modified to be affordable.
The Attorney General issued a second subpoena to Countrywide in March seeking information to determine whether the company has violated state and federal fair lending laws. That investigation is ongoing.
A team of attorneys in Madigan’s Consumer Fraud Bureau is handling this suit for the Attorney General’s Office.
www.thomasmoens.com
Here's the link to the press release:
http://www.illinoisattorneygeneral.gov/pressroom/2008_06/20080625.html
If you have scads of time on your hands (it's 81 pages), you can download the complaint here:
http://www.illinoisattorneygeneral.gov/pressroom/2008_06/countrywide_complaint.pdf
From the Illinois Attorney General's website:
ILLINOIS ATTORNEY GENERAL MADIGAN FILES LAWSUIT AGAINST MORTGAGE GIANT COUNTRYWIDE
Alleges Company Deceptively Sold Risky Loans Despite Borrowers’ Inability to Pay
Chicago – Attorney General Lisa Madigan today filed a lawsuit in Cook County Circuit Court against Countrywide, the nation’s largest mortgage lender and servicer. The complaint alleges that Countrywide Home Loans, Inc., and its parent company, Countrywide Financial Corporation, engaged in unfair and deceptive conduct on a large scale in creating, originating, marketing and servicing unnecessarily risky and costly mortgage loans for Illinois homeowners.
The complaint also names as defendants Countrywide’s subprime lending unit, Full Spectrum Lending; the company’s servicing arm, Countrywide Home Loans Servicing LP; and Angelo Mozilo, the co-founder and former CEO of Countrywide Financial whose name has become synonymous with the excesses of the subprime mortgage industry. The lawsuit is the result of a nine-month probe by Madigan’s office into the lending practices of Countrywide.
Madigan’s complaint alleges that Countrywide, in a single-minded quest to dominate the nation’s mortgage market, sold risky and costly loan products to borrowers who could not afford them. The lawsuit also details how, as failure rates on Countrywide loans began to escalate, the company intensified its originations of unaffordable and poorly underwritten loans to satisfy its obligations to Wall Street investors.
“Countrywide created risky and costly loan products and marketed them to borrowers who could not afford them,” Madigan said. “Countrywide’s unfair lending practices have harmed tens of thousands of borrowers who’ve been placed in unaffordable loans and, as a result, our communities are now being destabilized by a skyrocketing number of home foreclosures.”
Countrywide’s Major Role in the Foreclosure Crisis
Madigan’s complaint comes in the midst of an unprecedented foreclosure crisis. In May 2008, there were 9,670 foreclosure filings reported in Illinois, up nearly 42 percent from May 2007, and the delinquency rates on Countrywide loans in Illinois from 2005 through the first half of 2007 are even higher than Countrywide’s national rates.
Countrywide’s delinquency rates are having a devastating impact on Illinois homeowners because of the company’s massive presence in the market:
By 2007, Countrywide was both the nation’s largest originator of prime and subprime mortgage loans.
In the first quarter of 2008, Countrywide originated $73 billion in mortgage loans nationally.
At its peak, Countrywide operated approximately 100 retail branches in Illinois and was the largest mortgage lender in the state from 2004-2006, selling approximately 94,000 loans to Illinois consumers in that period.
Countrywide also was the largest seller of high-cost, or subprime, home loans in the Chicago area in 2006, according to a 2007 Chicago Reporter study.
Moreover, Countrywide is unique among lenders for its involvement in virtually every segment of the mortgage industry. Countrywide sells, purchases, services and securitizes mortgage loans.
“At the start of our investigation, we knew that Countrywide was a major player in the rapidly collapsing subprime mortgage market,” Madigan said. “Through the investigation, we have learned the larger story of how Countrywide created and implemented a corporate strategy that resulted in widespread loan failures by luring Illinois homeowners into unfair and unaffordable loans.”
Countrywide Relaxed Underwriting Standards and Placed People into Unaffordable Loans Madigan’s complaint outlines the Countrywide practices that put borrowers into unaffordable home loans, including relaxing underwriting guidelines to qualify borrowers with insufficient income and assets; inflating borrowers’ income on loan applications; and underwriting borrowers for less than the full amount ultimately owed—a practice that counted on borrowers refinancing when payments became too expensive. Madigan further alleges that the company combined lax underwriting standards with products containing multiple layers of risky features, thus ensuring that loans would fail.
As one example of Countrywide’s practice of placing borrowers into unaffordable loans, the complaint describes how Countrywide lessened its underwriting standards to place more subprime borrowers into reduced document loan products, which were faster and easier for Countrywide to sell, but came with higher costs for borrowers and higher delinquency rates. The complaint alleges that Countrywide sales employees and independent brokers selling its products used reduced document loans to inflate incomes of borrowers who otherwise wouldn’t qualify for a loan.
“Countrywide repeatedly qualified borrowers for mortgage loans based on salaries that were significantly higher than what they really made,” Madigan said. “As a result, Countrywide put borrowers into loans that they could never afford, leading to high failure rates.”
Moreover, the complaint alleges, even as Countrywide was increasing sales volume with reduced document loans based on inflated incomes, the company was also ramping up its sales of “affordability” products that exposed borrowers to unnecessarily high risk of foreclosure or loss of home equity. “Affordability” products are loans with low payments that last for only an initial period. Madigan alleges that Countrywide routinely qualified borrowers for affordability loans based on the initial low payment amount, even though the company knew that the borrowers would not be able to repay the loan after it reset to a higher rate.
One example of these risky products is Countrywide’s popular hybrid adjustable rate mortgage (hybrid ARM). These loans typically have a two- or three-year fixed rate, followed by 28 or 27 years in which the rate varies. Countrywide’s hybrids usually had discounted interest rates during the short fixed-rate period. After that period, the rate would reset upward every six months to a year, resulting in higher monthly payments. Most of the Countrywide borrowers who qualified for the lower fixed-rate period would not have qualified at the higher payment amounts after reset. Nonetheless, the company put borrowers into these unaffordable loans, assuming that borrowers would refinance the loan or sell the home before the payments increased.
Countrywide Used Unfair and Deceptive Sales Techniques to Lure Borrowers
Madigan also alleges that Countrywide relied on a host of unfair and deceptive sales techniques to push its unaffordable loan products on unsuspecting borrowers. Specifically, the lawsuit alleges that Countrywide enticed borrowers with promises of the best loan terms, low monthly payments, low interest rates and no closing costs but failed to disclose the loan’s true costs, affordability and risk.
The lawsuit alleges that Countrywide’s deceptive sales techniques were due in large part to a compensation structure that encouraged sales employees to place borrowers in risky loans by tying their compensation to the volume of loans sold. Madigan further alleges that Countrywide incentivized its vast network of independent mortgage brokers to sell home loans that were riskier and costlier than necessary, to the exclusion of other products.
Countrywide’s Conduct Violated Illinois Law
Madigan’s complaint alleges that Countrywide violated Illinois law by engaging in unfair and/or deceptive practices that included:
Originating mortgage loans that borrowers could not afford;
Relaxing certain underwriting guidelines, particularly through the company’s reduced documentation loan program, dramatically increasing the risk that borrowers would be unable to pay;
Originating mortgage loans that exposed borrowers to an unnecessarily high risk of foreclosure or loss of equity, particularly through risky products like pay option ARMs;
Originating unnecessarily costly loans to borrowers;
Engaging in unfair and deceptive marketing and advertising practices to lure borrowers into risky loans;
Incentivizing employee and broker misconduct and the use of unnecessarily costly and risky loan products; and
Engaging in deceptive practices in the servicing of mortgage loans, resulting in greater risk of foreclosures.
“Countrywide used egregiously unfair and deceptive lending practices to steer borrowers into loans that were destined to fail,” Madigan said. “As the nation’s largest originator of mortgage loans, Countrywide’s conduct has had and will continue to have a devastating financial impact on tens of thousands of families and many communities in Illinois.”
Madigan’s lawsuit asks the court to rescind or reform all Countrywide loans originated with the use of unfair and deceptive practices. This includes providing financial relief to borrowers who lost their homes to foreclosure, refinanced, sold, or have loans currently being serviced by Countrywide, even if that requires Countrywide to repurchase loans from current investor owners. For those loans currently being serviced by Countrywide, Madigan requests that the court allow the Attorney General’s Office 90 days to review any loans in foreclosure or moving toward foreclosure that were originated using the unfair and deceptive practices alleged in the complaint to determine if the loan can be modified to be affordable.
The Attorney General issued a second subpoena to Countrywide in March seeking information to determine whether the company has violated state and federal fair lending laws. That investigation is ongoing.
A team of attorneys in Madigan’s Consumer Fraud Bureau is handling this suit for the Attorney General’s Office.
www.thomasmoens.com
Wednesday, June 25, 2008
We don't need no stinkin' title insurance
Most purchase agreements in the Illinois portion of this area obligate the seller to provide either an abstract or a policy of title insurance to the buyer. If your purchase agreement does not, negotiate for title insurance. If your agreement leaves the option up to the seller, negotiate to get the title insurance. If the seller refuses, buy it yourself. The price depends on the purchase price of the real estate. But unlike most insurance policies, this one is good as long as you own the property. It does not matter if you live there for one year or fifty years. Once the premium is paid, you are covered until you sell the property.
DO NOT let anyone tell you you don't need it. You might hear that it costs too much, the bank is doing a title search, the bank's lender's policy will protect you, or any number of other excuses. All are wrong, wrong, wrong.
Here's a recent horror story, from the Columbus Dispatch:
Family in Ohio buys a house from a Doctor in 2001. The Doctor had a couple of mortgages on the property. The County Recorder entered the Doctor's name wrong in the computerized index on one of the mortgages, so when the title company went to search the records, they did not find this mortgage (don't know why they didn't search the property index--maybe they don't have one in Ohio?). The Doctor didn't see fit to mention this oversight at closing, and it was not paid out of the settlement funds. It appears that the mortgage was for a line of credit, so the Doctor actually paid on it for a few years. Apparently the Doctor ran into a bit of a financial difficulty, and stopped paying in 2007. Now that lender is going to foreclose. All the buyers got was a title search, which is not insurance, and now the buyers stand to lose their home.
DO NOT let anyone tell you you don't need it. You might hear that it costs too much, the bank is doing a title search, the bank's lender's policy will protect you, or any number of other excuses. All are wrong, wrong, wrong.
Here's a recent horror story, from the Columbus Dispatch:
Family in Ohio buys a house from a Doctor in 2001. The Doctor had a couple of mortgages on the property. The County Recorder entered the Doctor's name wrong in the computerized index on one of the mortgages, so when the title company went to search the records, they did not find this mortgage (don't know why they didn't search the property index--maybe they don't have one in Ohio?). The Doctor didn't see fit to mention this oversight at closing, and it was not paid out of the settlement funds. It appears that the mortgage was for a line of credit, so the Doctor actually paid on it for a few years. Apparently the Doctor ran into a bit of a financial difficulty, and stopped paying in 2007. Now that lender is going to foreclose. All the buyers got was a title search, which is not insurance, and now the buyers stand to lose their home.
Tuesday, June 17, 2008
Peoria! Whatsamatta with you?
We are currently representing sellers who own property in the Peoria area. Our clients advised the real estate agent numerous times that we were representing them, to provide copies of all documentation and correspondence to us. The real estate agent has continually "forgotten" to do this. We had to request one particular document four times. Big surprise here--that document was written confirmation that the commission was to be reduced. We also informed the real estate agent that we would be taking care of obtaining title insurance, deed preparation, obtaining mortgage payoffs. You know, the usual attorney things.
We found out that the real estate agent had, against our clients' specific demand, ordered title insurance from its in-house title company. We were told that this in-house title company would be "hiring" one of the attorneys who owns the title company to "represent" our client. Talk about conflict upon conflict of interest. How can any sentient individual argue that this "attorney" would exercise independent judgment in the exclusive interest of the seller? The title company is beholden to the real estate company. The attorney is beholden to the title company. Is there room in that bed for all of them?
I told them they were engaged in the unauthorized practice of law by ordering title insurance. This attorney the title company "hired" was not involved in this transaction at all. My guess is, this was going to be a "Deed and Green." I must have struck a nerve, since this was what I found in my email the next day. (Thay gots gud grammer an' spellin' two!)
"I have attached written conformation for the commission reduction for 1234 Main. Again, I request for title insurance threw a title company, they send it to the Lawyers that own their company. I do this for every closing, there is nothing illegal about the way we get these ordered. If you think so, maybe you should do some research." [sic, sic, sic, sic, and I changed the address]
Oh, young lady, but I have done the research. And this is from a real estate agent's assistant no less.
In Chicago Bar Association v. Quinlan & Tyson, Inc., the Illinois Supreme Court tended to disagree with their assessment:
". . . [W]hen the broker has secured the signatures on the usual form of preliminary contract or offer to purchase, completed by the insertion of necessary factual data, he has fully performed his obligation as broker."
Obviously, these folks know better than the Illinois Supreme Court. To summarize, after the purchase agreement is signed, the real estate broker's job is complete; as in finished, done, rifinito, acabado.
So, if I may be so bold: Sellers and buyers, do your own research, and find an attorney knowledgable in real estate law who is willing to represent only you. Someone who works for the title company that works for the real estate company might not be your best choice.
And please, somebody tell me it is just this particular real estate agent or company that does this, and that it is not common practice in the Peoria area.
We found out that the real estate agent had, against our clients' specific demand, ordered title insurance from its in-house title company. We were told that this in-house title company would be "hiring" one of the attorneys who owns the title company to "represent" our client. Talk about conflict upon conflict of interest. How can any sentient individual argue that this "attorney" would exercise independent judgment in the exclusive interest of the seller? The title company is beholden to the real estate company. The attorney is beholden to the title company. Is there room in that bed for all of them?
I told them they were engaged in the unauthorized practice of law by ordering title insurance. This attorney the title company "hired" was not involved in this transaction at all. My guess is, this was going to be a "Deed and Green." I must have struck a nerve, since this was what I found in my email the next day. (Thay gots gud grammer an' spellin' two!)
"I have attached written conformation for the commission reduction for 1234 Main. Again, I request for title insurance threw a title company, they send it to the Lawyers that own their company. I do this for every closing, there is nothing illegal about the way we get these ordered. If you think so, maybe you should do some research." [sic, sic, sic, sic, and I changed the address]
Oh, young lady, but I have done the research. And this is from a real estate agent's assistant no less.
In Chicago Bar Association v. Quinlan & Tyson, Inc., the Illinois Supreme Court tended to disagree with their assessment:
". . . [W]hen the broker has secured the signatures on the usual form of preliminary contract or offer to purchase, completed by the insertion of necessary factual data, he has fully performed his obligation as broker."
Obviously, these folks know better than the Illinois Supreme Court. To summarize, after the purchase agreement is signed, the real estate broker's job is complete; as in finished, done, rifinito, acabado.
So, if I may be so bold: Sellers and buyers, do your own research, and find an attorney knowledgable in real estate law who is willing to represent only you. Someone who works for the title company that works for the real estate company might not be your best choice.
And please, somebody tell me it is just this particular real estate agent or company that does this, and that it is not common practice in the Peoria area.
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.........
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?
www.thomasmoens.com
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?
www.thomasmoens.com
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