You have a right, under Illinois law, to select any title agency you like. Simple as that. Boiled down: No firm which may make a loan secured by an interest in real estate with a single family residence shall require, either directly or indirectly that any borrower obtain title insurance through a particular insurer, agent, or broker. Here it is in its entirety:
(815 ILCS 505/2T) (from Ch. 121 1/2, par. 262T) Sec. 2T. No person, firm, corporation, partnership or association which may extend credit or make a loan secured by an interest in real estate which is or is to be improved with a single family residence or any residential condominium unit occupied or to be occupied as a principal residence by either the borrower as an individual or, if the borrower is the trustee of a trust, by a beneficiary of that trust, shall require, either directly or indirectly, as a condition precedent to making such loan or extending such credit (a) that any seller, borrower, mortgagor or debtor to whom such money or credit is extended negotiate, obtain or contract for title insurance through a particular insurer, agent or broker; or (b) that any seller, borrower, mortgagor or debtor pay for a title commitment or policy other than a title commitment or policy issued at the request of the seller, borrower, mortgagor or other debtor. Nothing contained in this Section shall be construed to prohibit the lender from requiring title insurance as a condition of making a loan secured by an interest in real estate. The lender may refuse to make the loan or may reject the title insurer or the proposed policy if the lender believes on reasonable grounds that the title insurance will afford insufficient financial protection to the lender or insufficient protection as defined under regulations administered by the Federal Home Loan Bank Board. Nothing contained in this Section shall be construed to affect any provision in a contract between a seller and buyer of real estate with respect to the selection of title insurance. (Source: P.A. 85‑1209; 85‑1351; 85‑1440.)
Certainly makes me wonder about lenders who, when faced with this statute, still refuse to let their borrowers select their own agent. What exactly do they have to hide? Are they receiving illegal kickbacks? Is their title agent a little "flexible" with the rules? Something even more nefarious? There are a few lenders in this area who have refused to allow borrowers to choose their own title agent. I wonder how much they will enjoy defending an Illinois Consumer Fraud and Deceptive Business Practices Act claim? Please call me if your lender has problems understanding this law. Or better yet, find a new lender.
www.thomasmoens.com
Wednesday, February 6, 2008
Tuesday, February 5, 2008
Deed and Green
Deed and green. Sounds like someone who works to improve the environment. But it is actually a pejorative term to describe what lazy attorneys do, or rather don't do, for their clients. In the olden days in Illinois, the declarations of value required when selling real estate were green. Hence they were called "green sheets." So "deed and green" refers to an attorney who does nothing but prepare a deed and green sheet for a seller of real estate--no representation, no attending closing, nothing. Seriously, all they do is fill in the blanks on a couple of prepared documents. This is not representation. This is providing secretarial services. In Illinois, there is an ethics opinion which states it is unethical for an attorney to prepare a deed and delegate all other responsibilities of the real estate transaction to a non-attorney. Here is a snippet of that opinion:
Opinion No. 94-1 July, 1994
Topic: Unauthorized Practice of Law; Conflicts of Interest; Limitation of Scope of Representation Digest:
A lawyer aids in the unauthorized practice of law, and may violate rules pertaining to confidentiality, conflicts, and the duty to communicate with and explain matters to a client, by limiting his role in a real estate transaction to the drafting of documents and delegating the gathering and dissemination of information, the resolution of problems arising from such the documents drafted, and other problems which may arise at the closing, to the real estate broker.
Ref.: Illinois Rules of Professional Conduct, Rules 5.5(b), 1.4(b), 5.4(c)
ISBA Opinion on Professional Conduct, Nos. 90-35 and 87-2
If you would like to read the rest, just let me know.
So why would an attorney do this? Are they lazy? Are they trying to minimize risk? Sucumbing to the demands of referring real estate agents? I have no idea. I am sure, however, that if a problem arises, the disciplinary commission and the attorney's malpractice carrier will not be amused with any arguments that the attorney felt his or her responsibility ended at preparing the deed.
In our area, there are only a couple of bad apples I know of who pull the "deed and green" routine, but in other parts of Illinois, with the exception of the Chicago area, it is more common. And in Iowa? Oh my goodness! You certainly would not guess Iowa prides itself on keeping attorneys involved in real estate transactions. We are involved in transactions throughout the entire state, and I am constantly shocked at how little attorneys do in "representing" their clients. Outside of our community, you are more likely to see Sasquatch on your way home from work this morning that you are to find an attorney at a closing.
So, come on "deed and green" attorneys; either represent your clients or don't represent your clients. Stop being satisfied with doing only part of your job. And sellers, if you can't find an attorney who will actually represent you, don't pay for someone to complete a couple of simple documents for you. Keep looking for someone who is willing to actually do his or her job. We are out there! And if there really is not one attorney in your community willing to represent you (and sadly, there are places like that), fill in the blanks yourself and save the $50-$100. All the documents you need are easily available on the Internet.
Opinion No. 94-1 July, 1994
Topic: Unauthorized Practice of Law; Conflicts of Interest; Limitation of Scope of Representation Digest:
A lawyer aids in the unauthorized practice of law, and may violate rules pertaining to confidentiality, conflicts, and the duty to communicate with and explain matters to a client, by limiting his role in a real estate transaction to the drafting of documents and delegating the gathering and dissemination of information, the resolution of problems arising from such the documents drafted, and other problems which may arise at the closing, to the real estate broker.
Ref.: Illinois Rules of Professional Conduct, Rules 5.5(b), 1.4(b), 5.4(c)
ISBA Opinion on Professional Conduct, Nos. 90-35 and 87-2
If you would like to read the rest, just let me know.
So why would an attorney do this? Are they lazy? Are they trying to minimize risk? Sucumbing to the demands of referring real estate agents? I have no idea. I am sure, however, that if a problem arises, the disciplinary commission and the attorney's malpractice carrier will not be amused with any arguments that the attorney felt his or her responsibility ended at preparing the deed.
In our area, there are only a couple of bad apples I know of who pull the "deed and green" routine, but in other parts of Illinois, with the exception of the Chicago area, it is more common. And in Iowa? Oh my goodness! You certainly would not guess Iowa prides itself on keeping attorneys involved in real estate transactions. We are involved in transactions throughout the entire state, and I am constantly shocked at how little attorneys do in "representing" their clients. Outside of our community, you are more likely to see Sasquatch on your way home from work this morning that you are to find an attorney at a closing.
So, come on "deed and green" attorneys; either represent your clients or don't represent your clients. Stop being satisfied with doing only part of your job. And sellers, if you can't find an attorney who will actually represent you, don't pay for someone to complete a couple of simple documents for you. Keep looking for someone who is willing to actually do his or her job. We are out there! And if there really is not one attorney in your community willing to represent you (and sadly, there are places like that), fill in the blanks yourself and save the $50-$100. All the documents you need are easily available on the Internet.
Friday, February 1, 2008
Good for her!
One of the reasons many of the mortgage fraud schemes can flourish is because of complicity, or at least indifference, of a very few appraisers. Just a few bad apples make it very difficult for appraisers with a strong moral compass to succeed. A California appraiser was "blacklisted" by Washington Mutual because she refused to lie about market conditions. This is pretty much the same problem legitimate closing agents and title companies suffer through every day. If I had a nickel for every "client" or "deal" we lost because we were not "flexible" enough.... Well, it would be a nice big pile of nickels. Of course, who need clients like that, I know, I know, but it sure would make life and business easier if we all played by the same rules.
Here's the whole story:
http://www.chicagotribune.com/classified/realestate/news/chi-harney_re_01-27jan27,0,5983594.story
Good luck Jennifer! We're all rooting for you.
Here's the whole story:
http://www.chicagotribune.com/classified/realestate/news/chi-harney_re_01-27jan27,0,5983594.story
Good luck Jennifer! We're all rooting for you.
Thursday, January 31, 2008
Your check register needs to match the HUD-1
Isn't that a simple rule? But for some reason, many closing agents and title companies just can't quite seem to follow this rule. When I look at a title/closing/escrow company's trust or escrow account check register for a particular file, it needs to match exactly what is on the HUD-1 Settlement Statement. So, if the seller is getting $23,000 on the settlement statement, your check register better show a check to the seller for $23,000. Not only that, but the names need to match. If the settlement statement says "Repairs to Smith Construction," that check best have gone to Smith Construction, and not back to the buyer or seller. Likewise, the seller's proceeds need to go to the seller, not to the seller AND the buyer, as some of the "flexible" closing agents will do.
The buyer and seller sign under this language on the HUD-1 Settlement Statement:
I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief, it is a true and accurate statement of all the receipts and disbursements made on my account or by me in this transaction.
The closing agent signs this:
The HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused or will cause the funds to be disbursed in accordance with this statement.
Those statements are pretty simple too, aren't they? What often happens is that the purchase agreement says that the seller will pay $3,000 of the buyer's closing costs (we won't discuss the fact that they have artificially inflated the purchase price by that $3,000). Sometimes, the closings costs don't amount to $3,000. Sometimes, the lender will not allow the seller to pay certain closing costs. Sometimes, the buyer would end up getting money back if the buyer gets the full $3,000, and the lender does not allow the buyer to get a check at closing. Doesn't matter.
Let's say the lender, for whatever reason, only allows the buyer to receive a credit for $2,000 of the $3,000 seller paid closing costs. The loan officers and real estate agents will beg, plead, and argue that you should give the seller $22,000 of the $23,000 shown on the settlement statement, and give the other $1,000 to the buyer. When the real estate agents and the loan officer are telling you that it's not fair if the buyer doesn't get the full $3,000, that all the other title companies in town will cut checks which differ from the settlement statement, go back and read what you just signed:
The HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused or will cause the funds to be disbursed in accordance with this statement.
And then ask yourself if their business is worth damaging your community, hurting our economy, and committing mortgage, RESPA, mail, and wire fraud.
www.thomasmoens.com
The buyer and seller sign under this language on the HUD-1 Settlement Statement:
I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief, it is a true and accurate statement of all the receipts and disbursements made on my account or by me in this transaction.
The closing agent signs this:
The HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused or will cause the funds to be disbursed in accordance with this statement.
Those statements are pretty simple too, aren't they? What often happens is that the purchase agreement says that the seller will pay $3,000 of the buyer's closing costs (we won't discuss the fact that they have artificially inflated the purchase price by that $3,000). Sometimes, the closings costs don't amount to $3,000. Sometimes, the lender will not allow the seller to pay certain closing costs. Sometimes, the buyer would end up getting money back if the buyer gets the full $3,000, and the lender does not allow the buyer to get a check at closing. Doesn't matter.
Let's say the lender, for whatever reason, only allows the buyer to receive a credit for $2,000 of the $3,000 seller paid closing costs. The loan officers and real estate agents will beg, plead, and argue that you should give the seller $22,000 of the $23,000 shown on the settlement statement, and give the other $1,000 to the buyer. When the real estate agents and the loan officer are telling you that it's not fair if the buyer doesn't get the full $3,000, that all the other title companies in town will cut checks which differ from the settlement statement, go back and read what you just signed:
The HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused or will cause the funds to be disbursed in accordance with this statement.
And then ask yourself if their business is worth damaging your community, hurting our economy, and committing mortgage, RESPA, mail, and wire fraud.
www.thomasmoens.com
Wednesday, January 30, 2008
Fake second mortgages
Why would anyone give a "fake" second mortgage? Here's how the scam works. Let's say the seller wants $100,000 for their house. The buyer does not have a down payment, and does not want to pay mortgage insurance. The buyer, seller, and sometimes the real estate agent, loan officer, and title company all conspire to increase the purchase price to $120,000 with the seller "financing" $20,000. The $20,000 seller financing is shown on the settlement statement. There is an actual note and mortgage signed by the buyer at closing evidencing the $20,000 debt. In extreme cases, the title company will even record the mortgage (though most do not).
So far, this is completely legitimate. What happens next though, is that the mortgage is immediately released, and the note cancelled. I have actually heard tell of the president of a big title company in our area who actually makes a big show of tearing up the note at closing.
As soon as that is done, it becomes a $20,000 gift from the seller to the buyer. And it becomes mortgage and RESPA fraud. The end lender is led to believe that the purchase price is actually $120,000, and that the buyer will be making payments to the seller on the $20,000. The truth is that the house is only worth $100,000 and the buyer has absolutely no investment in the property. Not really any different that under the table kickbacks, except that they put it on the table first.
www.thomasmoens.com
So far, this is completely legitimate. What happens next though, is that the mortgage is immediately released, and the note cancelled. I have actually heard tell of the president of a big title company in our area who actually makes a big show of tearing up the note at closing.
As soon as that is done, it becomes a $20,000 gift from the seller to the buyer. And it becomes mortgage and RESPA fraud. The end lender is led to believe that the purchase price is actually $120,000, and that the buyer will be making payments to the seller on the $20,000. The truth is that the house is only worth $100,000 and the buyer has absolutely no investment in the property. Not really any different that under the table kickbacks, except that they put it on the table first.
www.thomasmoens.com
Tuesday, January 29, 2008
Corporations selling real estate
Since the Quad Cities is a community which is split into two states, we often have "jurisdictional" problems. One common problem is when a corporation or LLC sells real estate in a state in which it is not authorized to do business. In other words, an Iowa corporation sells real estate in Illinois without being authorized to do business in Illinois.
In Illinois a corporation does not need to be authorized to do business in Illinois if all it does is buy and sell real estate. Buy it and sell it. That's it. As soon as it does anything to the property, the rules change. The problem arises when that corporation "transacts business" in Illinois. For example, if Iowa Property, Inc. buys a lot in Illinois, then builds a house on that lot, Iowa Property, Inc. needs to be authorized to do business in Illinois. Similarly, if Iowa Property, Inc. buys a house or building in Illinois and then fixes it up, it also needs to be authorized to do business in Illinois. In both of these examples, Iowa Property, Inc. is transacting business in Illinois and therefore needs to be authorized to do business in Illinois.
If Iowa Property, Inc. is not authorized to do business in Illinois when it buys property, improves it, and then sells it, all of the franchise tax, income tax, and registration fees it would have owed had it been paying its fair share become liens against any real estate it owns in Illinois. So essentially, if an attorney or title company allows the Iowa corporation to sell this real estate, the buyer could end up being responsible for this lien.
I have had numerous "stern discussions" with Iowa attorneys regarding this. I will never let my buyer-client purchase property from a corporation not authorized to do business in Illinois, when it should have been authorized to do business in Illinois. It is a simple enough process to check--www.cyberdriveillinois.com will tell you whether or not a corporation or LLC is authorized to do business in Illinois. Unfortunately, I see attorneys and title companies allow this to slide by all the time. They succeed in failing their clients.
In Illinois a corporation does not need to be authorized to do business in Illinois if all it does is buy and sell real estate. Buy it and sell it. That's it. As soon as it does anything to the property, the rules change. The problem arises when that corporation "transacts business" in Illinois. For example, if Iowa Property, Inc. buys a lot in Illinois, then builds a house on that lot, Iowa Property, Inc. needs to be authorized to do business in Illinois. Similarly, if Iowa Property, Inc. buys a house or building in Illinois and then fixes it up, it also needs to be authorized to do business in Illinois. In both of these examples, Iowa Property, Inc. is transacting business in Illinois and therefore needs to be authorized to do business in Illinois.
If Iowa Property, Inc. is not authorized to do business in Illinois when it buys property, improves it, and then sells it, all of the franchise tax, income tax, and registration fees it would have owed had it been paying its fair share become liens against any real estate it owns in Illinois. So essentially, if an attorney or title company allows the Iowa corporation to sell this real estate, the buyer could end up being responsible for this lien.
I have had numerous "stern discussions" with Iowa attorneys regarding this. I will never let my buyer-client purchase property from a corporation not authorized to do business in Illinois, when it should have been authorized to do business in Illinois. It is a simple enough process to check--www.cyberdriveillinois.com will tell you whether or not a corporation or LLC is authorized to do business in Illinois. Unfortunately, I see attorneys and title companies allow this to slide by all the time. They succeed in failing their clients.
Friday, August 10, 2007
Illinois Deed Provider, Inc.
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
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
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