Blog

WHAT

Changes to the Loan and Settlement Disclosure forms and processes are coming.

WHEN

The changes will be effective for transactions where a loan application is taken by a lender on or after August 1, 2015. WHY

Because the Dodd-Frank Act of 2010 mandates the combination of the Truth in Lending Act (TILA) loan disclosures with the Real Estate Settlement Procedures Act (RESPA) Good Faith Estimate and HUD-1 Settlement Statement disclosures.

Researching tax assessment data, determining the correct amount of any current or delinquent taxes due, and confirming the payment of ad valorem and other taxes on property involved in a sale or refinance transaction is an integral part of the closing process. How to obtain this information reliably and expeditiously from the taxing authorities often can be a challenge, but must be undertaken with care and patience. Calculating and pro-rating the proper amount of taxes payable by the seller and the buyer is equally crucial. Either way, simple mistakes in calculating or failing to pay the proper amount of taxes at closing can expose the new owner to threatened foreclosure and loss of title.

Construction of a new home has the potential exposure to unique title pitfalls that may impact the lender and owner.

You may think you are the first property owner when you are constructing or buying a newly built home. However, there were most likely many prior owners of the unimproved land. A title search will uncover any existing liens and a survey will determine the boundaries of the property you’re purchasing.

Q: What is title insurance?

A: An insurance policy–protecting against loss should the condition of title to land be other than as insured.

Over the years, the power of attorney has become ubiquitous, an inexpensive estate planning opportunity for someone with modest means (the Principal) to give another person (the Attorney-in-Fact) the right to act as his or her agent in real estate or financial transactions and other personal decisions.  A power of attorney, if used responsibly, can be an invaluable and legal tool that empowers the Principal by designating the Attorney-in-Fact to make important decisions at a time the Principal is unable to choose or make such decisions.  Use of a power of attorney, however, is not always a panacea for the Principal or ideal for the title insurer who may face increased underwriting risks.  This authority to act is not foolproof, and when it fails or is challenged, disastrous consequences for the Principal and the title insurer can follow.

Exchange Requirement

The first step in a 1031 exchange is to contact a qualified intermediary (such as First American Exchange), who will create exchange documents that must be signed before the relinquished property is transferred.  If these documents are not signed prior to closing, the transaction will be treated as a taxable sale and subsequent purchase, rather than an exchange.  Additionally, the exchange proceeds must not be received by or under the control of the taxpayer or his or her agent, but must be sent directly by the closing agent or buyer to the qualified intermediary.  Once the taxpayer is ready to acquire replacement property, the taxpayer must contact First American Exchange and sign additional exchange documents at or prior to that closing.

A recent decision by the District of Columbia Court of Appeals is bringing new attention to the priority of condominium and mortgage liens. You may have heard the term “concurrent liens” in the past. This term is often used to describe liens on a property that have “equal” priority and lack the ability to prime one another in a foreclosure action. Taxes are most often cited as this example. A foreclosing lender of a mortgage lien must always pay the taxes and cannot cut out or extinguish a previously unpaid tax bill. Similarly, a tax authority cannot cut out or extinguish a mortgage lien when a tax lien is foreclosed. Therefore the liens are called “concurrent” because they have equal priority.

There are two types of title insurance: owner’s title insurance, called an Owner’s Policy, and lender’s title insurance, called a Loan Policy. Most lenders require a Loan Policy when they issue you a loan. The Loan Policy is usually based on the dollar amount of your loan. It only protects the lender’s interests in the property should a problem with the title arise. It does not protect the buyer. The policy amount decreases as you pay down your loan and eventually disappears as the loan is paid off.

The closing itself takes about one hour and tends to be rather busy with much to be done and many details to be coordinated. During the closing, numerous documents must be explained and signed, funds must be received and disbursed, last minute questions on the condition of the property and operation of systems must be answered and the keys must be delivered. In many instances, buyers need to coordinate settlement with the arrival of their movers and cannot afford any delays. Choosing a reputable, experienced title company is crucial to a smooth settlement.

You Pay for What You Get.

Your purchase of a title insurance policy is required by your lending institution. Today’s nationwide mortgage practices have made title insurance a necessary part of the residential closing and escrow process in most cases in Ohio.