‘Til Death Do Us Part

A goal for some marriages, a strong commitment for others, or maybe just words for some: “‘Til Death Do us Part.” Everyone that has ever been married remembers the day they were married or decided they wanted to be married. Everything coming up roses, the warmth of the sunshine, love in the air,…but then a few months roll by and things become a little complicated.

Unfortunately, marriage can become complicated in real estate transactions as well, but the good news is: you won’t need marriage counseling to resolve the issues. I know you are wondering how marriage can be complicated to the Texas title insurance industry. If the couple is married and a property is purchased, they each have a vested interest in the property. Where’s the problem? Well, there may not be a problem in that scenario, but what if the couple is common law married? Does that create a problem? Is the property purchased as two individuals or is the property purchased as a married couple?

In the State of Texas there are two types of marriages recognized: (1) Formal marriage—where a marriage license is obtained and (2) Informal—also known as common law marriage. Common law marriage has been recognized in Texas since 1847. Tarpley v. Poage’s Adm’r, 2 Tex. 139, 149 (Tex. 1847). Common law marriage is an unavoidable issue that needs to be reviewed when issuing a Texas title insurance policy.

For example, in a refinance transaction, the borrower is asked to complete a marital status affidavit, and he marks himself as “single.” However, the warranty deed or conveyance document shows he purchased the house as “a married man.” After investigating the situation, the Texas title company finds that he had a common law marriage to Betty Sue, but she left him 2 years ago. This matters!! Betty Sue, as his common law wife, has a marital interest in the house. At this point, the file would need to go to the Texas title insurance underwriter to be reviewed for further instruction.

If you think your client may have been in a common law marriage, and they decided to X the “til death do us part” all together, be sure and contact your Texas title company with any questions—and definitely let your Texas title company know in advance so any possible issues can be dealt with before closing.

How To Handle Proper Disclosure of the Texas Title Insurance Premium and Other Title Fees on the New Good Faith Estimate

The lender‘s Texas title insurance premium is part of the new GFE’s Block 4—Title services and lender‘s title insurance. The difference between the new and old GFE is that the new GFE requires the mortgage originator to lump in the Texas title insurance premium along with any fees for title searches, examinations, endorsements and all charges associated with the title services and settlement (closing) agent services as one single cost, whereas the old GFE required an itemization of all of these fees.

Within this lump sum cost, a mortgage originator should include the Texas title company’s delivery fees, notary fees and settlement fees since these fees are included in the definition of title services. The term “title services” is defined to include any service involved in the preparation and issuance of the title insurance policies. See 24 C.F.R. § 3500.2.

It is common practice for the title company to charge both the borrower and seller a fee for conducting the settlement. Only the charge to the borrower must be included in the total for Block 4 of the GFE. Charges that the seller pays as a matter of common practice and experience are not disclosed on the GFE.

However, the owner’s Texas title insurance and recording fees to the county will still be listed separately from the “Title services and lender‘s title insurance” lump sum cost.

Is this simpler for the borrower to understand than the way in which the old GFE addressed title fees? There is an argument that it makes Texas title insurance fees more opaque to the borrower. Come January 2010, these arguments will not necessarily matter anymore because the new GFE will be the mandated method of disclosure.

Deceased Persons on Title: When Death Seems to Haunt You

You may think it is coincidence that it is October, the wind is chilled, and as you get ready to purchase a house, the current owner’s dead Uncle Albert from five generations ago holds up your closing. Yes, October is the haunting season, but it’s really not a coincidence. Dead ancestors regularly hold up closings.

Apparently, no one dealt with Uncle Albert’s death because the house you are buying has been gifted and kept in the family for the last 100 years. Of course, many people in Texas did not use wills and probate proceedings in Uncle Albert’s day, and the only information the family has is that he was hanged for running with Jesse James.

Cool that he ran with Jesse James, but limited information is no good. How can you ever get title to the property? How could you ever have a title company issue a Texas title insurance policy on it? In this instance, an attorney or title company is called in to determine who the heirs of Uncle Albert are. Yes, the family tree has to be compiled from five generations ago and brought forward to the present. More than likely, there will be more dead ancestors than just Uncle Albert whose estates the house has passed through, and this will slow your closing even more. The more deaths without wills, the more affidavits of heirship have to be prepared. This can be an extremely lengthy process, and you may find the title of your dream home haunted by more ghosts than just Uncle Albert, lingering until dealt with accordingly.

But don’t fear because the ghosts can be put to rest! We have an attorney on our staff and an experienced escrow officer to stop the haunting. If you have an Uncle Albert haunting you, just call us. We can help you get title to the property and have a Texas title insurance policy issued to protect you from any other “haunting.”

Hey Mortgage Lenders and Mortgage Brokers! Do You Know When You Are No Longer Bound To Your Good Faith Estimate?

Under the new RESPA regulations, the loan originator is bound, within the tolerances, to the settlement charges and terms listed on the GFE provided to the borrower unless a new GFE is provided prior to settlement. If a loan originator provides a revised GFE consistent with the new regulations, the loan originator must document the reason that a new GFE was provided. Loan originators must retain documentation of any reasons for providing a new GFE for no less than three years after settlement. See 24 C.F.R. § 3500.7(f) at http://bit.ly/QRYSY. But when can you provide a new GFE?

According to the new RESPA FAQs updated October 7, 2009 (pgs. 13–14) at http://bit.ly/msSSY, HUD lays out the following scenarios indicating when a loan originator is no longer bound by the GFE provided to the borrower:

i) A mortgage broker issues a GFE that a lender does not accept and the lender does not receive the application within three days of the date the broker received the application.
A: This does not constitute a changed circumstance.

ii) If a GFE is issued without a property address, the later identification of a property address.
A: If a loan originator issues a GFE without identifying a property address, the subsequent identification of the property address is not considered a changed circumstance.

iii) The borrower does not proceed to closing quickly upon final approval or does not act diligently in providing information to the lender.
A: The particular facts of each situation must be examined to determine if the facts constitute a changed circumstance.

iv) GSE, FHA or Mortgage Insurance program changes.
A: This could constitute a changed circumstance if the loan originator did not have notice of the GSE, FHA or other mortgage insurance program change prior to the issuance of the GFE.

v) The property address provided by the applicant, turns out to not be the correct, legal address.
A: This could constitute a changed circumstance.

vi) After the GFE is issued, parties are added to or removed from title or the property is moved into or out of trust.
A: These situations could be considered changed circumstances.

vii) During or as part of the transaction, it is determined that the property use may change, such as from owner-occupied to rental property.
A: This could constitute a changed circumstance. It should be noted that business purpose loans are not covered by RESPA. See 24 C.F.R. §3500.5.

viii) After the GFE is issued, it is determined that a party will be using a POA to sign, which may require additional work and additional fees.
A: This could be considered a changed circumstance.

ix) Credit policy is required to change after the GFE is issued due to regulatory changes such as fees charged by government agencies for recording fees or taxes change after the GFE is issued.
A: This could constitute a changed circumstance if the loan originator did not have notice of the regulatory change prior to the issuance of the GFE.

x) The loan does not close by the close date in the original Purchase Agreement or Construction Agreement provided to the lender.
A: The particular facts of each situation must be examined to determine if the facts constitute a changed circumstance.

xi) The vendor originally selected to perform a settlement service goes out of business or stops offering the service.
A: The particular facts of each situation must be examined to determine if the facts constitute a changed circumstance.

xii) AVMs are commonly used for the property type and loan amount requested, but the AVM request comes back with a ―no hit, necessitating the use of a more expensive valuation method.
A: This could constitute a changed circumstance.

xiii) After the GFE is issued, it is determined that an additional service such as an additional pest, structural or other inspection, upgraded appraisal, certification, survey or other requirement is required by the loan originator in connection with the transaction.
A: This could constitute a changed circumstance.

xiv) The borrower‘s credit score changes.
A: This could constitute a changed circumstance.

xv) A mortgage broker issues a GFE based on one lender‘s loan products and origination fees, but places the loan with a different lender.
A: No, this would not constitute a changed circumstance.

Owelty Liens: An Impediment to Closings & Issuing Texas Title Insurance

Since it is October and all the ghouls are out, why not talk about owelty liens? For many, the word is chilling and, at the least, a nuisance to most people in the real estate and mortgage industries that can prevent your closing. The most common use for an owelty lien is in the instance of a divorce. I know in a perfect world, we would like to think that a divorce decree is the final say on the division of the property, but in fact, it does not. It gives us direction and an idea of how the property should be divided, but in most cases, there are several steps to be taken to clear an owelty lien before we at the title company can close your loan and issue a Texas title insurance policy. For example, a divorce court has no authority to divest a party of title to separate real estate. Eggemeyer v. Eggemeyer, 554 S.W.2d 137 (Tex. 1977). Regardless of the judge’s order awarding the property, if a conveyance document has not been filed, the property will still show vested in both parties. However, the judge may award the person divested from title an amount of money for their interest/equity in the property. Such award would allow the divested individual to file an owelty lien in the land records.

Unfortunately, such recorded owelty lien is often looked over when winding up a divorce and obtaining a release is forgotten. This is the reason owelty liens are so scary. The owelty lien resurfaces only when the divorce decree is reviewed by the title company when preparing to issue a Texas title insurance policy. At that point, there are several options to take in clearing the issue—oftentimes involving contact with the divorced spouse. Hence, clearing an owelty lien can slow down the closing process.

If your client mentions a divorce at the time the loan application is taken, a good habit to start would be asking for a copy of the complete divorce decree upfront. Once you receive the divorce decree, send it to the title company for review so they can make sure there will be no delays in closing and issuing a Texas title insurance policy. A little digging upfront will save a lot of time in the end.

Is your Power of Attorney Powerless?

It’s down to the wire and your loan is ready to close. Your title is ready, your underwriting conditions are met, and the appraisal and survey have been approved. This is it! You are finally going to close this transaction. You call your borrower to schedule the closing only to find that one of the borrowers decided to take a two month vacation to Zimbabwe! Of course, the lock expires in three days….what do you do? The light bulb goes off in your head. I will use a Power of Attorney!

As brilliant as a Power of Attorney sounds as your silver bullet solution at this point, there is still a lot that goes into the use of one. The mortgage underwriter has to review the POA, but also the title company has to review and approve the POA as well. It seems the latter part is overlooked 99.9% of the time, so please keep in mind that surprising an escrow officer with the use of a POA will stop your closing!

Today title insurance company underwriters examine everything a little closer, and it makes the rules for approval a little tighter on a POA. For example, a medical power of attorney may negate a letter from a medical doctor stating that the patient is competent enough to execute the POA. Or a military POA may require a notary by a commissioned officer and a letter stating the principal is alive and well. If a Power of Attorney is used in a home equity transaction, it has to be specific to the transaction detailing lender, loan amount, etc.

If you are using a power of attorney, have the title company review it IN ADVANCE and BEFORE closing to avoid delays; otherwise your Power of Attorney may be deemed powerless!