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Source of Title Blog : Risk, Liability and Claims

Email Fraud in Real Estate Transactions is on the Rise
by Robert Franco | 2017/05/14

A scheme that targets real estate transactions can be devastating to potential homebuyers.  Such scams are on the rise and changes intended to protect settlement professionals may have made matters worse for many innocent, unsuspecting consumers.

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Categories: Crime, Escrow/Funding, Legislation, Ohio Legislation, Risk, Liability and Claims, Title Industry

Source of Title Blog :: 2 comments ::

Why the cost of Closing Protection Coverage has increased in Ohio
by Robert Franco | 2013/05/02

Effective yesterday, the cost to consumers for closing protection coverage has increased by $5 for each covered party.  Public records obtained from the Ohio Department of Insurance show that the change was largely due to concerns that losses caused by defalcations are uncertain and closing instructions are evolving.  A Demotech report recommended the premium increase.

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Categories: Defalcations, Risk, Liability and Claims, Title Industry

Source of Title Blog :: 2 comments ::

Is That Mortgage Open-Ended?
by Robert Franco | 2011/12/27

I got a call from a client this morning asking if a mortgage we showed on a title search was open-ended.  It is an important question.  When we do a search, we report what we find.  If the mortgage is open-ended we write "Open-Ended Mortgage."  If it is not, we simply write "Mortgage."  But, this reminded me of an email I received a few months ago.  It seems that an abstractor did not indicate whether the mortgage was open-ended or not.  As it turned out, it was open-ended and there was a claim on the title policy because of the discrepancy. The question in the email I received was simply "who is responsible for the claim?"

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Categories: Abstractors, E&O Insurance, Risk, Liability and Claims

Source of Title Blog :: 15 comments ::

Are Quit-Claim Deeds Really Worthless in Texas?
by Robert Franco | 2011/06/07

I was stunned when I got a call from another Ohio attorney telling me that he was told by a title insurer that real estate he was dealing with in Texas was uninsurable because there were quit-claim deeds in the chain of title. He said "they treat them as if they don't exist." It didn't make any sense to me, so I did a little digging. I think I understand the logic of the insurers' position, but it seems like a huge problem that Texas really needs to address.

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Categories: Abstractors, Attorneys, Risk, Liability and Claims, Texas Legislation, Title Problems

Source of Title Blog :: 4 comments ::

The North Jersey Practice
by Robert Franco | 2009/08/06

When the buyers hire their attorney to represent them in a real estate purchase and he absconds with their money, who is liable for the loss?  According to the Appellate Division of the Superior Court of New Jersey, the title company is on the hook.  The Court refers to this as an illustration of the "north Jersey practice."  Perhaps it's time for title insurers in north Jersey to rethink their closing procedures. 

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Categories: Attorneys, Defalcations, Escrow/Funding, Risk, Liability and Claims, Title Problems

Source of Title Blog :: 7 comments ::

Fidelity Company Sues Attorney For Relying On Its Commitment
by Robert Franco | 2009/06/18

Chicago Title, one of the Fidelity companies, recently filed a lawsuit against an attorney in New Jersey claiming that it was malpractice for him to rely on a title commitment he ordered for his client in the course of representing him in a purchase transaction.  I guess nothing in this industry should surprise me anymore, but I had to read this article twice just to make sure I wasn't missing something.  What does it say for the title industry when the nation's largest underwriter, controlling about 45% of the market share, sues an attorney who ordered its product for relying on its accuracy?

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Categories: Attorneys, Risk, Liability and Claims, Title Problems

Source of Title Blog :: 3 comments ::

The Entire System Of Property In This Country Might Collapse
by Robert Franco | 2009/06/15

The real drama of a Florida couple leads to a pretty bizarre court decision that should have most of us in the title business scratching our heads.  The MacLeods purchased a 70 acre farm and later found themselves in foreclosure over a lien against the prior owner.  Orix Financial had recorded its lien in 1996, but the county clerk never indexed it.  Thus, it was not discovered by the MacLeods, or their title agent... until the foreclosure action was instituted in 2006.

The Third Circuit ruled that the MacLeods' ownership rights trumped Orix's lien, but the First District Court of Appeals overturned the decision. The Court of Appeals stated that the MacLeods' "remedy, if any, will lie against the title insurer or abstractor or against the clerk of the circuit court." 

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Categories: Abstractors, Risk, Liability and Claims, Title Problems

Source of Title Blog :: 7 comments ::

Who Should Pay For The Owner's Policy?
by Robert Franco | 2008/04/15

I had an interesting discussion with a friend and colleague regarding the differences in local custom regarding who pays for the owner's policy of title insurance. Around here, it is customary for the buyer to pay for his policy, if he wants one. A little further south, it is customary for the seller to provide an owner's policy to the buyer. These differences have become a part of the standard sales contracts used by the boards of Realtors. I have even heard that in some areas, the title premium for the owner's policy is split between the buyer and seller. With the variances in local customs, I thought it would make for an interesting discussion - what is the custom in your area and which makes the most sense?

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Categories: Risk, Liability and Claims, Title Industry

Source of Title Blog :: 8 comments ::

Requiring Closing Protection Coverage
by Robert Franco | 2008/04/08

In Ohio, title agents now must offer Closing Protection Coverage (CPC) to all parties to a transaction - lender, buyer/borrower and seller. Basically the CPC indemnifies the covered parties for the agent's theft, misappropriation, fraud, or any other failure to property disburse funds and failure to comply with written closing instructions when agreed to by the agent. It is an awkward form of insurance to sell because the agent is requiring the covered party to pay a fee to be protected against the agent's misfeasance. The cost is $35 for the lender, $50 for the seller, and $15 for the buyer/borrower.

But what happens if a party to the transaction declines the CPC, but still requires the agent to sign its closing instructions? Presumably, the party would have a tough time seeking indemnification from the underwriter in the event of loss that would have been covered under the CPC because they expressly waived the coverage. Is the agent still on the hook? Most likely if the agent has embezzled from his escrow account he is not all that concerned with the liability he may incur to a lender. Let's face it, if you are willing to commit a felony, you probably don't have much regard for civil liability. But, what about an unintentional mishandling of funds, negligently disbursing a large sum to the incorrect party, for example?

In the case of an agent's negligence, resulting in a short-fall in his escrow account, the agent may very well be the only source of recovery by an injured party. If declining CPC prevents recovery from the underwriter, the agent may still be liable to third parties for his negligence - even if he is acting in his capacity as an agent for the underwriter.

Thus, it would seem to me that it would be a good idea to require anyone providing closing instructions to purchase CPC before agreeing to comply with them. Though I believe that it was mainly the issue of fraud by title agents that promulgated this rule in Ohio, negligence is still a possibility. Honest agents do not worry about losses due to their own fraud, though the fraud of an employee should still be a concern. If an underwriter can escape liability when the would-be covered party declines the coverage - maybe the title agents should consider requiring CPC when provided with closing instructions that could result in liability.

Just out of curiosity, does anyone require lenders, or other parties providing instructions, to purchase CPC?

Robert A. Franco

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Categories: Risk, Liability and Claims, Small Agents

Source of Title Blog :: 2 comments ::

Closing Without Funds
by Robert Franco | 2008/04/04

I received an interesting email regarding Closing Protection Coverage (CPC) in Ohio. A buyer wanted to know if "Closing Protection Coverage covers a case where a purchase closes but the lender fails to fund the loan." Funding seems to be a bigger problem these days. Usually, the funding is just late... but I have heard reports of lenders who have lost their sources of capital and have been unable to fund. From the email I received, it sounds as though this lender was in the latter category.

The lender was a small broker/lender who was also the mortgagee. The closing was moved from 10:30am to 1:30pm because the wire was originating from California. The wire, however, was never received. Apparently the lender blamed it on a "credit exception" and said that they would need 24 to 48 hours to clear it up and send the wire.

It was at this point that I received the email asking if the CPC provided any protections if the loan was never funded. "Do you know if there is anything I can do if it doesn't fund?" He asked. His settlement agent seemed to think that the CPC would provide some protection if the lender did not fund.

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Categories: Escrow/Funding, Risk, Liability and Claims, Small Agents, Title Industry

Source of Title Blog :: 2 comments ::

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Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco



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