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The future of title searching and abstracting
by Dave Pelligrinelli | 2010/10/05
The conspicuous headlines for the past few weeks have been about the mortgage assginment crisis. For industry professionals who have been paying attention, this is old news, since it has been talked about for years. As far back as 6 months ago you read here that the issue was "blowing up."
Professional title searchers should not be distracted by the noise in the mortgage industry. Over the next few years, the abstracting industry will change forever. Remember outsourcing and offshoring? It is back with a vengeance. First American is still increasing its offshore title processing capacity, and Fidelity announced today that it currently has 800 title searchers in India, with plans to increase that to 1800 next year. That is one of the largest groups of associated abstractors in the world, and it is not going anywhere.
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Is it a valid mortgage or not?
by Dave Pelligrinelli | 2010/02/06
Property title claims, and the process of title abstracting are based on the mechanism of "notice." Ownership, mortgage interest, and claim of lien can only attach to a property when there is notice to a person. This notice can take the form of actual notice and constructive notice. Properly executed documents are the most common form of constructive notice, under the premise that a document recorded in the land records is available for any interested party to make them self aware of.
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Title errors from the housing bubble are starting to emerge
by Dave Pelligrinelli | 2010/01/25
The title errors from the housing bubble starting to become evident. In two cases this month, the issue of broken chains of mortgage assignments are creating questionable ownership rights. The routine practice of securitized loan instruments created a number of methods of transferring mortgagee interests, some without specific recording. Nominee trustees and mechanisms such as the Mortgage Electronic Registration System (MERS) were intended to streamline the process. Instead, these methods created confusion and ambiguity. It is becoming more common that a foreclosing lender realizes that their interests is not clear in the land records, and rushes to record an assignment to them self at the last minute. In some cases it comes too late.
Just this week, in Massachusetts, a judge invalidated a foreclosure because the assignment was recorded after the foreclosure was commenced. Any reasonably informed title abstractor would know this would be a problem, but some attorney went ahead with it anyway. "First in time, first in right" is one of the basic premises of records priority in searching.
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Real estate title issues in the next decade
by Dave Pelligrinelli | 2009/12/31
The past decade, from 2000 to 2009, has seen the most developments, and activity in the real estate industry; and by extension the title industry. After a slow escalation in volume which started in 1999, the first few years of the decade exploded into a frenzy of activity for those who search, examine, insure, or process title work. Only a handful of years later this trend reversed course, reverting back to the capacity of the 90's, and lower.
It wasn't just the volume that changed during that time. The nature of the activity, and the structure of the transactions taking place did not resemble the landscape of the past decades, even the past century. The history of the '00 decade will affect real estate records, title searching, and the status of properties forever. For 50 years or more, those involved in the business of dealing with property title will be cursing this decade for its complicating of title records.
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Misleading foreclosure records
by Dave Pelligrinelli | 2009/07/20
It has been relatively well-known that many municipalities do not consider the sale prices on foreclosures when calculating property values, for the purpose of taxation. The position of assessors in often that these transactions are "distress sales", and do not represent the true nature of an arms-length exchange.
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Mechanics liens require local knowledge
by Dave Pelligrinelli | 2009/06/08
A few months ago, I wrote a blog post about the problem new home buyers can face with mechanics liens, especially with more builders having financial problems.
There has been some recent news reporting on the subject, but an article written this week points out how the public, and even the press is not completely correct in their understanding of the problem. In this article from the ABC affiliate in Philadelphia, a homeowner faces the prospect of a lien being filed from an unpaid subcontractor on his home. Pennsylvania's mechanics lien law has a specific provision which invalidates a lien waiver from a contractor if the general contractor has not posted a bond to cover their payment to subs. Contactors have up to 6 months to record a lien, so subsequent homeowners can be affected. Many home buyers would not be aware of the need to verify the existence of a payment bond, to validate the lien waiver.
In PA, second-tier subcontractors can also file mechanics liens, so even if a homeowner is give a stack of waivers from all of the primary subs, a direct vendor to one of these can still pop out of the woodwork.
There are also requirements for the contract for work be filed with the prothonotary office within 10 days of commencement of work or delivery of materials. This recording requirement also stipulates indexing in the name of contractor and owner.
This is just one example of the specific technical knowledge of a single aspect of title searching in one state. The point of this is to show that property rights can be affected by mechanics liens in ways which would not be readily apparent, unless searching is done by an experienced abstractor, with substantial local knowledge. The affects of mechanics liens on properties follow different rules in different states, which is another reason that thin searches, short searches, or online searches are not appropriate in every situation. For example, in Florida, a process exists for a contractor to protect their anticipated rights in advance, by filing a "Notice of Commencement", prior to engaging construction activity. This self-releasing document puts the public on notice that a vendor may be accruing rights to claim against a property if not paid.
What are the unique mechanics lien provisions in your state?
- Dave Pelligrinelli
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New twist on deed fraud: duplicate corporation name
by Dave Pelligrinelli | 2009/06/01
Over the years I have written several articles about instances of deed fraud. In these cases, a person intending to commit fraud executes a deed transferring a property into their name without the knowledge of the true owner. The most common method used is to find a vacant and un-mortgaged home, and then forge the signature of the current owner on a quit-claim deed. Once this fraudulent deed is recorded, the criminal can sell, mortgage, or rent out the home and pocket the proceeds.
In a recent incident from California, a slightly different variation of the trick was used. In this case, the true owners apparently vested their California property into a corporation which the couple uses to do their real estate business. The company was named “California Housing Association LLC”, although it is domiciled in Nevada. This transaction was executed in 2007.
Fast-forward to 2009, where a person named Raymond Tate allegedly forms a CA corporation with the same name, and then proceeds to sell the property to an apparently innocent third party. The original owners discover this unknown person living in their home, and the scheme is uncovered. The local county sheriff has some trouble figuring out what to do, and it takes some time to backtrack the process. Fortunately, the title insurer states that the new deed out of the CA corp is invalid. It would be easy to determine this if the corporation was not in existence when the property was vested into it in 2007.
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Longer road to closings
by Dave Pelligrinelli | 2009/05/26
It is common knowledge that real estate purchases and refinances are in much lower volume today compared with just a few years ago. The volume of interested buyers has evaporated, and the number of borrowers qualified with credit and equity are both a fraction of what they once were.
For some individual title abstractors, this has resulted in a lower volume of search orders in the marketplace. To make matters worse, an additional obstacle to completed transactions is becoming more commonplace. When a willing buyer or borrower has executed a sales contract or loan application, met the qualification criteria of the lender, and the property appraised, it was usually likely that the transaction would close.
More frequently, loan underwriters are throwing last minute stipulations back at the borrower. Loan officers and appraisers are reporting that lenders are suddenly requesting specific items before funding.
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