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New York Times fails to deliver goods in Florida foreclosure article

Slade Smith — Wed, 08 Sep 2010 02:15:48 EST

Over the weekend, the New York Times published an article, Florida’s High-Speed Answer to a Foreclosure Mess, that should have brought some important issues to the attention of the broader public-- most specifically, the deterioration of the rule of law that has occurred in Florida's court system. Unfortunately, like much of the Times reporting on the financial crisis, the article was a weak and flawed effort.

Florida courts have perhaps the heaviest foreclosure burden of any state in the country. Approximately 500,000 foreclosure cases were pending in the court system earlier this year when lawmakers put aside $9.6 million in emergency funding for the courts to be used specifically to clear the logjam. Retired judges were hired back to run foreclosure-only courtrooms and help clear clogged dockets.

Are the new courts dispensing a quality brand of justice? According to the Times, judges say yes and foreclosure defense lawyers say no:

Lawyers say judges are simply ignoring problematic or contradictory evidence and awarding the right to foreclose to institutions that have yet to prove they own the properties in question.

“Now you show up and you get whatever judge is on the schedule and they have not looked at the file — they don’t even look at the motions,” says April Charney, a lawyer who represents imperiled borrowers at Jacksonville Area Legal Aid. “You get a five-minute hearing. It’s a factory.”

But Victor Tobin, chief judge in the 17th Judicial Circuit, which includes Broward County, defended the effort. “There are more assets devoted to those three foreclosure divisions in Broward than to any other division in the building in terms of case managers and that sort of thing to help the general public,” he said. “The people who come get fully, fully heard.”

In any event, huge numbers of cases are being handled.

"In any event...."

Isn't that what you say when you are presented with contradictory statements, and you really don't care enough to determine which is true?

Example: My daughter was whining that my son was poking her... my son denied this, and cried that my daughter had hidden his toy truck. In any event, I told them that if they did not both start behaving, I was going to send them to their rooms.

Example from the New York Times: Lawyers say that the people are not getting their issues heard by the courts in foreclosure hearings. Judges say that the people are getting proper hearings. In any event, we didn't bother to really determine which statement is true, so it's anybody's guess.

The authors of the New York Times article-- Gretchen Morgenson and Geraldine Fabrikant-- didn't even try to answer what should have been the fundamental question of the article-- are homeowners in foreclosure getting due process in Florida's courts?

The most likely answer, of course, is that it depends greatly on the court and the judge. Even foreclosure defense lawyers are not necessarily claiming that all judges are "simply ignoring problematic or contradictory evidence." Some have in fact highlighted certain Florida courts that they believe are fairly considering the issues of their clients-- see praise here from foreclosure defense attorney Matt Weidner for the Pinellas County (Tampa) courts, for instance.

None of that, however, excuses the New York Times from failing to report the plain fact that at least in many Florida Courts, homeowners in foreclosure are not getting anything but a sham hearing when they contest a Florida foreclosure. Examples of this permeate the public record.

Before I provide just such an example, however, let me back up a second though and examine another excerpt from the New York Times article which will help me lead into my example. Morgenson and Fabrikant write:

Doctored or dubious records presented in court as proof of a bank’s ownership have become such a problem that Bill McCollum, the Florida attorney general, announced last month that his office was investigating the state’s three largest foreclosure law firms representing lenders.

I'm going to try to get past Morgenson and Fabrikant's tortured logic in which the existence of an investigation shows that a problem is getting bad. (No investigation is ever launched for political reasons, for instance?) "Doctored or dubious" mortgage records-- created by the foreclosing banks, their agents, and their attorneys-- are indeed a real problem facing foreclosure courts. The shoddy and/or fraudulent documentation has caused real problems in many instances, such a case where two banks were attempting to foreclose on the same property, and a judge granted the right to foreclose to the wrong bank due to a failure to review the evidence.

Since Morgenson and Fabrikant acknowledge that "doctored or dubious records... have become such a problem," you'd think that they'd include some of the ready proof in the public record of the fact that many courts are not even considering defense arguments contesting the validity of the documents offered as evidence by the banks.

Consider the scene in Palm Beach County just last week, where one of the judges brought out of retirement to help handle that county's foreclosure backlog made it abundantly clear that any inconvenient issues regarding bank documentation would be given short shrift. A foreclosure defense attorney described the scene:

On 8/30, I had a Summary Judgment Foreclosure hearing on Palm Beach County’s “Rocket Docket”. The judge spoke for 14 minutes to the crowd, of mostly pro se defendants, about how they should just agree to the summary judgment and the plaintiffs, (whose attorneys (Shapiro & Fishman had a dedicated courtroom and to whom he referred to as “my attorneys”) would be gracious (Ha!) enough to allow them to stay in their homes for 120 days if needed (even though the statute says he only has to give them 30). When it came to hearing arguments which were fully briefed and provided to the court (pursuant to the instructions of the Divisions head judge) he only allowed 30-60 seconds for argument, failed to read any of the papers, failed to review the plaintiff’s foreclosure package,flatly ignored the Affidavit filed in Opposition, ignored my plea for a trial, signed the judgment and dismissed me. I never was permitted to even read the proposed judgment or to examine the “newly discovered” allonge which Shapiro’s counsel said I had no right to see. Thank God I had a court reporter!

The transcript reveals a judge who believes in advance that he has heard all possible defenses to foreclosure and doesn't need to pay much attention to any particular one in the future. "I've heard all of that," the judge declares dismissively after rattling off a litany of possible defenses involving the very kind of questionable documentation that Morgenson and Fabrikant say is a legitimate problem.

This judge's rant alone strongly suggests that hundreds or even thousands of foreclosure defendants in Palm Beach County alone probably won't get much of a hearing on their case. His conduct in the very first case following the rant-- in which he failed to read or consider any of the evidence or arguments before ruling in favor of the plaintiff bank, allowing the foreclosure in question to proceed-- proves that at least one defendant didn't get anything but a hearing in name only.

But since they didn't report stuff like this, New York Times readers are left to guess whether or not homeowners in foreclosure are having their issues heard.

Instead, the New York Times reported "an example of how wrong things can go in complex foreclosure cases"-- another case where it turned out that the wrong entity was foreclosing. In the New York Times' world, "things" apparently just "go wrong" because they are "complex." Maybe the issues in the case wouldn't have been so "complex" if the judge had actually done his job and looked at the evidence and read the arguments? Maybe if reporters looked at the issues, they would turn out not to be so complex, and in fact can be described in actual words that readers can understand! Maybe there was an actual, specific reason that the wrong entity was attempting to foreclose in the case cited by the New York Times.

But instead of providing the goods, the New York Times resorts to he-said, she-said quotes time and time again. Instead of actually reviewing documents and testimony in cases that have "gone wrong" and attempting to determine the truth, the reporters merely type out quotes from the opposing sides.

The worst is saved for the end, when an anonymous source is used to dish a mildly scandalous but possibly untrue tidbit about Daniel J. Stern, the owner of one of the largest "foreclosure mill" law firms in Florida:

This being Florida, Mr. Stern also collects boats. A 108-foot Mangusta yacht, Lady J, is for sale at $5.9 million, Web postings show. It was replaced by a 130-foot yacht that cost about $20 million, according to an acquaintance who requested anonymity over concerns about Mr. Stern’s influence in the community.

In a nod to his foreclosure work, according to the acquaintance, Mr. Stern mused about possibly naming the larger yacht Su Casa Es Mi Casa — “Your House Is My House.” But his wife and others cautioned against it, according to this acquaintance, and Mr. Stern named the boat “Misunderstood.” Mr. Stern denies that he considered the “Su Casa Es Mi Casa” name.

Is this anecdote true? Your guess is as good as mine, because we have no means to evaluate the credibility of the anonymous source. Mr. Stern himself denied it. This excerpt should have never made it to print, and the space could have been devoted to more relevant information about the conduct of Stern's firm and other foreclosure mills like it.

I am really puzzled as to why the New York Times failed to gather much new information on this rich and important topic. These Florida courtrooms are open to the public. Court documents are entered into the public record. Maybe if the reporters had gone to actually witness firsthand what is happening in these foreclosure courts, this would have been an entirely different and better story.

Escrow fraud concerns escalate with cyber fraud reports

support@rynoh.com — Tue, 07 Sep 2010 14:58:35 EST

Escrow and cyber fraud are becoming more and more prevalent throughout the title insurance industry, as agents question how best to protect themselves from threats. The answer to that question and more will be provided in October Research Corp.’s upcoming Webinar Combating Internal Fraud: People, Processes and Technology Firewalls. Read on for the details. (8/20/2010)

Recent cases of corporate identity theft and cyber fraud have put title agents on the alert concerning the safety of their overall business as well as their escrow accounts. Agents are scrambling to put more effective controls in place to build a stronger bulwark around their companies. What can agents do to ensure the safety of both their identity and their accounts against internal and external threats?

On Sept. 16, October Research Corp. will host a Webinar to outline what agents can do to put in place protocols to prevent internal escrow fraud as well as cyber fraud. Information about the Webinar, Combating Internal Fraud: People, Processes and Technology Firewalls, can be found at www.octoberstore.com.

The Webinar will feature RynohLive President Dick Reass, Agents National Title Insurance Co. CFO Brent Scheer and RynohLive COO Rafael Toledo Jr. and will be moderated by The Title Report editor Jennifer Kovacs.

Toledo, who has more than 25 years experience in criminal investigations, both as a police officer and a private legal investigator, will share some dire warnings for title agents about new fraud schemes he is seeing in the marketplace.

“A national bank called us recently and had a unique situation,” Toledo recalled. “They loaned some money to a borrower whose identity had been stolen. But here was the interesting piece: The title agent and policy they received were also fraudulent. The identity of the agent had been stolen.”

Toledo recounted that the fraudsters had gone online to a state licensing site and changed the address of the tile company and the registered agent under that company’s name. Once they did that, it appeared that they were operating a legitimate title company using a legitimate underwriter.

“They opened a checking account using the agent’s stolen identity and then processed a loan like they were a title agent for a borrower who had great credit — whose identity was stolen as well. When the money was sent by the bank to the title agent to close, they stole the money and sent the bank a fraudulent closing protection letter and policy. The bank didn’t find out until 30 or 60 days later when there was no payment,” Toledo said.

According to Reass, there are many things agents can and should be doing to protect their accounts. “It’s a combination of account management, what you need to do to work effectively with your bank to protect your company, and what you can do to put up better firewalls against cyber fraud,” he said.

During the Webinar, Reass and Toledo will cover a wide range of topics including the necessity of three-way reconciliation and daily reconciliation; the importance of choosing the right software, procedures and bank; the need for the entire staff to be thoroughly grounded in what are truly “good funds;” and other basic internal processes that can prevent agents from becoming a target for internal or external threats.

Combating Internal Fraud: People, Processes and Technology Firewalls will air Thursday, Sept. 16, 2010, at 2 p.m. ET. To register or to order a recording of the Webinar, visit www.octoberstore.com or call (877) 662-8623 ext. 7221 for more information

ABA's and CBA's

CHARLENE PERRY — Fri, 03 Sep 2010 14:55:28 EST

When you get a moment please take the time to read the comment posted to www.regulations.gov by The National Association of Independent Land Title Agents in reference to HUD's Advance Notice of Rule Making relating to "Required Use"

Docket # FR-5352-A-01.

From my blog at ActiveRain

http://activerain.com/blogsview/1836661/this-post-will-not-win-me-any-friends-on-ar

I have been reading for some months now some of the comments that have been to submitted to HUD at www.regulations.gov as they relate to the Real Estate Settlement Procedures Act (RESPA): Strengthening and Clarifying RESPA's "Required Use" Prohibition. (Docket No. FR-5352-A-01).

As a proud member of The National Association of Independent Land Title Agents I have been very outspoken about my opinion of Affiliated Business Arrangements (ABA's) and Controlled Business Arrangements (CBA's). I firmly believe that steering consumers into using affiliates for bundled services in their real estate transactions is detreimental to consumers and to the title industry as a whole.

For years now the use of ABA's and CBA's have become almost standard in more than half of all real estate transactions. The use of these ABA's and CBA's have resulted in a wealth of title claims being filed by and on behalf of consumers who were "steered" into the use of an affiliate title agency. Many believe that by providing the consumer with ONE STOP SHOPPING they are providing their client, the consumer, with convenience, cheaper fees, and increased efficiency. In fact, while trolling through the more than 1000 comments made on HUD's web-site, I came across a submission from Vicki Cox Golder, CRB, President, National Association of Realtors. In Ms. Cox-Golder's 2 page letter she states that in 2008, NAR contracted with Harris Interactive to guage consumer sentiment on one stop shopping. She goes on to state that the poll results were as follows:

The biggest perceived advantages are: saving money because of discounted prices (77%), increased efficiency and manageability (74%), convenience (73%) and things not falling through the cracks (73%).
The biggest perceived disadvantages are that consumers can't compare rates across different providers (15%) and that one company is responsible for all aspects of the process (13%).

Ms. Cox-Golder further states in her letter that the new HUD-1 and the new GFE allow consumers the necessary tools to allow them to shop for services and to make comparisons. I would beg to differ with that assessement, particularly as it relates to fees for title services. A review of the new HUD-1 and the new rules associated therewith will reveal to you that title agents are REQUIRED to bundle their fees. In fact the only fee that we can show as a seperate line item is the cost of the required lender's title insurance policy, which fee, I will remind you, is dictated by the State Insurance Commission based on rates filed by the various title insurance underwriters. The consumer under the new GFE and HUD-1 rules is not handed a document which allows them to compare an "apple with an apple" but rather is more equivilent to the comparison between an "apple and an orange".

My interpretation of Ms Cox-Golder's letter is that the position that has been taken by NAR seems to be, leave it alone. Let us continue to do whatever we can to insure that the consumer is using bundled services in their real estate transactions.

In further searching the comments, I came then upon a comment issued by The National Association of Independent Land Title Agents. In the comments offered in their 12 page letter you will find reference to the study done by the NAR in 2008. This letter specifically lays out the questions that were asked in the poll and clearly shows that the poll questions were designed in such a way as to have the answers given by the respondents support the desired result of the survey data.

The NAILTA letter goes on to state, correctly, that "with the help of massive lobbying efforts on the part of banks, mortgage companies, home builders and real estate companies, the title insurance industry has been collectively overrun by its referral sources.

In the same time period that referral source infiltration has blossemed, claims have dramatically increased. Further, historic ways in which title searches have been performed have degraded in order to accomodate the hastened approach to real estate closings preferred by these referral sources. Current owner searches (not 60 year searches on purchase transactions), title insurance without benefit of title searches and risky off shore title searches have been embraced to the detriment of both the homeowners and the insureds."

The blatent conflicts of interest that are inherent in these "one stop" shops has not been properly addressed by anyone in the real estate industry. The problem with CBA's and ABA's is that they allow for ACTUAL CONFLICTS OF INTEREST between the title insurance industry and the referral source. Since the borrower has no way in which to WAIVE the conflict (as would be required if your attorney had a conflict of interest) Iit is not only unethical, but it is potentially illegal. The use of disclosures buried in a stack of paper presented to the consumer at the time of execution of the contract of sale is NOT SUFFICIENT to enable to consumer to understand the possible HARM they can suffer as a result of the fact that there is no independent oversight in their settlement transaction.

The independent title agent is the consumers best defense against fraud, kickbacks, and undue influence directed toward "one stop" shops to push a deal through to closing no matter what the status of the title is and no matter the consequences to the consumer in the future should a title claim become necessary.

How well do you think you are serving your client by insisting on the use of an ABA or a CBA? Are you really serving your client at all, or are you making sure that you get:

a higher commission split from your broker by using his/her ABA or CBA title vendor
more referrals
a portion of your E & O being paid for by your broker
Any other "thing of value" that may have been negoiated as a result of your use of the ABA or CBA title vendor

The real estate industry is the only industry that allows "kick-backs" as a means of business. You can call these kick backs anything that you want to call them, but they are what they are. Doctors and lawyers may not accept money or things of value in order to influence their professional judgment. Your title agent should be held to the same professional standard as other professionals you would engage to protect your interest.

Title agents should be the neutral third party when determining whether or not matters affecting title will determine whether or not to proceed to closing rather than whether they will continue to get referrals from their affiliate lender, builder or Realtor. Their professional judgment should not be clouded by the fear that if they hold up a closing due to a title problem, because they are members of an ABA or a CBA, that they will suffer a monetary loss in the form of less referrals.

I am sorry to be the one to tell you but.... you're dead!!!

CHARLENE PERRY — Wed, 01 Sep 2010 14:33:26 EST

Did anyone read this story. It's a little scary to know that if a computer glitch says your dead, then, by God, you're dead

http://redtape.msnbc.com/2010/08/hey-banks-this-woman-is-alive.html?GT1=43001

Judy Rivers of Jasper AL is DEAD!! This bit of information came as quite the shock to Ms. Rivers when she went to her local bank to open a safety deposit box. Ms. Rivers has suffered a "digital death" at the hands of Chex Systems.

Chex Systems, which is a subsidiary of Florida-based Fidelity National Information Services Inc., said in an e-mail to msnbc.com that it could not comment on a specific consumer's situation, citing privacy concerns, but it asserted that all death information comes "via a direct feed from the Social Security Administration."

Two years ago, an msnbc.com investigation found that the Social Security Administration database is riddled with similar errors. A government report found that more than 1,000 people were being "killed" incorrectly every month. In some cases, appealing the decisions can take more than a year to complete.

This story will upset and enlighten you about the number of errors that go unnoticed in our digital world, many of which can cause you extreme hardship and, as is evidenced in this story, your actual DEATH!!

I read this story and was immediately reminded of a similar situation that occured in my family back in the early 70's. My father, a career military man, (USAF) had been re-assigned to Japan. As a result of that re-assignment all of his dependents needed to acquire the necessary innoculations, documentation, etc., which documentation included new passports for most of us so that we could accompany him to his assigned duty station. The dependents included my mother and 5 children. At this time we children ranged in ages from 4 to 12 years. We were all born while my father was on active duty, we were all born either in military hospitals (my sister having been born in England) or in private hospitals located near military bases and the government paid for our delivery and our mother's stay in the hospital as well as all of our medical care from day one. How, you may wonder, does this have a thing to do with the story referred to? Well...... when we presented ourselves to the appropriate office, with orders in hand, to acquire our passports, we were told that my father had only ONE dependent, his wife. There was no record at our current duty station to reflect that he had 5 children.

This was of course long before the time when you were reduced to simply being a number in a data base and records were paper not digital, but, I remember being taken by my father along with my siblings to the JAG office, being presented to the Commander of the post and my father obtaining the necessary "proof" that we were in fact his dependents. Can you imagine the headache at the time for my poor parents, but, can you imagine the trouble that would create had this been in today's world when a simple data entry mistake can KILL YOU or in the alternative indicate that you were never BORN.

Ms. Rivers is on her way to getting her life back in order and having herself declared a living breathing soul. This is the suggestion from the article as to how to prove you are in fact a living breathing soul:

Because Rivers' error has not reached the Social Security Administration — and her records there appear to be accurate — Foley believes her problem will be relatively easy to fix. The recipe:

"Get a letter from the Social Security Administration verifying you are alive and a letter from local police verifying your driver's license and send it in," he said. "The fix should find its way through the system relatively quickly."

That's assuming Chex Systems declares Rivers alive and kicking some time soon. For now, she remains in the middle of her digital murder mystery. And she may never know who, or what, wanted her dead in the first place.

Diversification. Hm.... is it working for Fidelity National. Kinda makes you wonder.

Equitable Subrogation is an Over-used Remedy for Negligence

rfranco@sourceoftitle.com — Fri, 27 Aug 2010 14:12:41 EST

There is a great post on the Ohio Association of Independent Title Agent's (OAITA) blog - Ohio Supreme Court Says No to Equitable Subrogation. The Ohio Supreme Court last week refused to apply the doctrine of equitable subrogation to save a lender from a "missed" mortgage when it refinanced the borrower's first mortgage. My personal opinion - that is good news!

Ordinarily in Ohio, the first mortgage presented shall be the first recorded, and the first mortgage recorded shall have preference. Commonly stated as "first in time, first in right."

In ABN AMRO v. Cuyahoga County Department of Development (CCDOD), the borrower originally had a first mortgage with First Ohio Mortgage Corporation (First Ohio) in the amount of $68,916, and a second mortgage with the CCDOD in the amount of $7,500. Later, he refinanced the First Ohio mortgage with ABN AMRO, borrowing $77,000. Unfortunately, the title examiner did not discover the CCDOD mortgage and it was not paid off, released, or subordinated. Thus the CCDOD mortgage was the first recorded when ABN AMRO filed its foreclosure action against the defaulting borrower.

ABN AMRO argued that it should be paid first regardless of recording chronology because it paid off First Ohio and CCDOD had negotiated for a second lien position when its loan was made.

Equitable subrogation is an exception to the "first in time, first in right" statute and is often used to advance the new lender to first position. In 1898, the Ohio Supreme Court defined equitable subrogation:

Where money is loaned under an agreement that it shall be used in the payment of a lien on real estate, and it is so used, and the agreement is that the one who so loans the money shall have a first mortgage lien on the same lands to secure his money, and through some defect in the new mortgage, or oversight as to other liens, the money cannot be made on the last mortgage, the mortgagee has a right to be subrogated to the lien which was paid by the money so by him loaned, when it can be done without placing greater burdens upon the intervening lienholders than they would have borne if the old mortgage had not been released.

Interestingly, I wrote a blog about this case when it was decided at the appellate level - Equitable Subrogation. The court of appeals danced around the important issues and it was unclear whether it actually reached the correct decision when it held that ABN AMRO was in first lien position.

As I said in the previous blog:

There are two competing policy concerns at issue with equitable subrogation in such a case. First, the title agency was negligent in failing to discover the CCDOD mortgage. It searched the title and issued coverage to protect ABM from a loss due to its mortgage not having the first and best lien on the property. Should the doctrine reward the party who was negligent in performing its duties?

Second, CCDOD had bargained for a second mortgage position. If Kangah had not refinanced, CCDOD would have still been in second place. Is it fair to reward it by allowing its mortgage to assume the first priority because of a mistake made by the title agent?

My personal opinion is that equitable subrogation is over-used. The reason for obtaining title insurance is to insure lien position. If the title company is negligent and misses a lien, I believe the proper recourse is a title insurance claim - not equitable subrogation. And, that is more of less what the Ohio Supreme Court held.

Equitable subrogation is an equitable remedy that is appropriate only when the equities clearly favor the party asserting it. In this case, we conclude that the equities disfavor ABN.

ABN would not be seeking equitable subrogation but for someone's negligence. That circumstance alone was enough to defeat equitable subrogation in Jones [an earlier Ohio Supreme Court case]. Whether ABN or the title company it employed was negligent is uncertain. If the title company was negligent, ABN may have a claim against it for its loss, negating its need for equitable subrogation. CCDOD has no claim against ABN or the title insurance company. Furthermore, CCDOD's note with Kangah prohibits it from seeking a judgment against Kangah; ABN's does not.

The emphasis of the Court's holding seems to be on the negligence in discovering the CCDOD mortgage when the ABN AMRO mortgage was made. It does seem clear that where a title company is negligent and the lender has a valid claim on a policy of title insurance, equitable subrogation does not apply. It is unclear how important it was that the CCDOD mortgage was non-recourse, but it was a factor the Court considered.

The Court also found that CCDOD was in a worse position because if equitable subrogation was applied it would be second to a larger mortgage that it was prior to the refinance.

The OAITA blog addressed this issue rather well.

Unfortunately, the Ohio Supreme Court did not apply the reasonable solution which would have been to limit the bank's recovery to the amount it paid to satisfy the first mortgage, rather than the full amount of its own mortgage. Clearly, the court was confused as to how to apply the doctrine. It is unclear whether the briefs or oral arguments helped to clarify that point for the court.

Normally, when a bank recovers under equitable subrogation, they are only entitled to the amount they paid to satisfy the prior mortgage, not the full amount of their own mortgage. Had the Ohio Supreme Court been aware of this important point, it may have made a difference.

But I think there is more to the issue than how much of the new mortgage should receive priority. I am inclined to believe that missing the opportunity to get paid off has prejudiced CCDOD. Perhaps the mere passage of time made it more likely that the CCDOD would not get paid. The property may have depreciated, the new mortgage may have had a variable rate making default more likely, or the credit worthiness of the borrower could have changed. Regardless, CCDOD should have been given the opportunity to subordinate its loan or insist that it be paid prior to the refinance.

Somethings we just don't know. But, I rather like the Supreme Court's ruling in this case. It most certainly is not "title friendly;" title companies have gotten out of many a jam by arguing equitable subrogation. I do believe that equitable subrogation is useful in certain circumstances where justice is better served by applying the doctrine, but I don't think it should be a catch-all for negligence.

My hope is that this case will give the title industry a chance to reconsider its lax search standards and the "cheaper, faster" approach to title searching. There is a reason the title search is so important and it is about time the title industry starts recognizing the value of a skilled, professional title abstractor. I don't mean to say that even the best title abstractor is immune from making mistakes, but the chances of mistakes can be minimized by choosing the right abstractor.

Robert A. Franco
SOURCE OF TITLE

Alderman felt that a reconveyance fee was not necessary for his personal home?

CHARLENE PERRY — Wed, 25 Aug 2010 11:15:32 EST

Proponent Of New Real Estate Fee Exempts His Own House

So will this now mean that the endless debate by Freehold and it's owner as to the use of these covenants? Probably not. From the article:

Alderman sometimes argues that the arrangements are appropriate for homes that aren't newly developed. He told Ohio legislators this year that, given the choice, buyers would be happy to forgo 1% of the sale price on their home later if by doing so they're able to acquire a new home for less now. When Texas lawmakers considered a ban on the arrangements, however, Alderman insisted that Freehold didn't put reconveyance fees on homes that aren't part of new developments.

But Alderman's own home wasn't part of a new development. According to documents filed in Williamson County, Texas, he originally set up the fee scheme on his opulent nine-bedroom home in Round Rock, a suburb of Austin, in 2005, the year that it was built. The covenant Alderman affixed to his title in November that year was pretty typical. It stated that any buyer of the home in the future would have to agree to shell out to Alderman and his company, Freehold Capital, "a Transfer Fee equal to one percent (1%) of the ‘Gross Sales Price'" of the home. The fee would be due when the home was resold.

Alderman removed the arrangement last year. In a notarized document titled "Release and Termination of Declaration of Covenants, Conditions and Restrictions" and submitted to the Williamson County clerk on May 19, 2009, Alderman sought to "terminate and forever discharge the Declaration of Covenants" he'd filed in November 2005 on his house. Shortly thereafter, he and Tara Alderman put the nine-bedroom property up for sale at Owners.com, a for-sale-by-owner website. It's now listed at $1.395 million.

So was Alderman insincere when he said Freehold didn't put reconveyance fee arrangements in place on homes that aren't part of new developments? The confusion over that question, says Alderman, is exactly what led him to cancel the reconveyance fee on his own home. He says during the legislative fight in Texas the lobbyists for the National Association of Realtors "suggested that I was a liar" because, after all, his home was built in 2005 but it wasn't part of a new development and hadn't required the construction of significant new infrastructure.

"I pulled the document off my home, and the NAR then came back and said that I didn't like the product enough to have it on my own home," says Alderman. "Damned if I do and damned if I don't."

I guess some people just can't pick a side.

I'm Like a Dog With a Bone as it Relates to MERS it Seems

CHARLENE PERRY — Mon, 23 Aug 2010 20:41:04 EST

Has anyone seen this law suit filed in California where the Courts are alleging that they lost money as a result of false representations made by the Defendants, MERS etal, in order to avoid payment in full of all recording fees reflecting the establishment and/or transfer of secured interests in real property in the State.

www.msfraud.org/law/lounge/California-Qui-Tam-False-Claims-Recording-Fees.pdf

For a complete copy of the complaint, see the link above. I found this particular allegation interesting:

The Defendants adopted the Mortgage Electronic Registration System (MERS) to deprive county and state governments of revenue used among other things to maintain county real property records, fund the judiciary, fund school systems, and provide other government services. But for the recordation of false statemetns, the Defendants would have paid additional recording fees to the Counties.

The complaint goes on to state various ways in which MERS has circumvented the recording process and according to the complaint, that MERS has stated that it has saved 2.4 BILLION dollars in recording costs by not filing or recording documents that reflect the transfer of an interest in real estate on loans that have a MERS deed of trust or security instrument...

Now for many of you this may be old news as this case was filed in May, 2010, but I only just now came across it. I don't know why this issue is stuck in my craw as they say, but I just am floored by the absolute arrogance of MERS and all of its affiliates as well as the forclosure mills that relied (rely) upon these falsified documents to proceed to foreclosure on properties they have no right, title or interest in.

As a case in point today I reviewed a file where the foreclosure attorney filed a Trustee's deed into the "note holder (bank)". There is no assignment of the Deed of Trust in the land records. The Trustees deed specifically states that the Note was assigned, and that pursuant to the note assignment they are proceeding to foreclosure in the name of the bank. This foreclosure has ratified with the court and we are to proceed to closing on Friday EXCEPT that neither the foreclosure attorney nor the title agency representing the seller can present to me a copy of the assigned Note.

What am I to do with this? Should I proceed and assume, as most would, that the Note was properly assigned or should I open a can of worms, delay my closing and possibly lose the deal?

Do I need to stop reading these cases against MERS and all of their various and sundry "assignees"?

Oh, again, my head hurts!

I remember when . . .

Joseph Grabiel — Mon, 23 Aug 2010 10:24:45 EST

To examine in a county Recorder's Office you had to meet certain requirements.

Reminding you this is the early 1970's. There were plenty of men's clothing stores, and even more numerous were the women's stores. Small towns had entire stores selling nothing but shoes! So, the economy was not yet big box retailing. Something else, most if not all law school graduates were male. For whatever reason, women just had not chosen law as a career. To be considered for a position with a title company, usually there was an attorney somewhere near the process. Either it was their law firm who sponsored the title company, the lawyer did titles for a living, or the attorney played a significant role in the output. Whichever it was, there was a certain standard set for examiners. Many, although far from being attorneys, felt the professionalism and carried it with them to work. Many firms would not hire an individual unless they had first become part of a law school program - even if the student was expressly interested in becoming a prosecutor. True, moreso than now, most record rooms were dusty affairs. Still, it was a professional position and work - and a person should not come to work dressed inappropriately. Dresses or skirts with hose were a pretty standard thing for women. T-shirts and tank tops, blue jeans and Nike's did not become popular in the work world until the later 1980's. Office workers in D.C. sort of began the liberalization of dress codes, and it spread. Soon, blue jeans and running shoes were common - with a tie and dress shirt. That has given way. As 'short-form' searches became the standard, the requirement of being some kind of a college graduate fell by the wayside. A blue collar mentality grew. Dress codes slackened and disappeared. True, if it is work, then the clothes worn to perform that work are - by definition - work clothes. So, skin tight or shaggy, soiled or shiny, it came to work with the 'worker'. The new uniform was a non-uniform. Ties left, then button down collars, then dress trousers, and leather shoes. Women's attire left the dress at the cleaner, the hair in rollers, and the midriff bare and pierced. Tattoos appeared - mostly on women! Make up became the functional minimum - almost never lipstick. After all, there is a ladder to be climbed, and that is work! Maybe this is one reason why E & O Insurance now is required to examine or abstract, certification tests have been developed for examining and abstracting, and mortgage companies have come under fire to strengthen their procedures. These days you really can not tell what a person does by what they wear to work (FedEx and McDonald's employees excepted).

Short Sale Flips and Title Insurance

CHARLENE PERRY — Thu, 19 Aug 2010 14:34:11 EST

I am sure that you all have been asked recently about whether or not you are able or willing to do a short sale flip/simultaneous closing. I know I have been asked to do one recently.

In the instant case I told the client that I would handle both transactions, but reminded them that I had to disclose the "flip" to the short sale lender. This of course did not please my client but that was my position and I was sticking to it. I went on to advise the client that each of the transactions would be required to "stand alone" and that if the short sale lender had any prohibitions in their letter of instruction to me then I would be compelled to adhere to these instructions.

The client was unaware, as I believe many may be, that short sale letters of instruction from short sale lenders can, and do, sometimes include language that prohibits the transfer of the property for a specified period after closing. If that is the case then obviously a title agent cannot complete the "flip" until the time period has passed and further, the title agent should disclose to the lender on the 2nd transaction the fact that the seller acquired the property pursuant to a short sale, stating the date upon which the seller acquired the property, purchase price, recording information, etc.

I have recently read information from underwriters where they ask that title agents confirm that the short sale buyer is not related in any way to the short sale seller and that the short sale buyer has not entered into a contract or agreement that allows the short sale seller to re-acquire the property, including lease with option contact etc. These scenarios may be in conflict with the provisions of the short sale lender's understanding of the transaction.

It is getting more and more difficult to underwrite these transactions. Of particular interest from an title agents standpoint are issues surrounding the issuance of a title policy to the lender on the 2nd transaction. Additional steps should be taken to acquire the release document from the short sale lender as quickly as possible after the 1st transaction has closed and funded, if a pending foreclosure was revealed in the 1st transaction we have to make sure that the foreclosure action has been dismissed, and naturally any other outstanding issues that were revealed the 1st transaction must be resolved before proceeding on to the 2nd transaction.

A lot of clients would suggest that the title clearance and settlement fees on the 2nd transaction should be less than on the 1st transaction since the title agent has already done the title work on the property. However I find that in underwriting the 2nd transaction there is actually more work to be done and possibly more risk to be taken on. In particular are issues surrounding creditors rights. At least one underwriter has issued a statement surrounding creditors rights issues and have offered a specific exception to be added to the owner's policy.

We need to be careful in reviewing title and other related documents in all transactions, but when it comes to short sale transactions we need to be extra diligent for our own protection and that of the final buyer and their lender.

Clothing Optional? What ever happened to dressing up?

information@timelydocuments.com — Wed, 18 Aug 2010 18:06:14 EST

Now a days the requirements as regards to dress vary wildly. The rare office requires a suit and tie, while more and more home based businesses crop up and small businesses have an “anything goes” policy.

Frankly, in my office I could roll in wearing fuzzy bunny slippers, my hair in rollers and my pajamas and most of the staff wouldn’t even raise an eyebrow. They might make fun of me, but we are a jeans and t-shirts kind of office.

Law offices sometimes require dressing up… depending on the cities culture and whether clients frequent the offices.

Counties don’t seem to give a hoot and their staff wear, jeans and nice shirts, maybe some heals. I see abstractors roll in wearing socks with sandals, t-shirts, worn jeans, etc.

Dressing sharp? – In a lot of cases wearing a nice shirt with jeans and nice shoes suffice for a “professional” setting, lunch meetings, etc.

Do you think that jeans should not be worn in the work place?

When do you dress up and to what extent?

Do you have more confidence in your vendors and clients when they dress a certain way?

Do you feel more prepared for a meeting when in a smart suit? Does this help with your presentation or meeting?

Upbringing – The younger generations in our workforce tend to be more inclined to a hip laid back style. While the older generations stick with their ties and business jackets. Does this still communicate that they are more serious about their career or is it becoming less and less important and in some cases even the opposite – old fashioned?

Make-up – There is a line between a refined/ professional look and garish ostentation, and then there is the matter of a make-up free woman at the reception desk or meeting a client. A bare face in the workplace, is this a faux pa or do we not even notice?

Meetings with clients – Again, does appearance have any affect on your faith in your clients, vendors or coworkers? To what extent? Is there something you mentally note? “No tie = not serious about this meeting”.

Ethnics – Location to location, culture to culture brings you very different dress standards. While in Hawaii fresh out of college I had to invest in some comfy “flippers” (sandals) and more tanks tops. This was common and I fit right in, in the downtown offices.

Los Angeles is an utter mosh of different standards, Portland even more so.

Grooming – Hopefully, at least this one standard remains important at all times. If a ladies hair is a bit frizzy or a gentleman’s hair is shaggy or askew - I can deal with that. Odors, clothing that have been worn to shreds, pit stains or bad breath will always decrease my respect in that individual. Is there anything you look at in this regard? I had a past co-worker that would check in people’s ears to see how much attention to detail was paid. Thankfully I clean my ears and passed her sneaky inspection.

In closing, in this high speed internet age you rarely see any of your clients or even your vendors. But when you do, what do you expect? What instills confidence? Is this solely a battle of personality and products as opposed to appearance and presentation? I have to say I personally dream that the style, grace and panache of the 50’s would come back with vengeance, but it is doubtful given how busy the common American is.

So while Robert’s page shows him in a smart tie and suit, he may be typing his posts in a comfy pair of… fuzzy bunny slippers.

You Want Fries with That?

rfranco@sourceoftitle.com — Wed, 18 Aug 2010 14:45:06 EST

After reaching the top of the title insurance industry, it appears that Fidelity National Financial (FNF) has decided to diversify. While many of us in the title business have been tightening our belts, trying to make it through the nation's worst housing crisis since the Great Depression, Fidelity has been bargain shopping in bankruptcy courts. Soon, they may be offering you a side of fries with your title policy.

According to a press release, "Fidelity National Financial, Inc. is a leading provider of title insurance, mortgage services, specialty insurance and information services. FNF is the nation's largest title insurance company through its title insurance underwriters - Fidelity National Title, Chicago Title, Commonwealth Land Title and Alamo Title - that collectively issue more title insurance policies than any other title company in the United States." Now they can add "burgers and fries" to their business line.

According to bankruptcy documents filed yesterday in U.S. bankruptcy court in Pittsburgh, Fidelity Newport, a subsidiary of FNF, was the successful bidder in an auction for Max & Erma's Restaurants. Max & Erma's got its start in 1972 in Columbus, Ohio and has grown to serve more than 80 locations in several states.

My first experience at a Max & Erma's was in Rochester Hills, Michigan when I was in high school. They are known for their gourmet hamburgers - including the Garbage Burger.

Garbage Burger - Everything but the kitchen sink - we stack it with hickory-smoked bacon, cheddar, Swiss, American, mozzarella, grilled onions, sautéed mushrooms, guacamole & marinara. Bursting at the bun with fantastic flavor!

While in law school, in Columbus, Ohio, I visited the original Max & Erma's location several times. It was a favorite after-class destination for a late dinner and cold beer with a good friend of mine.

The amount of the bid hasn't been disclosed yet, but the other bidder, which was endorsed by Max & Erma's, had submitted a bid valued at $24.9 million.

The restaurant business sounds like a strange choice for Fidelity, but it this isn't its first foray in to the market. Last year, it bought Village Inn and Bakers Square restaurants, also out of bankruptcy.

I guess the insurance business got a little boring for the execs at Fidelity. Selling burgers and fries should spice things up a bit.

FANNIE MAE SERVICING ANNOUNCEMENT

CHARLENE PERRY — Fri, 13 Aug 2010 15:43:31 EST

I am not really sure what they are trying to say here....

Servicing Guide, Part VII, Section 501.03: Allowable Attorney Fees, and Part VIII,
Section 104.04: Attorney (or Trustee) Fees

Effective September 1, 2010, Fannie Mae is prohibiting servicers from directly or indirectly requiring or encouraging attorneys or trustees to use specified vendors in connection with Fannie Mae referrals, including, but not limited to, title companies, posting and publication vendors, and service of process vendors. Attorneys and trustees must be allowed to select vendors of their choice based on their assessment of factors such as the cost efficiency, quality, reliability, and timeliness of the services provided by the vendor.

Fannie Mae is also reminding servicers that their arrangements with vendors and other service providers, particularly affiliates, must not be tainted with an actual or perceived conflict of interest. Fannie Mae requires servicers, attorneys, and trustees to use the most cost-efficient and effective vendors to assist in processing Fannie Mae foreclosures and bankruptcy cases without regard to arrangements that could provide a financial benefit directly or indirectly to servicers.

If an attorney or trustee wishes to use a vendor that is either the servicer itself, an outsourcing company, or other third-party vendor utilized by the servicer to assist in servicing defaulted mortgage loans, or an affiliate of the servicer, outsourcing company, or third-party vendor, the attorney or trustee must obtain Fannie Mae's prior written approval. Requests for approval must be directed to retained_attorney@fanniemae.com

and.....

Attorney or Trustee File Transfers

Part VII, Section 501: Selection of Bankruptcy Attorneys and Avoiding Delays in Case Processing, and Part VIII, Section 104: Referral to Foreclosure Attorney/Trustee

Effective immediately, Fannie Mae's prior written approval is required for the transfer of any files from one law firm or trustee to another. Fannie Mae reserves the right to assess compensatory fees for delays caused by unauthorized file transfers and to deny reimbursement of fees and expenses with respect to mortgage loans that are the subject of unauthorized file transfers. Requests for authority to transfer files must be sent via e-mail to retained_attorney@fanniemae.com.

Now I have read this over and over again and I am not sure who would fall into the catagory of affilliates, but I do know for a certain fact that if the law firm hired to conduct the foreclosure or handle the bankruptcy or both has used the services of a title company that they own for conducting the settlement on the property after the foreclosure has been complete, they are not only perceived as having a conflict of interest, there is an actual conflict of interest. How can one not say that if the attorney firm/trustee has used the services of one of the entities that they own or control that there is no conflict of interest. Additionally, if the servicing attorney/trustee reaps a portion of the fees associated with the closing of the REO transaction there is still a question of whether or not there are RESPA violation as they relate to "kick-backs".

In reviewing the information that speaks to the transfer of files from one law firm to another, does this not beg the question, why would an attorney feel the need to transfer the work to another law firm? Just asking given the raft of litigation that has recently been filed......

In light of all of the current or pending class action law suits pending nationwide relating to the foreclosure mills activities of late are we surprised by these announcements?

Looking to the Future - Our COO's First Post!

information@timelydocuments.com — Thu, 12 Aug 2010 19:08:35 EST

I've been reading the informative articles that are published here and on other sites like WSJ and I wanted to make a general comment about the economy and our future. Feel free to let me know what you think.

We all know the economy has been fluctuating between barely hanging in there to crashed for the past couple of years. Our previous and current administrations have both been blamed for the down economy and the seemingly thoughtless expenditure of tax payer money has decreased the popularity of a once-loved president.

This is the situation in America today, no matter what state, county or city you live in. Everyone is affected by the economic downturn.

With such depressing news out there, it's hard to look at the future as anything but a bleak expanse of government bailouts, undiscovered corruption amongst previously trusted corporations and government bodies, and general oppression by institutions we once looked up to.

It's my opinion, though, that we can make things better. Yes, the government is throwing good money after bad at the nation's problems. Yes, companies we once trusted are filling their coffers with this money and not sharing with those who need help. But, this nation was created upon the belief that as a people, we could change conditions and make a better place to live. So far, we haven't done too bad. While the problems we are experiencing are terrible and the trials ahead might be frightening, we can get through it.

I get angry about the current economy, I get upset when I read about what's being done. But that's the point. I'm just reading about what's being done and not doing anything about it. We are a nation of doers, and by golly, I think we can individually decide to change conditions within our own companies, within our own lives, and persist until those conditions are bettered. This might mean you or I have to extend a helping hand to another company or person. It might mean a vendor has to extend a helping hand to you for a bit. It might mean you have to send out more promotional materials or collaborate with a competitor. There's nothing wrong with that. After all, this nation, our states, counties, cities and companies are all made of individuals, and most individuals are pretty compassionate.

So far, it seems to me that compassion and the urge to make things better are the only things that have helped this country become a leading economic power on the world stage. If enough people start making changes for the better within their own lives and their own companies, the economy has to turn around. Because we are a nation of individuals who choose to band together and forge a better home for ourselves, our families, our friends and loved ones.

I, for one, have become inspired to change conditions in my life and work place. As a group, we've collaborated and come up with fun games to play during the workday that forward our production, but keeps things fun. Our Deputy CEO has gone on a thanking binge. We make sure to give our staff vacation time. These little injections of joy help our days fly by and, in my opinion, help our company become more successful.

So, here's hoping your life and your workplace stay busy and happy!

- Julia Scott-Douglas, COO, Timely Documents

Online Account Best Practices

support@rynoh.com — Mon, 09 Aug 2010 15:15:28 EST

Online Account Best Practices:

• Reconcile and review all banking transactions on a daily basis.
• Initiate wire transfer payments only under dual control, with a transaction originator
and a separate transaction authorizer.
• Use tokens for all online transactions to provide an additional layer of authentication.

Computer systems best practices (including but not limited to):

• If possible, carry out all online banking activities from a stand-alone, hardened and completely locked down computer system from which e-mail and Web browsing (beyond the secure online banking site) is not possible.
• Be suspicious of e-mails purporting to be from a financial institution, government department or other agency requesting account information, account verification or banking access credentials such as usernames, passwords, PIN codes and similar information.
• Opening file attachments or clicking on web links in suspicious emails could expose the
system to malicious code that could hijack your computer.
• Install a dedicated, actively managed firewall, especially if they have a broadband or dedicated connection to the Internet, such as DSL or cable. A firewall limits the potential for unauthorized access to a network and computers.
• Limit administrative rights on users’ workstations to help prevent the inadvertent downloading of malware or other viruses.
• Install commercial anti-virus and desktop firewall software on all computer systems.
• Free software may not provide protection against the latest threats compared with an industry standard product.
• Ensure virus protection and security software are updated regularly.
• Ensure computers are updated regularly particularly the operating system and key applications with security updates. It may be possible to sign up for automatic updates for the operating system and many applications.
• Consider installing spyware detection programs.
• Recommend clearing the browser cache before starting an Online Banking session in order to eliminate copies of web pages that have been stored on the hard drive. How the cache is cleared will depend on the browser and version. This function is generally found in the browser’s preferences menu.

Online Best Practices (including but not limited to):

• Train staff with access to online accounts on best practices to be used online.
• Create a strong password with at least 10 characters that include a combination of mixed case letters, numbers and special characters and change that password regularly.
• Prohibit the use of “shared” user names and passwords for online banking systems.
• Use a different password for each website that is accessed.
• Never share username and password information for Online Services with third-party providers.
• Verify use of a secure session (https not http) in the browser for all online banking.
• Avoid using an automatic login features that save usernames and passwords for online banking.
• Never leave a computer unattended while using any online banking or investing service.
• Never access bank, brokerage or other financial services information at Internet cafes, public libraries, etc. Unauthorized software may have been installed to trap account number and sign on information leaving you vulnerable to possible fraud.

Main Street Bailout: Will the Government Forgive Mortgage Debt?

rfranco@sourceoftitle.com — Mon, 09 Aug 2010 13:18:18 EST

There are rumors floating around that the Obama Administration will order Fannie Mae and Freddie Mac to forgive a portion of homeowners' mortgage debt - at least those that are currently underwater. If true, it could happen as soon as this month. It is difficult to tell how well such a move will received. On one hand, Wall Street got its bailout and many are wondering what good that did for the average homeowner. On the other, the many people who did not borrow more than they could afford may not like seeing irresponsible borrowers getting let off the hook for their poor decisions.

Could the rumor be true? In a letter to Barney Frank, House Rep. Spencer Bachus wrote:

...it is being reported that the Administration might order the government-controlled mortgage finance company [Fannie Mae] to forgive many Americans' mortgage debts later this month.

This comes just weeks after a lawsuit was filed against Fannie Mae alleging that it "grossly wasted public funds." I suppose if the government is going to allow such waste, it might as well waste it helping homeowners.

It is estimated that 15 million American homeowners owe more on their mortgages than their homes are worth. That is approximately 1-in-5 with a combined negative equity of about $800 billion!

But is it fair to just forgive debt in such a manner? Many of those who are upside down on their mortgages just happened to buy, or refinance, their home at the wrong time. According to Zillow.com, the Zillow Home Value Index has dropped from $240,000 to $185,000 in less than four years. That is a drop of nearly 24%.

No doubt, part of the reason for the declining values in homes has been the foreclosure crisis. When homes are foreclosed on, they sell for well below the market value. A flood of foreclosures in a neighborhood adds many lower value comparable homes that factor into appraised values.

Certainly it can be argued that poor governmental policy caused the collapse of the housing market. Shouldn't the government bear some of the responsibility for all of the underwater mortgages? Maybe they do have some obligation to help.

But, what about all of the homeowners who are not underwater, and who are keeping up with their mortgage payments. As taxpayers, they will certainly be asked to pay for this Main Street bailout. Is it fair to them to be required to pay for this massive undertaking?

According to a blog on RedState.com, this is a "blatant political strategy:"

The mortgage Hail Mary would be a last-gasp effort to prevent this from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they — and their children and their grandchildren — would be paying for someone else’s mortgage woes.

In general, most Americans are opposed to government bailouts. Taxpayers were forced to bailout AIG, GM, Chrysler, the banks, etc... They are sick of seeing their taxes going to companies that caused this mess and not getting anything for it. Will they be any more receptive to a bailout of ordinary people, or will they simply become more irate at the idea of paying for someone else's troubles?

With this move likely to come just before a mid-term election (if at all), we may soon find out. Republicans are expected to pick up some seats in the House and Senate - possibly even regaining control of one or both. This bailout could send a loud message to our elected officials - but what that message is remains to be seen.

Robert A. Franco
SOURCE OF TITLE