Welcome to the July Edition of Virginia Title Center's Title Notes E-Blast. It is our hope that you will find the information contained herein to be useful and timely. Please let us know what you think. We want to hear from you.
Director of Marketing & Communications
Title Notes E-Blast
FREE AUGUST WEBINAR:
Reviewing Title Commitments
and Title Policies
How to Read Them, Understand the Requirements, Exceptions, Exclusions
and Identify Potential Red Flags
Have you been seeking clarity as to what is disclosed in a title insurance commitment? Ever come across an exception on a title commitment and weren't sure exactly what it meant? Wonder if an exception will jeopardize your title coverage?
A title commitment and policy may be one of the most important, yet most misunderstood documents in the real estate transaction. A few minutes reviewing the commitment is one of the best ways to prepare the way for a smooth transaction at the closing table.
Join us for this interactive webinar to help clear up these questions and more, as well as help you gain a greater understanding about your client's title policy.
Presented by David S. Florio, Training Director at Investors Title Insurance Company.
Don't miss your chance to hear the latest on this hot topic. Reserve your FREE Webinar seat now!
A Little Background on David Florio
As the current Training Director at Investors Title, David manages training programs designed to educate real estate professionals on the purpose of title insurance and its role in a real estate transaction, policy forms and available coverages, and underwriting practices used to provide insureds with the best possible title insurance coverage. David delivers training courses that range from introductory topics relating to title insurance and underwriting to commercial underwriting certification courses to educational seminars for real estate partners.
David has held a variety of positions during his 14 year career with Investors Title. As an Underwriting Support Representative, he supported the issuing offices in the entire Investors Title footprint by fielding high volumes of underwriting and risk related questions and by providing solutions for resolving title issues to ensure smooth real estate closings. As Underwriting Auditor for the Company, David reviewed the practices of title agencies to ensure that policies and guidelines were properly implemented. And as an Operations Representative in numerous states, David managed the day-to-day operations of several agencies.
David graduated from Adelphi University with a Bachelor's Degree in History and is a Licensed Title Insurance Underwriter.
Homebuilder Sentiment Reached Highest Level Since January 2006
reprinted courtesy of the American Bankers Association Blog - July 16, 2013
According to the National Association of Home Builders, homebuilder sentiment improved in July as the index rose 6 points to 57. The index reached its highest level since January 2006 and is the third consecutive monthly gain. The details of the report were good as well, with all three components of the report showing improvement from the previous month, particularly current sales conditions.
All four of the housing market regions in the U.S. showed improved builder confidence, only the west declined from April. The Midwest showed the most improvement and grew to an index of 54.
Read the NAHB release.
Advantages of a New Owner's Policy for a Lender Acquiring Property in a Foreclosure
Question: The lender's coverage continues under the loan policy, after the insured lender acquires a property via foreclosure or a deed in lieu of foreclosure. Some lenders choose to purchase a new owner's policy, despite continued loan policy coverage. What are the advantages of getting a new policy?
Advantages: The following situations would give the lender better coverage with a new owner's policy.
- Indebtedness is greater than policy amount. Example: the original indebtedness was $100k, and the lender has a policy with policy limits of $100k. At foreclosure, with interest, penalties, and fees, the outstanding indebtedness was $125k. Bank acquired the property in foreclosure. In the case of a total title failure, the lender's coverage of $100k is insufficient to cover their total indebtedness. A new policy in the amount of $125k covers their entire investment in the property, including unpaid interest, penalties, fees, the cost of foreclosure, etc., assuming the property is worth at least $125k.
- Equity Coverage. Example: Same scenario as above, except that a current appraisal has also determined that the current fair market value is $150k. By getting a new owner's policy in the amount of $150k, the lender could protect the entire current value of the property, not just their outstanding indebtedness.
- The servicing bank no longer owned the debt. Example: The Note had been pooled and sold on the secondary market as a part of a mortgage-backed security. The securitized entity, owned by investors who now own the debt, forecloses on the property. The loan servicing bank bids, and acquires the property in foreclosure, without ever having actually re-purchased the debt from the investors. The lender's coverage does not continue, because the servicing lender no longer owned the debt. They have purchased the property out of foreclosure, just like any other third party.
- The Bank still owns the debt, but a related entity purchases the property out of foreclosure. The entity that has been set up to acquire the assets out of foreclosure is not wholly owned by the bank, but by some of the bank's major shareholders. Since the insured lender or its wholly owned entity did not acquire the property out of foreclosure, coverage does not continue for the new entity.
- Update to the Current Date. By getting a new policy, the coverage extends through the current date, and is not limited to encumbrances that attached prior to the original loan policy date. Although, typically, the foreclosure would wipe out junior encumbrances, such as junior liens that the bank hadn't subordinated to, we have had some claims where a junior lienholder has sued, asserting that their lien was not wiped out by the foreclosure. This claim would not be covered, as a post-policy encumbrance, on the original loan policy. But, by getting a new policy, defense coverage would be available under the new owner's policy, as long as the lender did not create the problem by performing a defective foreclosure.
- Obtain a more comprehensive policy. If the lender's policy was a 1992 Loan policy, the lender might prefer to have the broader coverage afforded by a 2006 Owner's policy. Some of the additional protections include:
- a) Covered Risk #9 - Creditors rights coverage for prior transfers,
- b) Covered Risk #10 - Gap coverage as to liens, other than taxes or assessments, that attach between the Policy Date and deed recordation,
- c) An expanded definition of who the insured is, including more successors in interest,
- d) Expanded coverage as to the extent of loss (the amount of insurance is increased by 10% in cases where the insurer is unable to cure title),
- e) The claimant can choose to have the loss determined as of the date the claim was made or as of the date the claim was paid or settled. If the value fluctuates up or down during the time the claim is open, the claimant gets the benefit to choose which date value is determined, and
- f) The insured is no longer held responsible for producing a copy of the policy (or evidence of its loss or destruction) in order to submit a claim.
HUD, FHA & VA already require a new owner's policy when they acquire properties in foreclosure.
Getting a new policy takes the guesswork out of doing an in-depth analysis of whether a new policy is needed.
A reissue premium may be available in some states, so the added protection is affordable.
When lender re-sells the property, they may feel more comfortable giving a general warranty deed, having this added protection, which could make the property more marketable than conveying title by special warranty deed.
IS A 1031 EXCHANGE RIGHT FOR YOUR CLIENT?
What is a 1031 Exchange?
1031 exchanges are defined by section 1031 of the Internal Revenue Code. The code provides that no gain or loss will be recognized on the exchange of property held for productive use in a trade or business or for investment purposes.
What does tax benefit does a 1031 Exchange Provide?
Exchanges allow investors to dispose of investment property without paying the capital gain tax that would normally be due. By deferring this tax, exchangers retain 100% of their equity to reinvest, providing more buying power and opportunities.
For property to be eligible as either relinquished property or replacement property in a 1031 exchange, it must be held by the exchanger for productive use in a trade or business or for investment purposes. Examples of eligible real property include:
a) rental homes or apartments
b) raw land
d) office buildings or condominiums
e) motels or hotels
f) industrial property
g) a thirty-year leasehold interest in real property.
Some property is ineligible as exchange property under Section 1031. Examples of ineligible exchange property include:
a) stock in trade, inventory or other property held primarily for sale
b) stocks, bonds or notes
c) an interest in a partnership
d) a personal residence
e) a vacation or second home that is used by the taxpayer or his family for more than two weeks out of the year, or 10% of the actual number of days the property has been rented in a given year.
The relinquished property and the replacement property must be "like-kind" to each other. For real property, the like-kind requirement is quite broad. One type of real property is like-kind to another as long as both are held by the exchanger for either investment purposes or productive use in a business or trade. For exchange purposes therefore , a farm may be like-kind to an office building. In a personal property exchange, properties are like-kind to each other only if they both fall within the same General Asset Class or the same Product Class as defined in the tax code.
Contact Bobby Fothergill - VTC Agency Manager for more information about facilitating a 1031 Exchange for your clients.
VTC is Moving Ahead with Social Media .... Jump on Board with Us!
Want Updated Industry Info Faster?
Follow Virginia Title Center's new BLOG, 'Like' us on Facebook, and Explore our Website.
In our efforts to continue to bring you value beyond our Title and Settlement Services, VTC recently increased its presence on the Internet and in the world of social media.
Recent VTC Blog Posts:
'TO DO' List:
- Bookmark the VTC Website - tell us about relevant resources you would like to access
- Bookmark and Follow the VTC Blog - send us ideas for new posts
- 'Like' our VTC Facebook Page - check out our past posts for great information
We are working to beef up the content of our website too! Check out a couple of our new features:
We are seeking to improve our Blog and website content, please provide ideas for relevant content.
Send your comments to Patti Dickerson.
DID YOU KNOW?
VTC offers Commercial Title and Settlement Services too?
Yes, that's right! The VTC staff is experienced in handling commercial deals of all sizes and price ranges. With the support of the Commercial Services Division of Investors Title Insurance Co., we offer expert underwriting for and management of complex commercial real estate transactions. Multi-site and multi-state transactions are coordinated through a single point of contact. We issue title insurance and offer escrow services for pre-closing and post-closing deposits in interest-bearing accounts for any size transaction.
to learn how we can assist you in a smooth commercial transaction.
TITLE TIP: Expanded Coverage Policies -
Providing the Lender and Owner with Coverage
for Future Events Affecting the Title
by Christopher McIlravey, Corporate Communications Director, Investors Title Insurance Company
Title insurance products include varying levels of coverage which range from a few specific covered risks related to a loan transaction to numerous, more comprehensive covered matters for both lenders and owners. An example of this hierarchy of products/coverage is provided in Table A.
Expanded coverage products provide a lender or owner with an alternative to the traditional policy by offering new and expanded coverage. Historically, title insurance policies have only covered losses arising from defects in title existing at the time the policy is issued. The Expanded Loan Policy and Homeowner's Policy provide the lender and owner with coverage for future events affecting the title which the insured hasn't caused or created and has no real means to protect against.
In terms of specific form versions, there have been several products and iterations of those products over the years. Most markets have either been or are in the process of being transitioned to the newer 2010 ALTA products.
Loan Policies: ALTA 2010 Expanded Coverage Residential Loan Policy replaces the ALTA 2008 Expanded Coverage Residential Loan Policy which replaced the ALTA 2001 Expanded Coverage Residential Loan Policy and the ALTA 1992 Enhanced Loan Policy.
Owner's Policies: ALTA 2010 Homeowner's Policy replaces the ALTA 2008 Homeowner's Policy which replaced the ALTA 2001 Homeowner's Policy.
The ALTA Expanded Coverage Residential Loan Policy is designed for issuance when insuring the lien of the insured mortgage encumbering title to an improved one-to-four family residence whereas the ALTA Homeowner's Policy of Title Insurance is designed for issuance when insuring title to an improved one-to-four family residence where the insured is a 'natural person' (i.e. not a business entity). The revised Expanded Policy (2010) and Homeowner's Policy (2010) of Title Insurance have been modified to include a creditor's rights exclusion in order to be consistent with the newer standard ALTA policies.
Additionally, the revised ALTA Expanded Loan Policy (2010) has been modified to conform to the standard policy by amending Section 8(a) of the Conditions concerning the extent of liability.
The revised Homeowner's Policy (2010) expands the Continuation of Coverage in Section 2 of the Conditions, by including an Estate Planning Entity, which is a newly defined term, to whom the insured transfers title and by insuring anyone who receives title by a transfer effective on the death of the insured, when authorized by law.
Rates for expanded coverage products are often greater than the standard coverage products as a result of the additional coverage. Typically, the rates involve a percentage increase of the original/regular rates (i.e. 120% of the original rate). The actual rates for the expanded coverage products have not changed as a result of the introduction of the 2010 versions. Not sure what to purchase or recommend for your client? Your Title Underwriter remains the best resource! Don't hesitate to give us a call, we are here for you.
TitleHound On-Line Rate Calculator
Virginia Title Center is excited to bring a new convenience feature to its Lenders and Partners: an easy-to-use on-line closing cost premium rate calculator.
TitleHound is a unique title insurance premium rate calculator. It allows you to get closing costs for accurate Good Faith Estimates (GFE) and estimated HUD statements. This allows for instant and accurate disclosures for mortgage refinance loans and real estate purchases.
Unlike other rate calculators, TitleHound ensures the premiums, endorsements, settlement fees, and government recording fees, as well as mortgage taxes and transfer taxes, are disclosed accurately to avoid tolerance losses.
TitleHound can be easily accessed from VTC's website home page under the RESOURCES tab or by going directly to the following link. Feeling uneasy about trying it out? Check out the handy TitleHound Tips & Best Practices document or contact any VTC staff member to walk you through a demo.
NOTE: TitleHound is not meant to replace your communication with our team, just to serve as another service convenience.
IN THE WORDS OF A VTC CLIENT
".... I just wanted to drop you an e-mail to express my sincere appreciation for a job well done by Brandy, Nicole and Debbie on our recent closing. The VTC team really went the extra mile to accommodate the customer's tight closing timeframe and worked diligently on obtaining the necessary title insurance. You have a great team ..."
Senior Vice President
VTC TEAMMATE FEATURE
Settlement Services Manager
Brandy Wimer, Settlement Services Manager
Brandy joined VTC in March of 2009 to lead the Settlement team. Prior to joining VTC, Brandy was a Realtor for 6 years.
She holds a degree in Accounting and served as the accounting manager for the local CellularOne office for 7 years.
In her role, Brandy is responsible for the day-to-day management of the Settlement Operations. Additionally, she utilizes her exceptional people skills to focus on both new business development and to manage current client relationships for VTC.
Brandy is engaged to be married in the fall, she has a son and a daughter, and lives in Stuarts Draft with her three dogs and a cat. In her leisure time, Brandy enjoys reading, listening to music and trips to the beach. Send Brandy a note.
**Remember to offer your borrowers Owners' Coverage on their most valuable investment. It's a one time premium with a lifetime of security. In addition, they will receive a reduced premium rate when they obtain it simultaneously with your Lender's Coverage.**
WANTED: YOUR FEEDBACK
What Topics Are On Your Mind?
Virginia Title Center wants to provide you with pertinent information in future E-Blasts and Webinars. What questions are on your mind regarding the real estate and mortgage lending industry? What Hot Topics would you like to receive greater insights and clarity? Send Patti your thoughts.
|Patti L. Dickerson
Director of Marketing & Communications
Virginia Title Center, LLC
1.800.468.5811 or 540.772.0585
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