real estate default symposium clearing title © 2012 default attorney group
TRANSCRIPT
Real Estate Default Symposium
Clearing Title
© 2012 Default Attorney Group
www.defaultattorneygroup.org
Title Insurance The Title Commitment Clearing Title Title Claims Other Title Issues
Condo and HOA AssociationsMobile Home Basics
What We’ll Cover Today
Title Insurance
What is it? Owner’s Policy
Insurance for the fee owner Lender’s Policy
Insurance for the lender Why is it necessary? How do we use it?
Type of Search/When do you use?
Title Report/Ownership & Encumbrance
Report
Foreclosure Report
Title Insurance Commitment
The Title Commitment: Basic Sections
Schedule A
Fee Simple Owner
Property Description
Schedule B -Requirements
Schedule B - Exceptions
Differing Title Interests
Fee Interest held by the owner (borrower or REO
lender after foreclosure)Types of Concurrent Estates
MortgageInterest held by the lender
Other InterestsOthers who claim an interest in the property
Fee Interests
Types of EstatesJoint TenancyTenancy in CommonTenancy by the EntiretiesLife Estate
Correctness of Descriptions Proper Recording
Office Public Records
Mortgage Interests
Recording Acknowledgement Completeness Assignment Priority Subordinate vs. Superior
Other Interests
Judgments Construction/Mechanic’s Liens Tax Liens Superior Liens vs Subordinate Liens
Determining Priority
Depends on type of Recording ActRace
○ Person who wins the race to record prevailsNotice (IL)
○ Last BFP for value without notice prevailsRace-Notice (MI)
○ BFP for value who records first prevails
What Constitutes Notice Actual Notice Constructive Notice
Recording of document Inquiry Notice
Odd documentsPossession
Super Priority Items State Specific Property Taxes
Run with the landTax Foreclosure/Forfeiture
Water Liens Condo’s and HOA’s Federal Tax Liens
Clearing Title
Non -Judicial ForeclosureDoes your State have an MIA?Lien ReleasesCorrective DocumentsTitle Claim
Judicial ForeclosureReformation CountQuiet Title ActionTitle Claim
Mortgage Recording Issues Mortgage must be of record before commencement of
the foreclosure proceedings If mortgage unrecorded highly recommend filing an
Affidavit of Interest in order to cloud title and prevent borrower from selling the property to a Bona Fide Purchaser
Claim should be filed immediately with the underwriter to ensure that the mortgage is properly recorded and to request the policy limits if another mortgage or interest has been recorded in the interim
A mortgage recorded with an incorrect legal description can affect mortgage priority
Mutual Indemnity Agreement (MIA) State Specific
An agreement between most title underwriters where issues predating the recording of the mortgage to be foreclosed will be removed as exceptions from the foreclosure title commitment if a clean title policy has been issued
General Title Resolution Under the MIA
Common Issues Cleared Under The MIA
• Prior Mortgages• Prior Interests• Prior Liens
Common Issues Not Cleared Under MIA
• Missing Deeds• Fee Simple Interests• Gap Mortgages*• Lis Pendens• Future Advance
MortgagesGap Period is anything recorded within 8 months of the mortgage. Ordinarily a title claim will be necessary to clear up a lien recorded within the gap period.
Title Claims
Generally: Any issues not cleared under the MIA or obtaining proper releases/corrective documents can be cleared by filing a title claim with the agent/underwriter who was paid to issue title insurance provided the issue is not an exception on the final policy
Making a Title Claim Who do you make the title claim with? What documents do you include in your claim?
PolicyHUD Statement/Commitment1st Lien LetterLoan Application/AppraisalClosing Protection LetterClosing Instructions from Lender
○ Payoff certain mortgages/liens○ Obtaining Releases
Copies of Prior Liens and supporting documents
General Title ResolutionResolution
of Title Claim
Seeking a Discharge
Obtaining Deed
IndemnityResolving the Issue
Litigation
Subordination
Title Claims Issue is listed as an exception on Final Policy,
what do you do? Obtain Origination File
Determine whether a first lien letter or other evidence that the prior lien should not have been listed as an exception exists. Claim can be renewed based upon such evidence.
Research prior lien or interest to determine whether it has been paid off or discharged.
If evidence exists that the mortgage to be foreclosed should take priority over the prior lien, litigation could be filed to establish priority.
Other Title Related IssuesCondominiums State Specific Priority determined by state statute or bylaws Generally, association has limited priority as to the first
mortgage of record In Michigan, state statute limits the amount a
foreclosing lender of a first mortgage of record owes to the foreclosure date
In Illinois, Condo Liens usually have priority over all Jr. mortgages
even if the Jr. mortgage is recorded first
Construction LiensWhen a Mechanic/Construction Lien Can Take
Priority Over The Mortgage If visible work in conjunction with the construction
contract is performed on the property prior to the execution and recording of the mortgage
If claim of lien is filed within 90 days of the completion of work
The Lien may take priority over the mortgage being foreclosed even if the claim of lien is recorded after the mortgage so long as the lien is perfected properly
The Lien Claimant has one-year to pursue litigation from the date of the recording of the lien
Specific Title Related IssuesTitle Claims Regarding Construction Liens In the event that a construction lien has been
properly perfected and has the potential to establish priority over the insured mortgage a title claim should be made
The Closing Agent should ensure that any potential liens for on going construction are subordinated to the mortgage
Obtain Affidavit at closing from the borrowers stating that there are no construction projects recently completed or on going for which a claim of lien could be filed
Mobile Home Basics A Manufactured Home is treated like a motor
vehicle
Therefore, a vehicle “certificate of title” is issued….it is considered personal property
Note: Be careful to distinguish a mobile or manufactured home from a modular home!
Discovering a Mobile Home County Tax Assessment Deed Language/description Loan Appraisal ALTA 7 Title Policy
To Convert to Real Property
Most States Require 4 Things: Proper Physical Attachment Real Property Taxation by County County Land Records DMV Retirement
Must achieve both “physical” attachment and “legal” conversion
County Tax Office
The mobile home has to be taxed as part of the real property and be valued as part of the land
County Land Records Most states require that you record something in
the land records to indicate the ‘intent’Affidavit of AffixtureDeclaration of Intent to Affix (DOI)Statement of Ownership and Location
Some states/counties require that the DOA be approved by a building inspection to confirm the “physical” requirements
DMV Requirements
States vary here:1. Create title first….in order to ‘cancel’
2. If never created…simply ‘retire’’
- Some states require submission of deeds, DOI’s, etc to show proof of ‘affixation’