TitleTalk

Title Talk: Closing Protection Letters

TitleTalk

WHAT IS IT?
Essentially, a Closing Protection Letter (CPL) is an agreement from a title insurance company to a lender that protects the lender against any issues arising from a closing agent’s errors, fraud or
negligence. It covers escrow activities and services performed by the settlement agent.

 

WHY IT’S ISSUED?
Historically, lenders were looking for an insurance product that would cover them for the risks associated with having the settlement agents perform the closing that had the same financial backing as the title policy. Since the 1960’s, lenders have been concerned about the lack of protection provided to them against several issues including: fraudulent action, failure to comply with the lender’s closing instructions, and closing agents/attorneys contracted by the title insurance company to handle the closing, but are not employed by the title company. The CPL assures the lender that their instructions for closing the transaction are followed by the title insurers agents, and that the funds given to the title insurance agent have been disbursed according to the terms of the transaction, and that it’s backed by the financial strength of the issuing underwriter.

 

IS THE CPL NORMALLY REQUESTED?
Yes, it is a very common request, and quite often is required in any transaction that has a title settlement agent involved. Today’s uncertain economic climate has necessitated the need for lenders to request the CPL. They are important to lenders for another very practical reason: the CPL provides vital protection to the financial institutions that purchase mortgages in the secondary loan market as those secondary lenders do not have agents at the closing table and do not have an opportunity to oversee the closing process.

 

WHAT DOES IT COVER?
The typical CPL covers the following:
1. Failure to follow written closing instructions
2. Fraud or dishonesty in handling the lenders funds or documents
3. Negligence of the settlement agent

 

IS THERE A STANDARD FORM?
Yes, the American Land Title Association (ALTA) has standardized the CPL across the nation, and in California, many title insurers have adopted the standard form.

 

WHAT ELSE SHOULD I KNOW?
The CPL has a capped liability of the face amount of the title policy issued in the same transaction and the coverage contained therein is contingent on the title policy being issued. The lender has a limited time in which to file a claim once the letter is issued, typically 90 days. Claims against the CPL are on the rise as lenders look to minimize their loss and spread the loss out that they have incurred.

NewHomeowners

Got Buyers? First Time Homeowners Guidebook

[ New ] Homeowners Guidebook

The Perfect Tool For New Homeowners

Are you looking for something that can educate your new homeowners regarding their grant deed, tax information, and important things they should look out for? Than our First Time Homeowners Guidebook is the perfect tool.

Our Booklet Features:

    • Title & Ownership Info
      • Understanding their grant deed.

       

    • Taxes & Value Assessment Information.
      • Supplemental Taxes
      • Property Taxes
      • Homeowners Exemption

 

    • What to Watch-Out-For
      • Homestead Solicitations
      • Grant Deed Solicitations
  • Our Role
    • How Title protects your client.

Contact us for a copy today.

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Understanding Mechanics Liens

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California Mechanics’ Lien law provides special protection to contractors, subcontractors, laborers and suppliers who furnish labor or materials to repair, remodel or build your home. If any of these people are not paid for the services or materials they have provided, your home may be subject to a mechanics’ lien and eventual sale in a legal proceeding to enforce the lien. This result can occur even where full payment for the work of improvement has been made by the homeowner.

The mechanics’ lien is a right that California gives to workers and suppliers to record a lien to ensure payment. This lien may be recorded where the property owner has paid the contractor in full and the contractor then fails to pay the subcontractors, suppliers, or laborers. Thus, in the worst case, a homeowner may actually end up paying twice for the same work.

Why, you may ask, can a homeowner be placed in the impossible situation of having to pay twice for the same work? The answer lies in the Constitution and laws of California. The overriding theory behind the mechanics’ lien law is that between two potentially blameless parties, the homeowner who has ordered the work and made full payment of the agreed amount and obtained the value of the work is in a better position to bear the loss than the laborer or supplier who has provided work or materials to the job site and has not been paid for his efforts by the contractor. It is the homeowner who bears the ultimate responsibility for making payment for services rendered. The theory is that the value of the property upon which the labor or materials have been bestowed has been increased by virtue of these efforts and the homeowner who has reaped this benefit is required in return to act as the ultimate guarantor of full payment to the persons responsible for this increase in value. In practice, a homeowner faced with a valid mechanics’ lien may be compelled to pay the lien claimant and then pursue conventional legal remedies against the contractor or subcontractor who initially failed to pay the lien claimant but who himself was paid by the homeowner. Another justification for this result relates to the relative financial strengths of the parties to a work of improvement. The law views the property owner as being in a better situation to absorb the financial setback occasioned by having to pay the amount of a valid mechanics’ lien, as opposed to a laborer or material man who is viewed as being less able to absorb the financial burdens occasioned by not being paid for services or materials provided in connection with a work of improvement.

The best protection against these claims is for the homeowner to employ reputable firms with sufficient experience and capital and/or require completion and payment bonding of the construction work. The issuance of checks payable

jointly to the contractor, material men and suppliers is another protective measure, as is the careful disbursement of funds in phases based upon the percentage of completion of the project at a given point in the construction process. The protection offered by mechanics’ lien releases can also be helpful.

Even if a mechanics’ lien is recorded against your property you may be able to resolve the problem without further payment to the lien claimant. This possibility exists where the proper procedure for establishing the lien was not followed. While it is true that mechanics’ liens may be recorded by persons who have provided labor, services, or materials to a job site, each is required to strictly adhere to a well-established procedure in order to create a valid mechanics’ lien.

Needless to say, this is one area of the law that is very complex, thus it may be worthwhile to consult an attorney if you become aware that a mechanics lien has been recorded against your property. In the event you discover that a lien has been recorded but no effort has been made to enforce the lien, a title company may decide to ignore the lien. However, be prepared to be presented with a positive plan to eliminate the title problems created by this type of lien. This may be accomplished by means of a recorded mechanics’ lien release from the person who created the lien, or other measures acceptable to the title company.

As in all areas of the real estate field, the best advice is to investigate the quality, integrity, and business reputation of the firm with whom you are dealing. Once you are satisfied you are dealing with a reputable company and before you begin your construction project, discuss your concerns about possible mechanics’ lien problems and work out, in advance, a method of ensuring that they will not occur.

handpuzzle

Lost Note & Missing Beneficiary

Man any of you probably know that you can do “the bond thing” if the preliminary report discloses an old deed of trust, and the seller tells you, “I paid this off many moons ago, but I do not have any of the original documents and the beneficiary cannot be reached. He was last seen ascending the Himalayas with the Dalai Lama long ago. I’m sure he’s drifted into the great void by now.” But do you really know about the ramifications of “the bond thing”?

In situations where both the beneficiary and the original note are missing, “the bond thing” is a multi-step process wherein obtaining the bond is just the first step. (See California Civil Code Section 2941.7)

To obtain a bond an insurance agent must be contacted, who in turn will work with a surety company that issues Lost Note Bonds. The insurance agent will request that the applicant/seller provide copies of the note (if available) and copies of documentation that evidences payment of the note, such as cancelled checks, payment books, etc. Additionally, the applicant/seller will be asked to sign an indemnity agreement in favor of the surety company issuing the bond. Occasionally, (typically when the bond is for a substantial amount of money), the insurance agent will request a financial statement from the applicant. Standard practices charged by bonding companies would be a premium paid for the bond ranging from 1.5 to 2%, double the original principal obligation of the deed of trust (the original principal will be increased to include any additional advance amounts disclosed by the official records).

 

The minimum requirements for all bonds are:

1. The bond shall be the greater of either (A) two times the amount of the original obligation secured by the mortgage and deed of trust and any additional principal amounts, including advances, shown in any recorded amendment thereto, or (B) one-half of the total amount computed pursuant to (A) and any accrued interest on such amount, and shall be conditioned for payment of any sum which the mortgagee or beneficiary may recover in an action on the obligation secured by the mortgage or deed of trust, with costs or of litigation and reasonable attorney’s fees.

2. The obligee named in the bond can be:
a) The mortgagee or mortgagee’s successor in interest
b)The trustee who executes a reconveyance and the beneficiary or beneficiary’s successor in interest
Once the bond is in hand, is the deal all set to go? Can a reconveyance be obtained from the trustee? Unfortunately, the battle has just begun. Section 2941.7 sets forth that the bond and a declaration must be of record for at least 30 days before the trustee may issue the reconveyance. It is important to note that “prior” to the recording of the declaration, the code section requires that a notice of recording of declaration and bond be mailed by certified mail, return receipt requested to the last known address of the person to whom payments under the mortgage or deed of trust were made and to the last mortgagee or beneficiary of record at the address for such obligation shown on the instrument.

Lastly, it is recommended that the title officer, together with the owners, initiate personal contact with the trustee, who will be the person tasked with the job of reviewing the bond and declaration and who will ultimately be the one issuing the desired reconveyance. If the title officer and owners establish early contact with the trustee, the trustee will be in a position to review early drafts of the bond and declaration and thus provide the owner with helpful input. Such input will enhance the likelihood that the bond and declaration that was initially forwarded to them will be acceptable. Just as important, if the title officer has developed a rapport with the trustee, it is very likely that the trustee will deliver the reconveyance back to the owners in a very timely manner. Working together to solve title issues is how Pacific Coast Title Officers rise above the competition.

solar-panels

Solar Panel Agreement Transfers

While residential solar panel installations have increased more than 50% each year since 2012 nationwide, disputes over solar panel leases have simultaneously increased during the transfer of properties. Ensure your successful closing by considering these helpful tips and considerations for transactions involving solar panel lease agreements:

Be proactive:

Preopen your escrow with Pacific Coast Title Company and use the time early in the listing or prelisting period to be sure you completely understand the terms of the agreement as it applies to the transfer of the lease. It is better to be prepared and informed ahead of time before going into contract with a potential buyer.

Check the Records:

Ensure that any solar easements have been officially recorded in public records so that it is available to be noted during the title search process. Such an omission can potentially create issues for future buyers.

Know your options:

transfer well before the close of escrow (or before the official listing) to further help ensure a smooth process of the sale.

Communication is key:

Ensure that your escrow officer is informed. The more information you can offer, the better is to a smooth transaction. Make sure you alert your escrow team to your current lease agreement, status of the agreement and requirements from the leaseholder.

Keep your solar panel leaseholder involved:

Many companies have designated specialists available and assigned to assisting buyers and sellers through the lease transfer process.

Uninsured Deeds: What you should know

Have an Uninsured Deed?

Here is what you should know.

Most common problems from Uninsured Deed’s come from Quitclaim deeds between family members, especially
husband and wife. When a person is added to title, it is a window of opportunity for matters against him/her to attach
to the property.

You should be concerned when taking a listing…

• Is it a divorce situation?
• Was it signed in distress?
• Possible bankruptcy?
• Possibly a Forgery Deed

How can you spot an uninsured deed when you order a profile from Pacific Coast Title? Here are some red flags for your reference.

uninsureddeeds

 

Understanding Probate

probate

Understanding Probate

Everyone has a will or plan, whether created or by default. Even if you have not made out a will or a trust, you still have a plan – a plan dictated by the laws of the state where you reside upon your death. Making a will is not a way to avoid “probate”, the court procedure that changes the legal ownership of your property after your death. Probate makes sure it is your last valid will, appoints the executor named in your will and supervises the executor’s work. You can do several things now that can help your executor and family later, hopefully much later on.

I am in possession of a will that distributes the decedent’s estate to me, isn’t this all I need?

No. The will must be admitted to probate and the estate of the decedent must be “probated.”

 

What does “probate” actually mean?

Generally, probate is a court proceeding that administers the estate of an individual.

 

What is the purpose of “estate administration”?

Generally, there are five purposes, many of which have subsets to them:

•To determine that the decedent is in fact dead

•To establish the validity of the will

•To identify the heirs and devisees of the decedent,

•To settle any claims that creditors may have against the estate of the decedent, and

•To distribute the property

 

What is the Public Administrator?

The Public Administrator serves in a fiduciary capacity to provide professional estate management services to county residents who die without someone willing or able to handle their affairs. The powers of the Public Administrator are mandated by the Probate Code of the State of California.

 

What is the difference between “Testate” and “Intestate”?

When one is said to have died “Testate,” it means he or she died leaving a will. If one is said to have died “Intestate,” it means he or she died without leaving a will.

 

What is the difference between an executor and an administrator?

An “executor” carries out the directions and re- quests set forth in the decedent’s will. An “administrator” is appointed by the court to manage the estate of a decedent who dies intestate.

 

What are the steps to a normal uncontested probate?

Very generally speaking they are as follows:

•Death of the decedent

•The will is delivered to the executor or Court Clerk

•A petition is filed for the Probate of Will or Letters of Administration

•A hearing is held on the petition

•Letters of Administration are issued by the Court.

•Notice to creditors is given

•Inventory and appraisement of the estate is made by an independent probate appraiser

•File Federal estate tax return. Return states “No Tax Due” or specifies an amount due

•Final accounting and petition for distribution

•Final decree of distribution

•Discharge of personal representative

 

While real property is “in probate” can it be sold?

Yes. Without getting into too much detail it can be sold either at private sale in which the executor of the estate negotiates a transaction with a buyer or at public sale in which the property is sold at public auction.

 

If there is no will, how is the property of the estate distributed?

Sections 6400 through 6414 of the California Probate Code addresses intestate succession and the distributions. The method and manner of intestate distributions is quite complex and therefore one should specifically discuss intestate distributions with his or her legal advisor.

This piece is only for information purposes. Please contact a probate attorney for more information.

What is an Endorsement? Common & Special

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A title endorsement is an addition or limitation of coverage that is attached to a title insurance policy.Endorsements provide coverage that tailors the policy to fit the needs of the insured for a specific transaction.

100

This endorsement offers an explicit extension of coverage to an ALTA Extended Coverage Loan Policy by adding
insurance for certain recorded and “off-record” matters. The coverage is extended for Covenants, Conditions, and Restrictions (CC&Rs): encroachments and the rights to use the land surface for mineral developments. This endorsement is not issued in conjunction with policies covering raw land or construction loans.

110.9

Provides insured ALTA r esidential lender with coverage against loss b y r eason of lack of priority over (a) any
federal or state environmental protection set forth in Schedule B, and (b) any state environmental protection lien providing for by any state stature in effect at Date of Policy, except as provided for by state statues specified in the endorsement.

111.6

Provides insured lender with assurance that the manufactured housing unit described in the endorsement is
included within the term “land” when used in the policy. Standard Endorsements Issued at No Charge

Special Endorsements Issued with Fees

100.12

Also used with ALTA policies. Form 100.12 assures a lender or owner that existing CC&Rs do not contain any
enforceable reverter, right of re-entry or power of termination.

100.18

Provides insured ALTA lender or owner with coverage against loss by reason of the exercise or attempt to exercise
reverter rights in CC&Rs.

100.23

Provides insured ALTA lender with coverage against loss by reason of the exercise of surface rights for the extraction
or redevelopment of minerals leased under an oil gas lease.

100.29

Provides insured ALTA lender with coverage against loss by reason of the exercise of surface rights for the extraction
or redevelopment of minerals expected from the description of the land or shown as a reservation in Schedule B.

103.1

Provides insured lender with coverage against loss by reason of the exercise of the right of use or maintenance or
a particular easement by the easement holder.

103.5

Provides insured owner or lender with coverage against loss by reason of the exercise of surface rights for the
extrac- tion or development of water excepted from the description of the land or shown as a reservation in Schedule B.

104.1

Provides assignee of the insured mortgage with assurance concerning (a) validity of a recorded assignment transferring
the beneficial interest to the named assured assignee: and (b) full or partial reconveyances, modification or subordination of the insured mortgage.

110.5

Provides insured ALTA lender with assurance concerning proper modification of the insured mortgage, including
express priority coverage.

111.5

Provides insured ALTA variable rate mortgage lender with coverage against loss by reason of (a) invalidity or unenforceability
of the insured mortgage resulting from the terms therein providing for changes in the rate of interest, or (b) loss of priority of the insured mortgage lien caused by the changed in the rage of interest, unpaid interest added to principal and/or interests on interest.

115

Provides insured lender with assurance that the estate or interest covered by the policy is a condominium, in fee, and such is entitled to be assessed and taxed as a separate parcel.

116

An Address Endorsement used with ALTA policies, designating the street address of the land insured and specifying
the type of improvements on said land.

Clearing Title: 15 things that can delay your transaction.

 real-estate-standards

Title Clearance

Typical problems that cause transaction delays.

The following items will require added clearance and processing time for escrow and title. Avoid delays by providing information known to you on any of the below listed items.

  1. Establishing Fact of Death -Joint Tenancy
  2. Power of Attorney-Use of, Proper Execution
  3. Physical Inspection Results – Encroachment, Off-Record Easements
  4. Clearing Liens, Judgments
  5. Clearing Child/Spousal Support Liens
  6. Probates
  7. Transfer/Loans Involving Corporations /Partnerships
  8. Bankruptcies
  9. Proper Execution of Documents – Grantees Compare to Trustors, Proper Jurats, Notary Seals
  10. Last Minute Changes in Buyers
  11. Last Minute Change in Type of Coverage
  12. Recent Construction
  13. Family Trust
  14. Business Trust
  15. Property Recently Foreclosed

Article: Why you should read your deed.

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Q – Why should I read the Deed?

A – Real estate closings involve many documents, of varying degrees of importance.
However, the most fundamental document in any real estate closing, the deed, is often not signed by the buyers, and thus often overlooked.

If the deed reflects the buyer’s marital status, it is essential that it be correct. There have been cases in which the deed stated that two buyers were married to each other, but in actuality, they were not. This error can create tremendous implications in states that recognize common law marriage, because a couple that lives together and hold themselves out to the public as married may be considered to be legally married. Acceptance of a deed stating that they are married may be construed as holding themselves out to be married.

In community property states, property acquired during the marriage is generally presumed to be
community property. If a grantee claims that the property was his or her sole and separate property, the burden of proof is on the grantee. One way of overcoming this community property presumption is a recital in the deed that the property is the grantee’s sole and separate property. Title companies have received claims against title as a result of the failure of the vesting deed to include the appropriate sole and separate property language. For example, a spouse could claim interest or even children of a deceased spouse could assert a claim in the property.

If buyers intend to take title as joint tenants with right of survivorship, use of the proper language is essential. Language that may be sufficient to create a joint  tenancy in one state may be inadequate in another state. Using inadequate language can cause title to pass to the heirs of the deceased rather than the intended surviving joint tenant.

In a by-gone era, the deed was hand crafted by an attorney representing the buyer or seller, and reviewed and approved by both parties. Today, the deed is more often prepared by escrow or the title company by inserting the appropriate data into the necessary fields without requiring direct consultation with the grantees. This sometimes results in unintended consequences as a result of all parties not reviewing and approving.

Have vesting questions? Contact us today.