Transcript Document
© 2012 Default Attorney Group www.defaultattorneygroup.org
Real Estate Default Symposium
Clearing Title
What We’ll Cover Today
Title Insurance The Title Commitment Clearing Title Title Claims Other Title Issues Condo and HOA Associations Mobile Home Basics
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 Mortgage Interest held by the lender Other Interests Others who claim an interest in the property
Fee Interests
Types of Estates Joint Tenancy Tenancy in Common Tenancy by the Entireties Life 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 Act Race ○ Person who wins the race to record prevails Notice (IL) ○ Last BFP for value without notice prevails Race-Notice (MI) ○ BFP for value who records first prevails
What Constitutes Notice
Actual Notice Constructive Notice Recording of document Inquiry Notice Odd documents Possession
Super Priority Items
State Specific Property Taxes Run with the land Tax Foreclosure/Forfeiture Water Liens Condo’s and HOA’s Federal Tax Liens
Clearing Title
Non -Judicial Foreclosure Does your State have an MIA?
Lien Releases Corrective Documents Title Claim Judicial Foreclosure Reformation Count Quiet Title Action Title 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 Mortgages Gap 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?
Policy HUD Statement/Commitment 1 st Lien Letter Loan Application/Appraisal Closing Protection Letter Closing Instructions from Lender ○ Payoff certain mortgages/liens ○ Obtaining Releases Copies of Prior Liens and supporting documents
General Title Resolution
Resolution of Title Claim Indemnity Resolving the Issue Litigation Seeking a Discharge Subordination Obtaining Deed
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 Issues
Condominiums
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 Liens
When 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 Issues
Title 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
Proper Attachment
Varies by State: No Wheels No Axles Secured to Foundation
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 Affixture Declaration 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’
Thank you for your time.
Questions?
© 2012 Default Attorney Group www.defaultattorneygroup.org