Seller Mandated Use of Title Company

Many have expressed concern regarding the steering of title companies by sellers of residential property. This includes many REO companies. See below the actual rule from RESPA Section 9.

RESPA: SECTION 9 - WHY WAS I REQUIRED TO BUY TITLE INSURANCE FROM A SPECIFIC TITLE COMPANY BY SELLER?

The Real Estate Settlement Procedures Act's (RESPA) Section 9 (12 U.S.C. §2608) and Regulation X (§ 3500.16) prohibits, either directly or indirectly, a seller from requiring a purchaser to buy title insurance from a specific title company in any transaction as a condition of the sale.
Section 9 of RESPA (12 U.S.C. §2608) states that:
1. No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company.
2. Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance.

The only way a Seller can mandate that purchaser use a particular title company is if the seller paid 100% of all title insurance and related title costs. HUD's RESPA Division has stated on numerous occasions that unless the seller pays 100% of the title related costs then the seller has violated RESPA. REO companies need to pay particular attention to Section 9 because required use practices by REO companies are on the HUD's radar right now.

Lately, many builders and REO sellers (banks) have been steering and mandating the use of their preferred title companies in their addendums. Unless they pay for it, it is a clear violation of RESPA.

Additionally, there are several local real estate purchase agreements that are in use in parts of the United States where the language in the purchase contract states that Seller picks the title company but purchaser pays for title costs. It should be clearly noted that you can not contract out of a RESPA Section 9 violation. Just because the purchase agreement is signed by the borrower doesn't prohibit the borrower from coming back and suing the seller for required use if the borrower is stuck with any of the title related fees.

Another clever technique that is in use is where the seller (quite often found in builder addendums) says they will pay for the owner's title insurance policy but that purchaser has to pay for the lender's title insurance policy and all other costs. This does not pass the smell test nor does it pass HUD's smell test. The practice while novel in its approach is still considered a Section 9 violation.

Many borrowers still do not understand that they are allowed by law to use any title insurance company they want to and if the seller dictates that they must use the sellers preferred title company, it is in violation unless seller is going to pay all costs for title insurance.

Finally, with the rapid approach of the new good faith estimate that has tolerance limits, sellers and real estate agents should be aware that the buyer is going to see the difference in title and escrow charges that the loan officer originally quotes and any variance in actual costs of the agent or seller directed title and escrow company. When forced to pay more, is the buyer going to be happy with your choice? I would encourage all agents to consider learning about the new good faith and HUD-1 Settlement statement coming out January 1, 2010. Education on how it is going to affect your transaction could mean the difference between a happy buyer and a disgruntled one.

I would be happy to schedule a meeting with agents to go over the new rules. Just call my office at (253) 536-5626 or email me.

Reverse Purchase Now HOT!!

So far, every agent I have spoken with has not heard about how a senior can buy a home using a reverse mortgage. This is a great loan program for seniors over 62. Here are three ways to consider how to use this for a home purchase:

1. You plan on selling your home and want to downsize - The sale of your existing home is going to net you about $180000. You had planned to use this all to buy your new $180000 home. You are 72 years old. Instead of paying all cash, you find out your maximum benefit for a Reverse Purchase is about $88700. You put down $91300 and keep the $88700 working for you in other investments. No monthly payments!
2. You want to buy a second home to use as a vacation home. You use a normal reverse mortgage on your existing residence and with the lump-sum of equity you get, you go and pay cash for your vacation home.
3. Things have changed in your life and you need to up-size your home because it is too samll to accomodate the live-in help you want to have. You use the proceeds from the sale of your home; let's say that same $180000 as in example #1, and you use it all and add a reverse mortgage to it to come up with the ability to buy a $360000 home with still no monthly payment! Your reverse benefit allowed you to put the $180000 down and have a Reverse Purchase mortgage for the remainder.

The above examples were all estimates using the age of 72 and existing HECM interest rates. As each age is different and rates change, you need to find out what you purchase abilities would be by getting a maximum prinicple benefit analysis so that you can determine how this program will help you. Visit http://www.Reverse4HomeBuying.com for details.

We are scheduling meetings with are real estate offices using our Powerpoint Presentaion and handouts. We will be happy to meet with you and set up a meeting. Just email gary@cme4loans.com or call me at (866) 350-6140.

New Rules Increase Closing Times

Now that the new TILA rules have gone into effect, all lenders are scurrying to determine how they are going to interpret this new bit of legislation. Suffice it to say, all lenders agree at one thing: Deals are now going to take longer to close. Most lenders are now reporting that they view the minimum time to close on a transaction to be 30 days, but tell us that the minimum they really think is going to be 45-60 days. The smallest change in a good faith estimate and how it affects the truth in lending statement can pootentially retrigger an additional disclosure time and further delay a deal. Some lenders are saying that the time starts after 7 days, while others say 10 days. When matched up with the conventional loan HVCC rules, delays are becoming commonplace.
Now more than ever before, an agent needs to be keenly aware of how these changes will affect the style of transactions they are doing. Those agents selling distressed or REO properties need to allow more time for there borrowers. The banks know these rules and are trying to use them to their advantage by still shortening closing times knowing full well that some of these dates cannot be met and will potentially cause additional fees to the borrower.
IMPORTANT - All lenders must follow these new guidelines. You need to be very wary of any loan officer touting a faster than 30 day closing on conventional transactions. Remember that after the signing around of a purchase and sale transaction, the clock starts ticking and it will be a minimum of 7 days before the appraisal is allowed to be ordered and with some lenders, it is 10 days. With HVCC taking up to 2 weeks to get the appraisal done, you can quickly see how 30 days comes and goes in that short time.
Protect your buyers! Learn how these new regulations affect your business model and make the necessary changes to work within the new rules. Use them to your advantage by informing and educating your buyers. You do not need an unhappy buyer that finds out about closing delays that you should have known about!
If you are interested in a meeting at your office, please call us. We have powerpoint and visual information about these new regulations and would be happy to share them with you.