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Buyer Friendly Changes Are Coming

January 1, 2010 Changes Go Into Effect To Protect The Buyer At Closing

The buyer in a real estate transaction has often felt like a puppet on a string at the closing table, when unforeseen charges come up that were no where to be found on the good faith estimate. To protect the consumer from these practices, a new good-faith estimate will be going into use starting the first of the year. It will spell out the charges at the time of application, with some of the fees written in stone, some with small allowable adjustments and some with unlimited adjustments if the buyer goes outside of the process. It is described below:

(Washington Post) Here’s what’s about to happen: Starting Jan. 1, loan charges and settlement fees will be spelled out on a revised, more consumer-friendly version of the good-faith-estimate form that borrowers are supposed to receive within three days of their mortgage applications.

Charges will fall into three broad categories on the form:

— Fees that cannot increase from upfront estimates to final closing.
— Fee estimates that come with wiggle room, and can increase by as much as 10 percent in the aggregate from upfront estimates.

— Fees that can increase without limit, mainly because the lender has no control over them or because they are difficult to predict weeks in advance.

Charges in the zero-increase category include the lender’s or broker’s mortgage origination, processing and underwriting charges, where junk fees sometimes sprout out of nowhere — or increase significantly — from upfront estimates to closing. Also in this category are the lender’s or broker’s loan discount charge or “points” based on the interest rate quoted to the borrower, and local transfer taxes.

Charges subject to a 10 percent aggregate increase include services required by the lender but where the lender chooses the providers, such as appraisals; expenses such as lender’s title insurance and settlement services where the borrower chooses a firm on a list approved by the lender; owner’s title insurance when the borrower chooses a company on the lender’s approved list; and recordation charges by local governments.

Though any one of these items can increase more than 10 percent from the upfront estimate to closing, the combined total of all the fees in this category cannot jump by more than 10 percent. This is crucial, especially with title insurance and settlement charges, where some of the biggest surprises pop up at closing.

Charges that can increase without limit include lender-required services when the borrower chooses a title insurance, escrow or other settlement company that is not on the lender’s list; the cost of homeowners hazard insurance; daily interest charges on the loan; and the amount of the initial deposit by the borrower into an escrow account.

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What Is A Mechanics Lien?

A Mechanics’ Lien is an effective remedy for contractors, subcontractors, and others involved in the construction or improvement of real estate to resolve payment problems. If a service or materials provider records a Mechanics’ Lien against the real estate being improved, the owner can not easily sell or refinance the property without first paying off the debt secured by the lien. A Mechanics’ Lien motivates the owner to make sure the contractors get paid, and is a prerequisite to filing a foreclosure action on the property.
Preliminary Notices
Claimants who do not have a direct contractual relationship with the owner (e.g., subcontractors) must provide a Preliminary Notice within 20 days of furnishing labor or materials to the job. This ensures that the owner is aware of a potential claimant, so that appropriate steps can be taken to confirm that the contractor is paid. Preliminary Notices must be provided to the owner, general contractor, and lender.
Click here for a Preliminary Notice form.
Mechanics’ Liens
Mechanics’ Liens are available to almost anyone who contributes labor, services, or materials to a real estate improvement project. A Mechanics’ Lien is used to exact payment out of the real estate itself by placing a lien on the property, making it difficult for the owner to sell or refinance the property, and if necessary, allowing the lien holder to go to court to have the property sold at auction.
Click here for a Claim of Mechanics’ Lien form.
Stop Notices
A Stop Notice attaches to the owner’s undisbursed construction funds, rather than to the property itself, as is the case in a Mechanics’ Lien. A Stop Notice compels the owner or lender to hold the remaining construction funds so that claimants can recover for work already completed. Stop notices are not available to claimants with a direct contractual relationship with the owner.
Click here for a Stop Notice form.
Removing a Lien or Stop Notice
Once a Mechanics’ Lien has been recorded, the claimant must file a court action to enforce the lien within 90 days. If no court action is filed by that time, the lien is no longer valid. However, many title companies don’t recognize this fact, and require that the lien be removed before you can pass clear title to a buyer. The easiest way to clear this lien is to ask the lienholder to file a Release of Lien. If they will not, you can petition the court to release the property from the Mechanics’ Lien.

(Sacramento County Public Law Library)

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Public Option Discussed By ALTA

Coincidently The Following Was Put Out By ALTA

New York Legislative Bill Overlooks Necessary Business 
Costs in Public-Option for Land Title Insurance Proposal 
November 9, 2009
The American Land Title Association contended that hasty efforts in New York to create a government-run title insurer 
and displace the private sector in the real estate closing process would not produce the results asserted by proponents. 
Land title agents in New York go through labor-intensive steps to ensure homebuyers have “good title” before a land title 
insurance policy is written. The cost of these preventative steps are left unaccounted for in the proposal, potentially 
leaving New Yorkers “holding the bag” when the assumed revenue is not realized. 
“Stable land title agents and insurers understand the volatility of the real estate market, planning for a business cycle 
that includes years of revenue loss, such as the industry has experienced in this current recession,” stated Kurt 
Pfotenhauer, CEO of the American Land Title Association. “It is dangerous for a state government to look to a highly 
cyclical industry to fund critical infrastructure needs such as roads and bridges. What will the state do when their 
state-run title insurer needs money from the state instead of providing funding for key projects?” 
Assemblyman Richard Brodsky and Sen. Eric Adams proposal will have serious consequences for New York’s economy. 
Any discussion of reforming New York’s land title insurance system must be based on knowledge of the costs involved 
for the state. Unfortunately, the legislators’ proposal is based on assumptions; primarily that the land title insurance 
system is similar to property and casualty insurance instead of understanding that the business provides a preventive, 
assurance product. Through the industry’s hard work, the United States enjoys the fastest closings in the world, which 
ultimately saves consumers tens of billions of dollars annually in additional interest costs because long rate locks are not 
needed on mortgage commitments. 
From procuring the legal description and ownership to performing a title search on a property and curing any title issues, 
there are many detailed steps needed to issue a title insurance policy. This work must be performed, whether a state or 
private entity insures the title. It is unlikely to produce little to no savings for consumers when this work is taken into 
account within any proposal by the state to displace private title insurance. 
Any revenue from a public land title insurer would be offset by considerable costs not spelled-out in the legislative 
proposal. Governments would be required to invest substantial upfront costs to: hire experienced and trained staff in 
every county to conduct title searches, resolve title issues and underwrite title risks; establish operations and systems; 
and hold money that could otherwise be used for other budget priorities to meet the requirements of an extensive 
regulatory framework which requires substantial capital and reserve holdings, statutory premium reserves and 
investment restrictions to protect insurer solvency and prevent consumer loss. Assumptions that a single rate schedule 
exists in New York eliminate price competition fail to recognize that insurance regulators set rates so that no title insurer 
becomes insolvent – a regulatory structure designed to protect consumers. 
In addition to these upfront costs, the state would lose additional revenue in the form of $15 million in premium taxes paid 
by title insurers in 2008 alone. Local government also would lose significant revenue from recording fees. Nationally, the 
title insurance industry spends $170 million per year to purchase copies of public documents. New York’s share of this 
would be lost with the advent of a government-run title insurer. 
Opponents of the current system make accusations that the title insurance industry pays little in claims. Title insurers 
seek to eliminate the risk to consumers of being subject to loss and having to file a claim. When a consumer is hit with a 
title claim, it means that their right to their home and property is challenged. Title insurers understand that being faced 
with the possibility of losing what is likely to be the largest investment a family will ever make deserves the strongest 
protection possible. 
There are claims that this legislation will help create jobs. In reality, the legislation would result in lost jobs. A 
government-run title system would eliminate more than 2,750 title abstracters and examiners in New York and would 
impact many of the 60,000 attorneys in the state that provide title insurance services among their practice. 
The current government-operated system in Iowa is often cited as an alternative to traditional title insurance, however, 
the Iowa model is not transferable to other states. The title system in Iowa was implemented at a time when there was no 
established industry in the market. States looking to implement a similar system in an existing real estate practices would 
be anything but quick and effective. 

A congressional study concluded a government-run system would not make buying a home or business any easier or 
cheaper because of other costs consumers must pay associated with the real estate transaction. 
Furthermore, while premium rates for Iowa Title Guaranty might be lower, although not the lowest, than rates in many 
other states, the total costs that consumers pay for title searches, examinations, and clearing of any title problems might 
not differ substantially. Iowa’s total costs were about the same as those in Maryland, Nebraska, South Dakota, 
Washington State, and West Virginia, where private title underwriters are free to do business. 
ALTA urges legislators in New York to visit their local land title agent or abstracter to gain a better understanding of the 
preventative work and service the industry provides homebuyers. 

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Private Option For Title Insurance?

It’s Not Just Health Insurance

With all of the debate currently going on surrounding the Obama health care bill and the controversial public option, in some quarters the idea has been floated for a similar option when it comes to title insurance.

The same arguments that will most likely keep a public option out of health insurance, will likely do the same in title insurance. What is the public option. Simply speaking this is where the government comes in and runs a program as if it were the private sector. The problem becomes, however, that the government has proven over time that it is in no way as capable as the private sector in running a program, particularly complex ones.

“Cash for clunkers”, the program designed to get gas guzzling cars and truck off of the roads while stimulating car sales is a perfect example of the government bureaucracy getting involved in the private sector, and doing no where nearly as good a job.

According to, of the 600,000+ cars sold under the program, only 125,000 or so would not have happened anyway. If you determine the cost of the program and divide it by the 125,000, it cost the taxpayers over $24,000 per vehicle turned in. Not exactly a win-win.

For this reason it is important to keep the government focused on the main things they are tasked with and out of private enterprise. Those are namely national security and the well being of all of the citizens at home and abroad.

Leave title insurance to the experts!

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Why Is Title Insurance Necessary?

Why Is Title Insurance Required?

For those new to the home buying arena, title insurance provides you and your lender with the peace of mind that there is no problem with you taking “clear” title to the home. What this means is that no one has any claims on the property, whether it be for taxes, an unpaid contractor or a mortgage that had not been satisfied. For the lender, they need to know that the collateral for the money that they are lending you is as clean as possible. While it may sound complicated, the following article from will make it all very clear.

Why You Need Title Insurance

When you purchase your home, how can you be sure that there are no problems with the home’s title and that the seller really owns the property? Problems with the title can limit your use and enjoyment of the property, as well as bring financial loss. That is what a title search and title insurance are for.

The Title Search

After your sales contract has been accepted, a title professional will search the public records to look for any problems with the home’s title. This search typically involves a review of land records going back many years. More than 1/3 of all title searches reveal a title problem that title professionals fix before you go to closing. For instance, a previous owner may have had minor construction done on the property, but never fully paid the contractor. Or the previous owner may have failed to pay local or state taxes (See below for some other common title problems). Title professionals seek to resolve problems like these before you go to closing. What happens if a problem arises after you move in? Read on. (If you are refinancing, scroll down or click here to jump ahead and learn more about what you can expect.)

The Owner’s Title Policy

Sometimes title problems occur that could not be found in the public records or are inadvertently missed in the title search process. To help protect you in these events, it is recommended that you obtain an Owner’s Policy of Title Insurance to insure you against the most unforeseen problems.
Owner’s Title Insurance, called an Owner’s Policy, is usually issued in the amount of the real estate purchase. It is purchased for a one-time fee at closing and lasts for as long as you or your heirs have an interest in the property. Only an Owner’s Policy fully protects the buyer should a covered title problem arise with the title that was not found during the title search. Possible hidden title problems can include:
  • Errors or omissions in deeds
  • Mistakes in examining records
  • Forgery
  • Undisclosed heirs
An Owner’s Policy provides assurance that your title company will stand behind you — monetarily and with legal defense if needed — if a covered title problem arises after you buy your home. The bottom line is that your title company will be there to help pay valid claims and cover the costs of defending an attack on your title. Receiving an Owner’s Policy isn’t always an automatic part of the closing process, and is paid for by different people in different parts of the country. Be sure you request an Owner’s Policy and ask how it is paid for where you live. No matter who pays for the Owner’s Policy, the fee is a one-time fee paid at closing. The Owner’s Policy protects you for as long as you or your heirs have an interest in the property.
You also have the option of purchasing a policy with expanded coverage. It’s called the Homeowner’s Policy and it covers more things than the Owner’s Policy. Ask your local title company for an explanation of the expanded Homeowner’s Policy so you can decide which policy is the best one for you.