The Department of Financial Services recently approved the TIRSA Policy Authentication Endorsement. Let’s take a look at what the endorsement does and how it should be used.
The endorsement says:
“When the policy is issued by the Company with a policy number and Date of Policy, the Company will not deny liability under the policy or any endorsements issued with the policy solely on the grounds that the policy or endorsements were issued electronically or lack signatures in accordance with the Conditions.”
This allows insureds, particularly lenders, to receive, store, and transmit policies electronically without having to worry about an original signature in case of a claim. This should result in the lender getting their policy more quickly and keeping track of it more efficiently. For us, that should mean lower costs for paper, postage and time spent producing duplicate originals when policies have been lost. It will also mean less time spent signing policies.
Does this mean that you no longer have to sign policies? That’s correct. As long as your policy is numbered and dated and includes the Policy Authentication Endorsement it is not necessary to sign it. Before you start sending out policies without signatures, think about your customers. If you have been in the business for a while you probably remember when we started printing policy jackets from our own printers instead of using nicely colored, numbered, pre-printed jackets. It took a while for our customers to understand that policies with black and white covers that looked like photocopies were the original policies. You will probably get the same reaction when you start sending unsigned policies. It will take a few phone calls or emails to educate some of your customers that this is in fact the policy and it does not have to be signed.
Be careful if you issue a Pro Forma policy. If it is not intended to be the final version of the policy do not date it, do not include the policy number and most importantly, do not include the Policy Authentication Endorsement. You do not want to create multiple versions of the final policy.
As title people we are creatures of habit. We do not embrace change quickly or without angst. We take comfort in doing things the way our mentors taught us; the same way that their mentors taught them and their mentors before that. How many things do we do on a daily basis simply because that is the way it has always been done; the same way that it was done 100 years ago? Sometimes we need to look at those things and ask ourselves why they are done that way. If we do some digging we might find a good explanation. Sometimes we find an explanation that no longer makes sense. Maybe the law has changed, or local contract requirements have changed, or the underwriter has changed its position on something. Occasionally technology allows us to do something better than what came before. If we can make something better we need to embrace change.
One thing that title people hate to change is that wonderful old legal description that has been carried through from 1870. You know the one. It starts at the old walnut stump at the side of the road and then goes sixty chains more or less to the creek, then up the creek to the deer path next to the old barn that burned in 1850, then along the deer path to the stone wall and along the wall back to the road. In 2016 the surveyor actually manages to find evidence of all of those landmarks and gives us nice accurate measurements between them with his laser measuring devices, yet chances are the deed to the purchaser will be recorded using that same old description from 1870. And someone will insure it! This is the time when we need to embrace change. Do your due diligence. Make sure that what the surveyor is showing fits with the neighboring descriptions and lines of occupation. Draw up a description that is modern and accurate and makes sense. Making a change makes it easy to know exactly what is being insured.
Sometimes we need to break away from old ways of doing things in order to make it easy to know exactly what we are not insuring. Think about the survey exception. What do you put in your survey exception? Did your mentor teach you to exhaustively list every detail that you see on the survey? Are there things that are shown on the survey that should be exceptions from coverage, but don’t really seem like exceptions when they are just part of the laundry list of things that are shown on the survey? When you look at your exception, is it clear what you are excepting from coverage? For every item that you put in your survey exception you should ask yourself if you are putting it there because you want to except it from coverage and whether you have shown it in a manner that makes it clear that it is an exception to coverage. We might think that we have correctly excepted something because it was in our survey reading. A title person would know that. But the insured is not a title person and the judge that handles the lawsuit probably will not be one either. If the survey exception contains a long list of things that are not exceptions, how will they know what items are not covered by the policy? Since the insurer drafted the exceptions, any ambiguities will be interpreted against us. It’s time to change our ways and start rethinking our survey exceptions. The only things that should be in a survey exception are the things that we choose to except from coverage.
Now that the TRID implementation date has arrived and the world has not come to an end it might be time to revisit the disclosures required of licensed agents by New York Insurance Law. You might be surprised to find out that some people have the idea that the new TRID rules do away with or substitute for the disclosures required under New York law. They do not. The TRID Closing Disclosure and the disclosures required by New York are unrelated. You might also be surprised to hear that some people thought that the New York disclosures were not required until the TRID rules became effective on October 3. That is also not the case. Licensed agents should have been sending the New York disclosures for at least a year.
As a reminder, if you are a licensed New York agent, you should be sending the following on all title insurance orders:
Good Faith Estimate,
Memorandum of Ancillary Charges, and
Final disclosure of charges.
Other disclosures may apply to some files under different circumstances, but the three listed above apply to all files. For more information on this topic you can access the 9/25/2014 memo on disclosures on the agency website.
There are many misconceptions about the Market Value Rider (MVR).
Let’s take a look at what the MVR does not do; it does not cover an increase in market value resulting from the construction of improvements on vacant land and it does not cover an increase in market value resulting from post-policy improvements made to existing structures. These are the two most common reasons that I see for requesting an MVR. If your customer is asking for the MVR to cover contemplated improvements, it is not the appropriate solution. If the customer buys the MVR with this type of protection in mind they will be disappointed when a claim occurs and they find out that their improvements are not a part of the policy coverage.
Another common misconception is who can be the insured on a MVR. The insured is limited to a natural person and they must be a resident of the property. It cannot be a trust, an LLC or any other type of entity.
The MVR can only be issued for a property that is used primarily for residential purposes and contains no more than 4 residential units, a residential condominium or residential co-operative leasehold interest. Remember that the insured must reside in the property, so if this is a vacation property that is rented out for most of the year it probably does not qualify for the MVR.
The MVR is intended to protect the homeowner in a plain vanilla residential purchase transaction. If you remember that, chances are you will be issuing the MVR correctly.
There seems to be an unwritten rule that if there is a problem with the description on an insured mortgage, the mortgage will go into default, be foreclosed on and no one will notice the mistake until after the referee’s deed has been recorded. This happens frequently when the mortgage is a refinance and we issued the policy using a last owner search and no survey. Some common reasons for the problem are that the borrower acquired the property in multiple transactions and the search started with the last deed and did not show the earlier deeds, the borrower owns more than one parcel on the same street and the search was for the wrong parcel, or there was a course missing in the deed to the borrower.
Determining the insured description is not just a matter of copying the description from the vesting deed. Many of these errors could have been easily caught if the person issuing the commitment had taken one simple extra step. If you do not have a survey you should compare the description with the tax map, or at least compare it with the dimensions of the parcel as shown on the tax rolls.
If the description that you have is for a parcel that is 25 by 100 and the map shows a parcel that is 50 by 200, something is missing and you need to do some more research. A missing course in the description may be something that we can insure over, but if they foreclosed on the wrong property or only a portion of the property fixing the problem is a lot more difficult, especially once the foreclosure has been completed. A little extra care now will save a lot of headaches in the future.
One of the most consistently confusing things that I see in both commitments and policies all across the state is the survey exception. They run the gamut from the person who thinks that “The state of facts shown on survey made by ABC Land Surveyor dated 4/1/2013” is an adequate exception, to the person who does a 3-page dissertation describing every minute detail shown on the survey. Does the first person think that they have covered every possible problem with this broad, non-specific statement, or are they just trying to say that there are no exceptions? Has the second person actually managed to make an exception for anything, or are they just describing what the surveyor has shown? Would any of you care to bet on how a judge would interpret most of the survey exceptions that you have seen?
We have probably all done survey exceptions with a simple statement such as, “Gravel drive crossing the northeast corner of premises.” It is much better to clearly state what you are excluding from coverage by saying “Possible rights of others to use the gravel driveway crossing the northeast corner of premises.”
Remember that the survey exception is supposed to set forth the things that are disclosed by the survey that are being excluded from coverage and it should be stated in a manner that is clear and unambiguous so that someone who is not a title person will understand what you mean.