Hot topics of the week

I have fielded a number of questions this week on the same or similar topic so I thought it would be timely and appropriate to recap those issues here and provide you with some general rules.  As you know, each situation has its own set of facts and therefore the analysis may need to be adjusted accordingly; but this will, at least, provide you with some general guidance.

Effect of Renunciation on a Federal Tax Lien

A beneficiary of a disposition or distributee of an intestate share may renounce all or part of their interest. Once properly filed, the renunciation has the same effect as though the renouncing person predeceased the testator/intestate. It should be noted that the renouncing party cannot and will not receive any consideration for doing so (unless authorized by the court). Although the effect of renunciation treats the renouncing party as having predeceased, this does not apply to federal tax liens. Such a lien cannot be defeated by a renunciation of the property because it attaches to the real property at the moment of death.

Severing a Joint Tenancy

A joint tenancy can be unilaterally severed by any joint tenant without the consent of the non-severing joint tenant(s) by execution and delivery of a deed provided that the deed is recorded prior to the death of the severing tenant in the county where the real property is located (RPL 240-c).

Revocation of an Irrevocable Trust

An irrevocable trust by its name seems to suggest that you cannot revoke it. However, if the creator of the trust and all the beneficiaries join in to revoke then revocation of an irrevocable trust is possible pursuant to EPTL7-1.9.

Certification of Title in the Name of a Trust

A deed into a trust should be into the trustees of a trust and not the trust name alone. Exception to this rule is found in EPTL 7.1-18- if the donor is the sole trustee then title can be conveyed to the trust.

Deed required from Specific Devisee

A person who receives real property under a decedent’s will is called a devisee. In order to be characterized as a specific devisee the decedent must specifically identify the property to be received by the devisee. When a specific devise has been identified the deed must come from the specific devisee not the executor (unless it can be established that the property which is the subject of the specific devise must be sold to pay the debts of the decedent’s estate [EPTL 11-1.1(5)]).

Improper Reliance on the Mutual Indemnification Agreement

Getting a fee policy is not a cure-all for defects found in your title report. There is a list of “covered defects” in the agreement. If the defect you are raising as an exception is not listed under the “covered defects” provision of the agreement then you cannot rely on the policy to omit your exception.

As with any title you are reviewing please always feel free to contact Company counsel with the specifics of your transaction.

Case and Point

Case and Point

I previously published a blog post discussing the importance of our underwriting guidelines with respect to using a power of attorney when insuring transactions. Borders v. Borders (128 A.D. 3d 1542) is a case decided in May of 2015 setting aside a deed where a power of attorney was used.

In this case, the parties are siblings. The father who owned the property executed a power of attorney in favor of two of the siblings (defendants) granting them the power to dispose of his property.  The plaintiff (who lived with the father) had several judgments against him.  In an effort to keep the plaintiff from obtaining title to the property and then using the property to satisfy the claims of his creditors, the defendants used their power of attorney to transfer the property for no consideration to themselves and reserving a life estate for the father.  That deed was recorded on 11/20/08.  Unbeknownst to the defendants, the father executed a separate deed that was recorded 11/26/08 which conveyed title to the plaintiff while also reserving a life estate for father.  The court, on appeal, reasoned that the transfer made by the defendants creates a presumption of impropriety that can be rebutted only with a clear showing that the principal intended to make the gift or that the gift was in the principal’s best interest.  Here, since the father transferred title to the plaintiff, he demonstrated that he did not wish to give the defendants the property. And since there was no consideration for the transfer in defendant’s deed, the defendant’s intent was not to protect their father, but rather, to protect defendants’ future inheritance from the plaintiff and his creditors. Therefore the 11/20/08 deed transferring title to the defendants was deemed null and void.

This case is a classic example of the perils involved in dealing with powers of attorneys. Always contact company counsel when a power of attorney is used for a “self-serving” transaction.  I also recommend reading (or re-reading) my previous blog from 10/27/2015 which is accessible under the “posts” section of our blog page.

Case law relied upon in this case: Mantella v. Mantella, 268 A.D.2d 852-853, N.Y.S.2d 715, Semmler v. Naples, 166 A.D.2d 751, N.Y.S.2d 116, and Matter of Ferrara 7 N.Y.3d 244, 254.

Fraudulent POA’s

Recently duped? If your shaking your head yes then you must have personally experienced or heard of a transaction which involved fraud or forgery. The title insurance industry is unfortunately not shielded from this. Of the claims submitted in the last three years, a significant amount involves a fraud of some sort.

A relatively recent case, ABN AMRO Mortgage Group, Inc. v. Kayann Stephens (91 A.D.3d 801) is a prime example of the most commonly used method fraudsters use to conduct fraudulent activity; that method being the use of a power of attorney in a real estate transaction. In this 2012 case, a power of attorney was allegedly given by Manderville to Brown. Brown executed a deed using the power of attorney to Westport Marketing, Inc. Through a series of subsequent deeds Stephens ends up with the property and mortgages it also. The plaintiff, ABN AMRO took a mortgage on the subject property from another purported owner, Allam. The plaintiff commenced the action alleging the Brown power of attorney to be a forgery. Plaintiff submitted evidence showing that Manderville was in an assisted living facility in 2002 and was 77 years old at the time. An affidavit of the notary that acknowledged the power stated that Manderville was in her 40’s. This was sufficient proof for the court to rule in favor of the plaintiff and therefore the plaintiff’s mortgage is valid. The court reasoned that if a signature on a power of attorney is forged, any document executed by the purported attorney-in-fact pursuant to the power is void. The court also noted that if a document purportedly conveying a property interest is void, it conveys nothing, and a subsequent bona fide purchaser or bona fide encumbrancer for value receives nothing.

This case demonstrates the strong need to exercise extreme caution when presented with a power of attorney to be used in connection with your transaction. The following are a few underwriting guidelines you can use to minimize the risk of a fraudulent power of attorney.

  • Obtain the original power of attorney for review
  • Verify the principal’s identity by obtaining a valid form of photo identification. Then check the signature on the power to the identification and against a previously recorded instrument (whenever possible).
  • Verify the agent’s identity with proper photo identification
  • Power of attorney must survive incompetency/disability of principal. If the principal is incompetent then establish competency when the power was executed by obtaining an affidavit from the attending physician or other medical professional or, at the very least, an attorney who supervised the execution of the power.
  • If the principal is competent, call the principal at closing to verify the power has not been revoked and that they are aware that it is being used for this specific transaction. When speaking with the principal, for identification purposes (where applicable) ask the principal questions regarding prior recorded transactions (ie. mortgage amounts, name of lenders, dates of refinances, etc.).
  • All proceeds from the closing must be made payable to the principal with the exception of paying off existing mortgages, other liens or real estate taxes owed by the principal.
  • If a family member is the agent in the power then other family members should be aware of it. This is more appropriate when the principal is incompetent. You must then look to the other members to make sure no one is objecting to the use of the power.
  • Obtain a full force and effect affidavit.
  • Search the record for a revocation.
  • Self-serving transactions (where the agent uses the power to deed the property to them individually) should be discussed with underwriting counsel.
  • Notary should not be a party to the power

Each transaction will have its own set of circumstances that may give rise to additional problems and concerns not discussed here. So although this list of guidelines is exhaustive it is by no means meant to be comprehensive. I encourage you to share your experiences triggered by fraudulent activity or simply voice your concerns on this matter by responding to this post. Feel free to contact Company counsel with any questions or concerns you may have.

Mortgage Recording Tax on Mortgage Transactions After a Deed in Lieu of Foreclosure

When a mortgagee or nominee takes title to the property pursuant to a deed in lieu of foreclosure and either discharges the mortgage or agrees not to sue for the collection of the mortgage debt, the mortgage ceases to secure a bona fide debt.  When this happens, any subsequent instrument that purports to assign, modify, or consolidate the mortgage may not be treated as a supplemental mortgage pursuant to section 255 of th Tax Law, and may not be recorded without mortgage recording tax on the full amount of debt secured.  See attached link to the Tax Bulletin issued by NYS Department of Tax and Finance for a complete discussion.  http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/mrt/deed_in_lieu.htm

 

How to handle a payoff of a credit line mortgage

The title process when paying off a Home Equity Line of Credit:
1)borrower must send an unequivocal direction to the lender to freeze the account

2)the payoff check is sent or delviered to the lender, accompanied by a tramittal letter that clearly explains that the payoff check is intended to pay off the credit line account in full, and that the lender must issue a satisfaction of mortgage

3) a true copy of the trasmittal is preserved so that you have some documentary evidence to rely upon in asserting that it was the intent of the parties that the credit line be fully paid off and satisfied of record. 

4)if applicable, the line of credit checks should be destroyed

 

Some Helpful Links

In the last two weeks I have used the links below to help our agents on numerous occassions so I thought it would be helpful to blog those links for all to have access to.

This first link is about Title Insurance Company mergers.  Often times you have a policy or the homeowner digs up a piece of paper from their closing (from years ago) and it has the name of a Company on it but that Company doesn’t exists anymore.  More like than not it was merged into another Company.  This link should help you identify the acquiring company: 

http://www.alta.org/consumer/mergers.cfm?print=1

The next two links relate to locating a bank.  How many times have you had an open mortgage in the chain requiring a satisfaction but you have no idea where to begin to locate the lender.  These two links should help with that:

http://www.ffiec.gov/nicpubweb/nicweb/nichome.aspx

http://www3.fdic.gov/idasp/

We encourage you to use these links but you can always still call and we would be happy to continue to assist. 

 

Help Us Help You-Part II

In my prior blog I shared some helpful “do’s and don’t’s” relating to email communications.  Today, I want to focus on helping us help you by discussing “do’s and don’t’s” relating to High Liabilities/Over-The-Limit Authorizations (for purposes of this blog we will refer to these as “hi-li requests”). 

Have you ever sent a hi-li request the day of closing? While we make our best efforts to turn these around quickly and efficiently sometimes it becomes problematic.  There could be issues that we find that need clearing or sometimes further approval is required depending on the amount of the hi-li request.  Please try to get the hi-li requests over to us well before the closing date so we have ample time to review, comment and address.

Have you ever sent a hi-li request after the file already closed? This can create a plethora of problems.  Now that the file is closed our comments/suggestions from our review will not be properly addressed.  If there are issues that we raised it will be difficult for you to follow up on those issues post-closing.  Even worse, the issues we raise could be ones that would not have allowed the file to close until resolution was had.  

Have you ever sent a hi-li request without attaching the title report? We must review the title report prior to providing the necessary approval.  Sometimes we will also require additional documents from your abstract if we deem it necessary to get a better picture of what is involved in a particular transaction. 

Have you ever sent a hi-li request where the amount(s) of insurance and parties were TBD?  This is necessary information for us in our review process.  The amounts are necessary because depending on the amount of insurance a higher level of approval may be necessary (State and/or Regional Counsel approval).  The names of the insured parties are necessary because specific exceptions must be raised (for ex. LLC/Corps/Trusts etc. have specific exceptions that would be required for us to review and approve). 

Have you ever sent a hi-li request without explanation of a major problematic exception? It would be very helpful if you elaborate on an otherwise unusual or high-risk type exception.  Calling it to our attention on the cover page of the hi-li request and sending the necessary attachments with respect to that exception will help us in our review process. 

All hi-li requests should be sent to Teresa Singleton at tsingleton@fnf.com.  Teresa logs and tracks the hi-li’s.  She assigns them to available counsel and will always be able to provide a status update for you. 

Remember that, in the end, our goal is to provide you with the fastest service possible.  I hope the above tips were helpful.  They will increase the timeliness of our responses to you and make communications between us much more effective.

 

Help us help you

I attended a recent Counsel meeting and, as part of the materials, I received an article titled “WHAT IS THE MOST EFFECTIVE WAY TO COMMUNICATE WITH MY UNDERWRITER?” I thought it would be useful and helpful to discuss some of the FAQ’s outlined in this article as one or more of us here are presented with the very issues detailed in this article. 

So how can you help us help you? I will focus on email communications for the purpose of this blog.  Many of you use email as a primary means of communicating your underwriting questions. In order to more effectively help you with your underwriting questions we rely on you, the agent, to “arm” us with all of the information we need to formulate a response to you in the most consise manner.   Here are some do’s and don’t’s:

Have you ever titled the subject heading of an email “Help”, “Hi”, “Quick Question”, or no subject heading at all?  Avoid subject lines like this.  Instead, reference a specific file number or use the names of the parties. As we know, one email chain can span the course of several days as a transaction unfolds.  By using a specific subject line, we all have the ability to quickly locate the email chain by searching under the “subject” tab. Also, when you forward emails from other parties, take a moment to change the subject line to your original subject.  It’s not uncommon to receive emails from multiple parties with respect to the same transaction but when the other party sends you an email they may not be using the same subject heading.  Therefore, changing the subject line will make it easier for everyone to track down an email chain when the file is resurrected weeks later.

Have you ever sent an attachment (whether 1 page or 50 plus pages) and in the body of the email you write “please review and call me”? This is not helpful.  Instead, narrow it down for us.  Tell us what the question is, tell us what to focus on and look for so we are not reading the entire attachment looking for what we think may or may not be your question.  We expect you to have conducted a thorough review of the documents so that you are able to ask a concise question.  Unfortunately, we can’t anticipate your question simply by reviewing unmarked attachments.  We need you to spell out your question so that we can answer quickly. 

Have you ever sent a map or survey as an attachment and in the body of the email you write “what do you think”? It would be very helpful if you circle or highlight the area that you would like us to review and pose a specific question regarding the circled or highlighted area. 

Have you ever sent an email where you write “see below and advise”? Often times, the below message is from an attorney client responding to a question posed by you or raised by you in your report.  The file and exceptions relevant to the file are known to you and your client only.  Please be mindful that we do not have that information yet so it would be helpful to include a copy of your exception as an attachment and give us a brief background on the issue giving rise to the “see below”.

Have you ever composed an email that looked more like a research paper? Sometimes email is not the most effective way to communicate a question that has many variables.  If your question is extremely detailed then perhaps a phone call should be made when you have all the facts necessary to intitiate the discussion.   

Have you ever forwarded an email response from your underwriter to a client? We are answering your questions based on the information you provde and some of our replies are not intended for distribution to your clients.  Please ask us for permission to forward our responses.  We may want to rewrite our response in a manner that is more customer friendly.

Have you ever sent our email address to a client and told them to contact us directly or even given them our name and number to contact us directly? It is best to call us first and give us a brief synopsis of transaction or issue being presented that the client is looking to further discuss.  Sometimes, we can provide you with a response that will satisfy your client and alleviate the need for the to call us.  If a call with the client is still necessary then having spoken with you already, we know that the client is not adding facts or neglecting to share facts that would be important when we make our underwriting decision. 

Remember that in the end, our goal is to provide you with the fastest service possible.  I hope the above tips were helpful.  They will increase the timeliness of our responses to you and make communications between us much more effective.