Wednesday, August 31, 2011

REAL™ Credit OK'd by D.C. government

We've caught a lot of flack lately over our REAL Credit™, with some of our competitors saying the progressive program is a violation of D.C. Code.

After consulting the District of Columbia's Department of Insurance, Securities and Bank (DISB) for guidance, DISB released a bulletin clarifying their position. According to DISB, a title company may provide a settlement discount (e.g., REAL Credit™) to a homebuyer so long as the credit is tied to an "action that improves the efficiency of the settlement transaction, such as applying electronically." �

Real Credit™ is allowed

Federal Title's REAL Credit™ is perfectly legal since it is awarded to a homebuyer only when a homebuyer or the homebuyer's agent orders settlement services through the online order system.

DISB approved Federal Title's REAL Credit™ on the basis that it (1) improves the efficiency of the settlement transaction; (2) does not rebate any of the title insurance premium; and (3) is awarded to a homebuyer exclusive of whether the homebuyer elects to purchase owner's title insurance coverage.

Federal Title's proprietary online order & workflow system allows for a more efficient, transparent and error-free closing. In regards to ordering settlement services, scheduling and notification, the online system:
  1. Automatically confirms an order notifying all parties to the transaction together with a guaranteed quote for costs of title charges and transfer/recordation taxes.
  2. Automatically disseminates e-mail correspondence, with embedded online forms, to all parties (e.g., title abstractor, land surveyor, real estate agents, lenders, homebuyers, and sellers)
  3. Automatically delivers a preliminary HUD-1 to the lender to assist in the preparation of an accurate Good Faith Estimate
What's not allowed

Essentially, a title company may not offer a discount or credit unless it provides a "reasonable basis" for doing so.� In other words, a title company may not rebate, or provide a credit against, any cost of the title insurance premium or provide a credit to a homebuyer which is contingent on the purchase of owner's title insurance. �

According to our contact at the DISB, who is tasked with aggressively monitoring title insurance activities and enforcing D.C. Law, the following are examples of discounts or practices that would be prohibited:
  • A title company may not offer to match or beat any competitor's fees
  • A title company may not offer to purchase a home warranty on behalf of a homebuyer
  • A title company may not offer a settlement discount that requires a coupon
  • A title company may not offer a settlement� discount "at the closing table" as a result of negotiations by any party during settlement
  • A title company may not offer a settlement discount only if a settlement client does not qualify for a reissue rate
DISB is charged with the enforcement of a recently enacted statute (D.C. Official Code � 31-5041.07), which prohibits a title insurer from inducing a homebuyer to purchase title insurance.

Tuesday, August 23, 2011

Standard v. Enhanced coverage: Land survey matters

As a homebuyer in the District of Columbia, Maryland and Virginia, you have a choice between two types of owner's title insurance coverage�� Standard (Limited) Coverage or Enhanced Coverage. When deciding on which coverage, you may consider the possibility of being forced to remove a structure because it extends onto adjoining land or easement.

The Standard owner's title insurance policy contains 4 basic insuring provisions including (1) title being vested other than as stated, (2) any defect in or lien or encumbrance on the title, (3) unmarketability of the title, (4) lack of a right of access to and from the land.�

A Standard coverage title insurance policy includes an exemption for survey matters.While the coverage under the Standard policy is broad, the policy form excludes coverage for certain matters that are traditionally outside the scope of a title search of the public records.� One of those excluded matters concerns existing encroachments of structures or encroachments created subsequent to the date of the policy.� In other words, the Standard policy includes an exception for survey matters.

Unlike the Standard coverage, the Enhanced owner's title insurance coverage insures against forced removal of a structure (except for boundary walls and fences) due to an encroachment. Moreover, the Enhanced coverage covers the insured in the event that, after the date of policy, someone else builds a structure that encroaches on to the insured's land.

Specifically, the Enhanced policy covers the insured in the event the insured is forced to remove an existing structure because it extends on to adjoining land or on to any easement, or it violates a subdivision restriction, or it violates an existing zoning law.�

There are many other insuring provisions to consider when selecting the type of owner's title insurance coverage and I invite all of our prospective homebuyers to take a look at our Comparison of Coverages.

Wednesday, August 17, 2011

Understand mortgage fraud to avoid it

Mortgage fraud investigations have skyrocketed since the financial crisis began in 2008, and a recent report released by the FBI's white collar crimes division indicates the number of investigations has steadily increased in the years since.

If that's not bad enough, apparently now the mafia is getting involved in the scheming, drawn by the chance to rake in "high profits through illicit activities that poses a (relatively) low risk for discovery.

FBI mortgage fraud investigations chart 2008 - 2010As a homebuyer, you should familiarize yourself with the concept of mortgage fraud in its many forms.

As defined in the FBI's report, mortgage fraud is "a material misstatement, misrepresentation, or omission relied on by an underwriter or lender to fund, purchase, or insure a loan. This type of fraud is usually defined as loan origination fraud. Mortgage fraud also includes schemes targeting consumers, such as foreclosure rescue, short sale, and loan modification."

Buying a house is likely the biggest financial decision you will ever make. Select real estate professionals who understand your needs and look out for your best interests. The Internet is a great place to get started on your search, but you should supplement that information with input from your friends, family & neighbors who've recently bought or refinanced a home.

To get a sense of the types of questions you should ask at the beginning of your homebuying adventure, check out these pamphlets created by the Federal Trade Commission that cover deceptive mortgage ads, buying a home and tips for homeowners.