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Monday, August 24, 2009
10 Things You Should Know about Title Insurance: It's Required
Your mortgage lender will require title insurance. This isn't one of those cases where you can skirt the extra expense and hope for the best. If you are borrowing money for a real estate investment, your mortgage lender will want to make sure it's protected. Title insurance protects your money if it turns out the seller didn't legally have the right to sell the property in the first place. At minimum, you will be required to purchase a lender's policy. An owner's policy, while recommended, is not required.
Friday, August 21, 2009
New RESPA Rule FAQs - Good Faith Estimates
1) Q: What happens if a GFE is not provided to a borrower?
A: In a transaction involving a federally related mortgage, the loan originator is required to provide a GFE to the borrower. Failure to provide a GFE as required is a violation of Section 5 of RESPA.
2) Q: When will the use of the new GFE and HUD-1 forms be required?
A: The new GFE and HUD-1 forms must be used as of January 1, 2010. The new GFE and HUD-1 forms may be used before this date. Please note that if a loan originator issues a GFE on the new form, then the settlement agent must use the new HUD-1 form and the tolerances and other requirements in the revised RESPA regulations will apply.
3) Q: If a GFE is issued on the old form prior to January 1, 2010, and the loan will close after January 1, 2010, which HUD-1 form is to be completed by the settlement agent?
A: If a GFE is issued on the old form prior to January 1, 2010, then the old HUD-1 form must be used even if closing will occur after January 1, 2010. For GFEs issued on the old form, the loan originator has the option to reissue the GFE (with the same terms and charges) on the new form, in which case the settlement agent must complete the new HUD-1 form.
4) Q: When does a loan originator have to issue a GFE?
A: A loan originator must issue a GFE no later than 3 business days after the loan originator receives an application or information sufficient to complete an application. Application is defined as the submission of a borrower‘s financial information in anticipation of a credit decision relating to a federally related mortgage loan, which shall include the following: (1) borrower‘s name, (2) borrower‘s monthly income; (3) borrower‘s social security number to obtain a credit report; (4) property address; (5) estimate of value of the property; (6) loan amount and (7) any other information deemed necessary by the loan originator.
5) Q: What is a loan originator?
A: "Loan originator" means a lender or a mortgage broker.
6) Q: What fees can a loan originator charge before issuing a GFE?
A: Prior to issuing a GFE, the loan originator may, at its option, collect a fee limited to the cost of a credit report.
7) Q: I am a mortgage broker. Can I provide the GFE?
A: Yes, a mortgage broker can provide the GFE, however the lender is ultimately responsible for ascertaining that the GFE was provided to the applicant.
8) Q: There are not enough lines on the GFE or the HUD-1 to show all of the charges that are appropriate for some of the categories. Where should these charges be listed?
A: Additional lines may be added to Blocks 3, 6 and 11 of the GFE. Additional lines may also be added to the HUD-1.
9) Q: Is a GFE a loan commitment?
A: No, the GFE is not a loan commitment. A GFE is an estimate of settlement charges a borrower is likely to incur to obtain a specific loan.
10) Q: At what point can a loan originator charge a loan applicant fees for services other than the cost of obtaining a credit report?
A: After a loan applicant both receives a GFE and indicates an intention to proceed with the loan covered by the GFE, the loan originator may collect fees beyond the cost of a credit report for origination-related services.
11) Q: If the borrower is taking out two loans to finance the purchase, how should the loan originator disclose the charges from each loan on the GFE and the HUD-1?
A: Each loan must have a separate GFE and a separate HUD-1. However, the principal amount of the second loan and a brief explanation of the second loan should be listed on Lines 204 – 209 of the HUD-1 for the first loan.
12) Q: What are processing and administrative services?
A: Processing and administrative services are those services required to perform the functions involved in title service and origination service. Processing and administrative services include, but are not limited to the following: document delivery, document preparation, copying, wiring, preparing endorsements, document handling and notarization.
*The preceding Q&A was originally published on the HUD website.
A: In a transaction involving a federally related mortgage, the loan originator is required to provide a GFE to the borrower. Failure to provide a GFE as required is a violation of Section 5 of RESPA.
2) Q: When will the use of the new GFE and HUD-1 forms be required?
A: The new GFE and HUD-1 forms must be used as of January 1, 2010. The new GFE and HUD-1 forms may be used before this date. Please note that if a loan originator issues a GFE on the new form, then the settlement agent must use the new HUD-1 form and the tolerances and other requirements in the revised RESPA regulations will apply.
3) Q: If a GFE is issued on the old form prior to January 1, 2010, and the loan will close after January 1, 2010, which HUD-1 form is to be completed by the settlement agent?
A: If a GFE is issued on the old form prior to January 1, 2010, then the old HUD-1 form must be used even if closing will occur after January 1, 2010. For GFEs issued on the old form, the loan originator has the option to reissue the GFE (with the same terms and charges) on the new form, in which case the settlement agent must complete the new HUD-1 form.
4) Q: When does a loan originator have to issue a GFE?
A: A loan originator must issue a GFE no later than 3 business days after the loan originator receives an application or information sufficient to complete an application. Application is defined as the submission of a borrower‘s financial information in anticipation of a credit decision relating to a federally related mortgage loan, which shall include the following: (1) borrower‘s name, (2) borrower‘s monthly income; (3) borrower‘s social security number to obtain a credit report; (4) property address; (5) estimate of value of the property; (6) loan amount and (7) any other information deemed necessary by the loan originator.
5) Q: What is a loan originator?
A: "Loan originator" means a lender or a mortgage broker.
6) Q: What fees can a loan originator charge before issuing a GFE?
A: Prior to issuing a GFE, the loan originator may, at its option, collect a fee limited to the cost of a credit report.
7) Q: I am a mortgage broker. Can I provide the GFE?
A: Yes, a mortgage broker can provide the GFE, however the lender is ultimately responsible for ascertaining that the GFE was provided to the applicant.
8) Q: There are not enough lines on the GFE or the HUD-1 to show all of the charges that are appropriate for some of the categories. Where should these charges be listed?
A: Additional lines may be added to Blocks 3, 6 and 11 of the GFE. Additional lines may also be added to the HUD-1.
9) Q: Is a GFE a loan commitment?
A: No, the GFE is not a loan commitment. A GFE is an estimate of settlement charges a borrower is likely to incur to obtain a specific loan.
10) Q: At what point can a loan originator charge a loan applicant fees for services other than the cost of obtaining a credit report?
A: After a loan applicant both receives a GFE and indicates an intention to proceed with the loan covered by the GFE, the loan originator may collect fees beyond the cost of a credit report for origination-related services.
11) Q: If the borrower is taking out two loans to finance the purchase, how should the loan originator disclose the charges from each loan on the GFE and the HUD-1?
A: Each loan must have a separate GFE and a separate HUD-1. However, the principal amount of the second loan and a brief explanation of the second loan should be listed on Lines 204 – 209 of the HUD-1 for the first loan.
12) Q: What are processing and administrative services?
A: Processing and administrative services are those services required to perform the functions involved in title service and origination service. Processing and administrative services include, but are not limited to the following: document delivery, document preparation, copying, wiring, preparing endorsements, document handling and notarization.
*The preceding Q&A was originally published on the HUD website.
10 Things You Should Know about Title Insurance: Shop and Compare
It's easy to save money on title services. Ask for quotes from several title companies and compare them with your real estate agent's or mortgage lender's recommendation. By shopping around and asking about discounts, a lot of times the home buyer can save thousands on closing costs.
Thursday, August 20, 2009
10 Things You Should Know about Title Insurance: The Right to Choose
You have the right to choose your title company. In an industry contaminated by affiliated business arrangements, kickbacks and other referral incentives, the Internet returns the power to the people. Don't let your mortgage lender or real estate agent steer you toward their preferred title company without doing your homework first. You could save thousands of dollars – yes, thousands – by selecting a title company on your own.
New RESPA Rule FAQs - HUD-1 Forms
1) Q: How are courier and overnight delivery fees shown on the HUD-1 Settlement Statement?
A: Courier and overnight delivery fees are considered to be fees for administrative or processing services. They are part of a primary service, such as the origination service or title service, and may not be separately itemized.
2) Q: Does voluntarily using the HUD-1 in a transaction that otherwise is not subject to RESPA result in RESPA applying to the transaction?
A: No, using the HUD-1 form does not subject a transaction to coverage under RESPA.
3) Q: Does "conducting a settlement" (from the definition of "title service") have the same meaning as "conducting the closing"?
A: Yes. The terms "conducting a settlement" and "conducting the closing" have the same meaning under HUD's RESPA regulations and are subject to identical requirements under the regulations.
4) Q: What if at closing the seller is paying for a settlement service that was listed on the GFE, such as the Owner‘s title insurance policy? How is this shown on the HUD-1?
A: If the seller is paying for a service that was on the GFE, such as Owner‘s title insurance, the charge remains in the borrower‘s column on the HUD-1. A credit from the seller to the borrower to offset the charge should be listed on the first page of the HUD-1 in Lines 204-209 and Lines 506-509 respectively.
5) Q: If there are additional government recording fees, such as to record a power of attorney or road maintenance agreement, are they included in Line 1201 of the HUD-1 or can they be charged separately?
A: Line 1201 is used to record the total government recording charges. Additional items the lender requires to be recorded, other than those already enumerated in Line 1202, must be itemized on Line 1206. The charges for these additional items must be stated outside the column.
6) Q: How do settlement agents get the information to prepare page 3 of the HUD-1? Do they have to search through all of the loan documents to get this information?
A: The lender is required to transmit the information necessary to complete the HUD-1. The instructions for completing the HUD-1 state that the lender must provide information to the settlement agent in a format that permits the settlement agent to simply enter the necessary information to complete the loan terms section on page 3 of the HUD-1 without having to refer to the loan documents.
7) Q: Is it a violation of the tolerance if some of the items in the 10% category in the Comparison Chart exceed 10%, but other items in the category do not exceed 10%?
A: The tolerance applies to the total of all charges shown in the category ―Charges That in Total Cannot Increase More Than 10%.‖ A tolerance violation of this category means that the total of all actual charges in this category exceed the total of all estimated charges in this category by more than 10%.
*The preceding Q&A was originally published on the HUD website.
A: Courier and overnight delivery fees are considered to be fees for administrative or processing services. They are part of a primary service, such as the origination service or title service, and may not be separately itemized.
2) Q: Does voluntarily using the HUD-1 in a transaction that otherwise is not subject to RESPA result in RESPA applying to the transaction?
A: No, using the HUD-1 form does not subject a transaction to coverage under RESPA.
3) Q: Does "conducting a settlement" (from the definition of "title service") have the same meaning as "conducting the closing"?
A: Yes. The terms "conducting a settlement" and "conducting the closing" have the same meaning under HUD's RESPA regulations and are subject to identical requirements under the regulations.
4) Q: What if at closing the seller is paying for a settlement service that was listed on the GFE, such as the Owner‘s title insurance policy? How is this shown on the HUD-1?
A: If the seller is paying for a service that was on the GFE, such as Owner‘s title insurance, the charge remains in the borrower‘s column on the HUD-1. A credit from the seller to the borrower to offset the charge should be listed on the first page of the HUD-1 in Lines 204-209 and Lines 506-509 respectively.
5) Q: If there are additional government recording fees, such as to record a power of attorney or road maintenance agreement, are they included in Line 1201 of the HUD-1 or can they be charged separately?
A: Line 1201 is used to record the total government recording charges. Additional items the lender requires to be recorded, other than those already enumerated in Line 1202, must be itemized on Line 1206. The charges for these additional items must be stated outside the column.
6) Q: How do settlement agents get the information to prepare page 3 of the HUD-1? Do they have to search through all of the loan documents to get this information?
A: The lender is required to transmit the information necessary to complete the HUD-1. The instructions for completing the HUD-1 state that the lender must provide information to the settlement agent in a format that permits the settlement agent to simply enter the necessary information to complete the loan terms section on page 3 of the HUD-1 without having to refer to the loan documents.
7) Q: Is it a violation of the tolerance if some of the items in the 10% category in the Comparison Chart exceed 10%, but other items in the category do not exceed 10%?
A: The tolerance applies to the total of all charges shown in the category ―Charges That in Total Cannot Increase More Than 10%.‖ A tolerance violation of this category means that the total of all actual charges in this category exceed the total of all estimated charges in this category by more than 10%.
*The preceding Q&A was originally published on the HUD website.
Wednesday, August 19, 2009
New RESPA Rule FAQs - General Information
1) Q: When does the new RESPA Rule take effect?
A: The November 2008 RESPA Rule was effective January 16, 2009. Implementation of the provisions are as follows:
2) Q: When does the revised required use definition take effect?
A: The revised required use definition was withdrawn by a separate final rule published May 15, 2009.
3) Q: Can a loan originator e-mail a GFE to a borrower?
A: Yes; as long as the borrower consents and the other specific requirements for consumer disclosures under the Electronic Signatures in Global and National Commerce Act (ESIGN) are met, a loan originator may e-mail, fax, or send by other electronic means the GFE (and other RESPA disclosures, such as the HUD-1/1A). See section 101(c) of ESIGN, 15 U.S.C. 7001(c); also see 24 CFR 3500.23. The loan originator may also continue to deliver the GFE to the borrower by hand delivery or by placing it in the mail, as provided by RESPA.
4) Q: RESPA and HUD‘s RESPA regulations require that certain records be retained for a period of time. Can those records be retained electronically?
A: Yes, if the person responsible for retaining records under RESPA and HUD's RESPA regulations meets the specific requirements and limitations applicable to the retention of electronic documents set out in the Electronic Signatures in Global and National Commerce Act (ESIGN), that person's responsibility will be satisfied by the retention of electronic records. See sections 101(d) and (e) of ESIGN, 15 U.S.C. 7001(d) and (e); also see 24 CFR 3500.23.
5) Q: Can we translate the GFE and the HUD-1 into languages other than English?
A: Yes, it is permissible to translate the GFE and the HUD-1 as long as the form has been translated accurately.
*The preceding Q&A was originally published on the HUD website.
A: The November 2008 RESPA Rule was effective January 16, 2009. Implementation of the provisions are as follows:
2) Q: When does the revised required use definition take effect?
A: The revised required use definition was withdrawn by a separate final rule published May 15, 2009.
3) Q: Can a loan originator e-mail a GFE to a borrower?
A: Yes; as long as the borrower consents and the other specific requirements for consumer disclosures under the Electronic Signatures in Global and National Commerce Act (ESIGN) are met, a loan originator may e-mail, fax, or send by other electronic means the GFE (and other RESPA disclosures, such as the HUD-1/1A). See section 101(c) of ESIGN, 15 U.S.C. 7001(c); also see 24 CFR 3500.23. The loan originator may also continue to deliver the GFE to the borrower by hand delivery or by placing it in the mail, as provided by RESPA.
4) Q: RESPA and HUD‘s RESPA regulations require that certain records be retained for a period of time. Can those records be retained electronically?
A: Yes, if the person responsible for retaining records under RESPA and HUD's RESPA regulations meets the specific requirements and limitations applicable to the retention of electronic documents set out in the Electronic Signatures in Global and National Commerce Act (ESIGN), that person's responsibility will be satisfied by the retention of electronic records. See sections 101(d) and (e) of ESIGN, 15 U.S.C. 7001(d) and (e); also see 24 CFR 3500.23.
5) Q: Can we translate the GFE and the HUD-1 into languages other than English?
A: Yes, it is permissible to translate the GFE and the HUD-1 as long as the form has been translated accurately.
*The preceding Q&A was originally published on the HUD website.
Tuesday, August 18, 2009
How Well Do YOU Understand RESPA?
At its core, the Real Estate Settlement Procedures Act, better known as RESPA, is a consumer disclosure and anti-kickback statute intended to alert consumers about their settlement costs and to prohibit kickbacks that could increase the cost of getting a mortgage.
New RESPA regulations were published in November 2008 and are scheduled to take effect Jan. 1, 2010. To prepare for the changes, Federal Title & Escrow Company is hosting a free event for 100 guests, which will feature a presentation by mortgage banking and consumer finance expert Holly Spencer Bunting.
To attend this free event and learn more about RESPA, contact the marketing department at Federal Title.
Wondering just how savvy you are when it comes to RESPA? Take this RESPA Quiz created by Realtor.org and test your knowledge of the law.
New RESPA regulations were published in November 2008 and are scheduled to take effect Jan. 1, 2010. To prepare for the changes, Federal Title & Escrow Company is hosting a free event for 100 guests, which will feature a presentation by mortgage banking and consumer finance expert Holly Spencer Bunting.
To attend this free event and learn more about RESPA, contact the marketing department at Federal Title.
Wondering just how savvy you are when it comes to RESPA? Take this RESPA Quiz created by Realtor.org and test your knowledge of the law.
Monday, August 17, 2009
Federal Title President Joins Expert Click Community
Todd Ewing, president of Federal Title & Escrow Company is among the newest members of the Expert Click community. Expert Click connects journalists and experts in a variety of fields. For information about the title insurance business, how to calculate closing costs and laws and regulations like the Real Estate Settlement Procedure Act, or RESPA, visit Todd's profile.
RESPA Reform Expert to Shed Light on Upcoming Changes
Mortgage banking and consumer finance expert Holly Spencer Bunting will educate real estate agents, mortgage lenders and members of the media about upcoming changes in RESPA regulations during a complimentary luncheon next month.
Federal Title & Escrow Company is hosting the event in the Dogwood Room at the Kenwood Golf & Country Club in Bethesda, Md. on Wednesday, September 16 beginning at 10 a.m.
Bunting is an associate with the Washington, D.C. office of K&L Gates, concentrating on issues of federal and state regulatory enforcement, according to the firm's website. She represents companies in the mortgage lending, title insurance and real estate industries in connection with regulatory compliance matters and defends clients subject to government audits, investigations and enforcement proceedings.
Additionally, Bunting advises clients about federal and state consumer credit and protection laws and regulations, including the Real Estate Settlement Procedures Act (RESPA). Consequently, Bunting has delivered several presentations on RESPA and compliance and written several articles about the consumer protection statute, including "Finally, a Final RESPA Rule," and "RESPA's New Average Charge Provisions – Available for Some."
Federal Title & Escrow Company is hosting the event in the Dogwood Room at the Kenwood Golf & Country Club in Bethesda, Md. on Wednesday, September 16 beginning at 10 a.m.Bunting is an associate with the Washington, D.C. office of K&L Gates, concentrating on issues of federal and state regulatory enforcement, according to the firm's website. She represents companies in the mortgage lending, title insurance and real estate industries in connection with regulatory compliance matters and defends clients subject to government audits, investigations and enforcement proceedings.
Additionally, Bunting advises clients about federal and state consumer credit and protection laws and regulations, including the Real Estate Settlement Procedures Act (RESPA). Consequently, Bunting has delivered several presentations on RESPA and compliance and written several articles about the consumer protection statute, including "Finally, a Final RESPA Rule," and "RESPA's New Average Charge Provisions – Available for Some."
Friday, August 14, 2009
Free RESPA Reform Luncheon, Presentation
Are you still chewing over the details of the new RESPA rule, wondering how the changes will affect your daily work routine?
Federal Title & Escrow Company invites you to hear the real story on RESPA and enjoy complimentary lunch in the Dogwood Room at the Kenwood Golf & Country Club in Bethesda on Wednesday, September 16 at 10 a.m.
Mortgage banking and consumer finance expert Holly Spencer Bunting will discuss the new RESPA rule, which goes into effect on the first of the year. Bring your questions for a Q&A session immediately following the presentation.
Here's what Holly had to say about her upcoming presentation:
Space for this free event is limited to the first 100 guests, so reserve your spot today! Last day to RSVP is Tuesday, September 8.
Federal Title & Escrow Company invites you to hear the real story on RESPA and enjoy complimentary lunch in the Dogwood Room at the Kenwood Golf & Country Club in Bethesda on Wednesday, September 16 at 10 a.m.
Mortgage banking and consumer finance expert Holly Spencer Bunting will discuss the new RESPA rule, which goes into effect on the first of the year. Bring your questions for a Q&A session immediately following the presentation.
Here's what Holly had to say about her upcoming presentation:
Despite the U.S. Department of Housing and Urban Development's ("HUD" or "Department") publication of its final rule to amend the Real Estate Settlement Procedures Act ("RESPA") in November 2008, the rule continues to stir controversy as the effective date for the new HUD-1 Settlement Statement and Good Faith Estimate draws closer. While there is still hope that HUD will delay implementation of the new forms until the Department coordinates its efforts with the Federal Reserve, settlement service providers are gearing up for the January 1, 2010 effective date. This session will provide an in-depth overview of the components of HUD's final RESPA rule and the new HUD-1 and GFE disclosure forms.
Space for this free event is limited to the first 100 guests, so reserve your spot today! Last day to RSVP is Tuesday, September 8.
Thursday, August 13, 2009
MD 1st Time Homebuyers: True/False
STATEMENT: As long as you have not owned a principal residence in Maryland in three years, you qualify as a Maryland First Time Homebuyer.
FALSE: The code does not provide a reset clause – if you have ever previously owned a principal residence in Maryland, no matter when, you are not eligible for the exemption.
STATEMENT: If you have previously owned a property in Maryland, but have never lived in that property, you qualify for the exemption.
TRUE: The requirement is that you must not have previously owned a principal residence in Maryland. Previously owning a non-principal residence does not disqualify you, as long as the property that you are purchasing will be your principal residence.
STATEMENT: It does not matter how you title the property, you will receive the exemption as long as you are a Maryland First Time Homebuyer.
FALSE: If the purchaser is a Trust, a Partnership, an LLC, or a Corporation, it can not qualify as a Maryland First Time Homebuyer.
STATEMENT: If two people are buying a principal residence, as long as one of the buyers has never previously owned a principal residence in Maryland, they can receive the exemption.
FALSE: Every purchaser who intends to live at the property as a principal residence must have never previously owned a principal residence in Maryland.
STATEMENT: While I qualify for the exemption, my parents who will be on title only to help me get the loan disqualify me since they already own a principal residence in Maryland.
FALSE: The Maryland Code will still allow the exemption as long as the parents sign an affidavit stating that they are a co-maker or guarantor of a purchase money deed of trust and that they will not occupy the residence as their principal residence.
FALSE: The code does not provide a reset clause – if you have ever previously owned a principal residence in Maryland, no matter when, you are not eligible for the exemption.
STATEMENT: If you have previously owned a property in Maryland, but have never lived in that property, you qualify for the exemption.
TRUE: The requirement is that you must not have previously owned a principal residence in Maryland. Previously owning a non-principal residence does not disqualify you, as long as the property that you are purchasing will be your principal residence.
STATEMENT: It does not matter how you title the property, you will receive the exemption as long as you are a Maryland First Time Homebuyer.
FALSE: If the purchaser is a Trust, a Partnership, an LLC, or a Corporation, it can not qualify as a Maryland First Time Homebuyer.
STATEMENT: If two people are buying a principal residence, as long as one of the buyers has never previously owned a principal residence in Maryland, they can receive the exemption.
FALSE: Every purchaser who intends to live at the property as a principal residence must have never previously owned a principal residence in Maryland.
STATEMENT: While I qualify for the exemption, my parents who will be on title only to help me get the loan disqualify me since they already own a principal residence in Maryland.
FALSE: The Maryland Code will still allow the exemption as long as the parents sign an affidavit stating that they are a co-maker or guarantor of a purchase money deed of trust and that they will not occupy the residence as their principal residence.
Friday, August 7, 2009
What Do TILA Changes Mean for Lenders, Title Agents?
Changes to the Truth in Lending Act (TILA) now require lenders to provide consumers "early disclosure" of good faith estimates of mortgage loan costs and a minimum seven-day waiting period between disclosure and closing.
This means it's all the more important for lenders to obtain an accurate settlement fee quote from their title agent as early as possible.
The Federal Reserve has highlighted the major changes in the truth in lending early disclosure requirements in the chart below:
To avoid delays in the closing process, lenders must be precise. The new requirements also call for an additional three business days of wait-time before consummating a loan transaction should the APR reflected in the initial disclosure vary by more than an eighth of one percent (.125%).
A guaranteed quote, such as the one offered by Federal Title & Escrow Company, will ensure there are no surprises – or closing delays – at the end of a real estate transaction.
This means it's all the more important for lenders to obtain an accurate settlement fee quote from their title agent as early as possible.
The Federal Reserve has highlighted the major changes in the truth in lending early disclosure requirements in the chart below:
To avoid delays in the closing process, lenders must be precise. The new requirements also call for an additional three business days of wait-time before consummating a loan transaction should the APR reflected in the initial disclosure vary by more than an eighth of one percent (.125%).
A guaranteed quote, such as the one offered by Federal Title & Escrow Company, will ensure there are no surprises – or closing delays – at the end of a real estate transaction.
Wednesday, August 5, 2009
Don’t Let your Vacant Listing Go Third Class
Selling a property that the owner has already vacated? If the property is located in the District of Columbia, you will want to register the property as vacant with the city so that it can be exempt from paying additional property taxes.
The Real Property Classification Clarification Emergency Act of 2002 created a Class 3 property tax rate for vacant commercial and residential properties in the District of Columbia. Vacant property is taxed at $10.00 per $100 of assessed value – by comparison, a Class 1 residential property is taxed at $0.85 per $100 of assessed value!
Sellers who move out of a property before it is sold run the risk of having their property reclassified as vacant. The Department of Consumer and Regulatory Affairs (DCRA) inspects properties regularly to determine whether or not they are vacant. Individuals are also encouraged to report vacant properties to the DCRA. So a property that takes some time to sell and has already been vacated by the owners is particularly vulnerable to being reclassified.
Fortunately, by registering the property with the DCRA, an exemption does apply. A form needs to be completed with exemption category 5 checked and a small fee submitted. Also, supporting attachments must be submitted, such as the listing agreement with the realty agent contact information and documents showing ownership (either the Deed or HUD-1 Settlement Statement will typically suffice). The code allows for an exemption from Class 3 status for up to one year.
Here is the link to the form: (http://dcra.dc.gov/dcra/frames.asp?doc=/dcra/lib/dcra/2009_vacant_property_form_fillable.pdf)
Usually doing something first class costs you money, but in the District of Columbia, you want your property to receive the Class 1 treatment. So when vacating a listing, remember to register to get your Class 1 status – it will save a ton of money!
The Real Property Classification Clarification Emergency Act of 2002 created a Class 3 property tax rate for vacant commercial and residential properties in the District of Columbia. Vacant property is taxed at $10.00 per $100 of assessed value – by comparison, a Class 1 residential property is taxed at $0.85 per $100 of assessed value!
Sellers who move out of a property before it is sold run the risk of having their property reclassified as vacant. The Department of Consumer and Regulatory Affairs (DCRA) inspects properties regularly to determine whether or not they are vacant. Individuals are also encouraged to report vacant properties to the DCRA. So a property that takes some time to sell and has already been vacated by the owners is particularly vulnerable to being reclassified.
Fortunately, by registering the property with the DCRA, an exemption does apply. A form needs to be completed with exemption category 5 checked and a small fee submitted. Also, supporting attachments must be submitted, such as the listing agreement with the realty agent contact information and documents showing ownership (either the Deed or HUD-1 Settlement Statement will typically suffice). The code allows for an exemption from Class 3 status for up to one year.
Here is the link to the form: (http://dcra.dc.gov/dcra/frames.asp?doc=/dcra/lib/dcra/2009_vacant_property_form_fillable.pdf)
Usually doing something first class costs you money, but in the District of Columbia, you want your property to receive the Class 1 treatment. So when vacating a listing, remember to register to get your Class 1 status – it will save a ton of money!
Thursday, July 16, 2009
"AS-IS" IS "AS-IS" For Termites
[. . . All clauses in this Contract pertaining to Property condition, termites or compliance with city, state or county regulations are hereby deleted from this Contract. . . .] - AS-IS para. #3, Addendum of Clauses, GCAAR Regional Sales Contract
Yes, it means what it says. Read it, live it, and breathe it when you set out to present your next "As-Is" sales contract.
- It means that if the purchaser discovers infestation and structural damage resulting from wood destroying insects - tough luck - purchaser pays for the treatment and repairs.
- It means para.#16 of the Regional Sales Contract, "Termite Inspection" is DELETED - POOF! GONE!
Caveat: A seller cannot hang his/her hat on the "As-Is" clause if the seller intentionally or negligently misrepresented a material condition or fact; or if the seller fraudulently concealed a material condition or fact; or if the seller made a false promise of a character likely to influence, persuade, or induce.
Wednesday, July 15, 2009
Location Survey - WHY?
The GCAAR Regional Sales Contract makes only one reference to the survey and is found in para.#19 as follows: "The title report and survey, if required, will be ordered promptly . . . ." Note the key phrase "IF REQUIRED." What does that mean?
"IF REQUIRED" means if required by the purchaser's lender. Nearly all mortgage lender underwriting will require the title insurer to issue a lender's title insurance commitment without exception to survey matters. In other words, a lender will not accept a title insurance policy without coverage for survey matters.
"IF REQUIRED" means if required by the purchaser's lender. Nearly all mortgage lender underwriting will require the title insurer to issue a lender's title insurance commitment without exception to survey matters. In other words, a lender will not accept a title insurance policy without coverage for survey matters.
Tuesday, July 14, 2009
Taking Advantage of your Tax Appeal
The decrease in home prices does have some advantages, one of which is the opportunity to challenge property tax assessments. Often I find myself seated at closing with a homebuyer who has purchased a property for far less than the county or city assessed value. While challenging a tax assessment after closing may not be the most exciting way to spend your time, it does have the potential to save you thousands of dollars.
In Maryland, if a property is purchased between January 1 and June 30, the new homeowner has 60 days from the settlement date to file an appeal. If the homeowner misses this 60 day window, there are two more options: an appeal within 45 days of receiving an assessment notice (typically every three years) or a “Petition for Review” by January 1 of any year. The initial review will take place at the Supervisor’s Level, which is typically an informal, 15 minute meeting. If the homeowner disagrees with the decision, an appeal can be made to the Property Tax Assessment Appeal Board. If still dissatisfied, a further appeal can be made to the Maryland Tax Court. Here is the link to the Maryland Department of Assessments and Taxation, http://www.dat.state.md.us/.
In the District of Columbia, an appeal must be filed within 30 days of the date of the assessment notice (taxes are assessed annually) and it must be received no later than April 1. A new owner may file a petition for administrative review. The initial appeal can be conducted in person, in writing, or by telephone. If the disputed assessment can not be resolved, the homeowner can appeal for a Board level review, and if the homeowner is still not satisfied, a final appeal can be made to the Superior Court of the District of Columbia. Here is the link to the DC Office of Tax and Revenue appeals page, http://otr.cfo.dc.gov/otr/cwp/view,a,1330,q,594359.asp.
You should be prepared to provide comparables or other data to prove that the property assessment is too high. When appealing after a purchase transaction, a HUD-1 Settlement Statement or an appraisal may be helpful. Every property owner is entitled to obtain, free of charge, their property worksheet and a sales list for the area where the property is located. Most importantly, during the appeal, focus on the points that specifically affect the property value – do not argue about percentage increases, past values, or values of properties in other jurisdictions
Don’t be intimidated by the tax appeal process; typically at the first appeal level you will meet one on one with an appraiser in a non-adversarial setting. Also, most appeals are resolved at the first appeal, especially if you have done your research, therefore appealing to a review board or the tax court is not generally needed. So use your right to Tax Appeal, it’s not as difficult as it seems and the reward will be worth it.
In Maryland, if a property is purchased between January 1 and June 30, the new homeowner has 60 days from the settlement date to file an appeal. If the homeowner misses this 60 day window, there are two more options: an appeal within 45 days of receiving an assessment notice (typically every three years) or a “Petition for Review” by January 1 of any year. The initial review will take place at the Supervisor’s Level, which is typically an informal, 15 minute meeting. If the homeowner disagrees with the decision, an appeal can be made to the Property Tax Assessment Appeal Board. If still dissatisfied, a further appeal can be made to the Maryland Tax Court. Here is the link to the Maryland Department of Assessments and Taxation, http://www.dat.state.md.us/.
In the District of Columbia, an appeal must be filed within 30 days of the date of the assessment notice (taxes are assessed annually) and it must be received no later than April 1. A new owner may file a petition for administrative review. The initial appeal can be conducted in person, in writing, or by telephone. If the disputed assessment can not be resolved, the homeowner can appeal for a Board level review, and if the homeowner is still not satisfied, a final appeal can be made to the Superior Court of the District of Columbia. Here is the link to the DC Office of Tax and Revenue appeals page, http://otr.cfo.dc.gov/otr/cwp/view,a,1330,q,594359.asp.
You should be prepared to provide comparables or other data to prove that the property assessment is too high. When appealing after a purchase transaction, a HUD-1 Settlement Statement or an appraisal may be helpful. Every property owner is entitled to obtain, free of charge, their property worksheet and a sales list for the area where the property is located. Most importantly, during the appeal, focus on the points that specifically affect the property value – do not argue about percentage increases, past values, or values of properties in other jurisdictions
Don’t be intimidated by the tax appeal process; typically at the first appeal level you will meet one on one with an appraiser in a non-adversarial setting. Also, most appeals are resolved at the first appeal, especially if you have done your research, therefore appealing to a review board or the tax court is not generally needed. So use your right to Tax Appeal, it’s not as difficult as it seems and the reward will be worth it.
Thursday, June 11, 2009
Power of Attorney Pitfalls
In my 18 years as a settlement attorney, I can point to an improper Power of Attorney (“POA”) form as one of the most common causes of a delayed closing. You have no doubt encountered clients who are too busy or physically unable to make it to closing. You’ve heard “My mom gave me Power of Attorney,” “I gave my husband Power of Attorney,” “Grandma is in the nursing home – I have Power of Attorney.” Simple enough – right? Wrong.
So often, clients find POA documents online or stationary stores. We are frequently presented with general “checklist” POA forms and clients are dismayed to learn that we cannot accept them for the purpose of insuring title. When it comes to conveying or encumbering real property by Power of Attorney, make sure your client has the proper legal authority well before the closing date.
Many states specifically address, by statute, the use of Power of Attorney and impose very specific requirements. Title insurance underwriters go beyond the state’s statutory requirements with even stricter guidelines for Power of Attorney usage. I think it’s helpful to first understand the definition of an “attorney.”
ATTORNEY: A person legally appointed by another to act as his or her agent in the transaction. . . . www.dictionary.com.
It’s also important to understand the two specific parties in the Power of Attorney. The PRINCIPAL is the person granting another the power to act in their stead; the one who signs the POA document. The ATTORNEY-IN-FACT is the receiver of the power from the Principal.
In order to satisfy most title insurers, a POA form to be used for the purpose of conveying or encumbering real property must meet the following requirements:
RECENT: The document needs to have been executed by the Principal within a year of the transaction at which it is being used. While exceptions are made on a case-by-case basis, it is rare that a title insurance underwriter will accept an aging POA because of risk of fraud or marketability issues.
SPECIFIC: The document must grant the Attorney-in-Fact the powers required to effect the transaction and should recite the specifics of that transaction (i.e., property address, convey or encumber). A document giving the Attorney-in-Fact the ability to “handle real estate transactions” is too vague and too general.
DURABLE: The document must state that the Power of Attorney will not terminate upon the disability of the Principal. It is not acceptable for the document to be entitled “Durable Power of Attorney” and not recite the above durability language specifically with the text.
ORIGINAL: The document must be an original. A copy of the POA is not acceptable. The POA must be recorded with the clerk’s office and the clerk requires original documents to be recorded.
To be absolutely certain that your client’s Power of Attorney is acceptable, please forward to our office for review prior to closing. If you would like to have sample POA forms recommended by our office, please feel free to contact us and we will gladly provide those forms.
So often, clients find POA documents online or stationary stores. We are frequently presented with general “checklist” POA forms and clients are dismayed to learn that we cannot accept them for the purpose of insuring title. When it comes to conveying or encumbering real property by Power of Attorney, make sure your client has the proper legal authority well before the closing date.
Many states specifically address, by statute, the use of Power of Attorney and impose very specific requirements. Title insurance underwriters go beyond the state’s statutory requirements with even stricter guidelines for Power of Attorney usage. I think it’s helpful to first understand the definition of an “attorney.”
ATTORNEY: A person legally appointed by another to act as his or her agent in the transaction. . . . www.dictionary.com.
It’s also important to understand the two specific parties in the Power of Attorney. The PRINCIPAL is the person granting another the power to act in their stead; the one who signs the POA document. The ATTORNEY-IN-FACT is the receiver of the power from the Principal.
In order to satisfy most title insurers, a POA form to be used for the purpose of conveying or encumbering real property must meet the following requirements:
RECENT: The document needs to have been executed by the Principal within a year of the transaction at which it is being used. While exceptions are made on a case-by-case basis, it is rare that a title insurance underwriter will accept an aging POA because of risk of fraud or marketability issues.
SPECIFIC: The document must grant the Attorney-in-Fact the powers required to effect the transaction and should recite the specifics of that transaction (i.e., property address, convey or encumber). A document giving the Attorney-in-Fact the ability to “handle real estate transactions” is too vague and too general.
DURABLE: The document must state that the Power of Attorney will not terminate upon the disability of the Principal. It is not acceptable for the document to be entitled “Durable Power of Attorney” and not recite the above durability language specifically with the text.
ORIGINAL: The document must be an original. A copy of the POA is not acceptable. The POA must be recorded with the clerk’s office and the clerk requires original documents to be recorded.
To be absolutely certain that your client’s Power of Attorney is acceptable, please forward to our office for review prior to closing. If you would like to have sample POA forms recommended by our office, please feel free to contact us and we will gladly provide those forms.
Thursday, June 4, 2009
Transparency in Title Charges
WHY AREN'T TITLE COMPANIES MORE TRANSPARENT?
On average, title charges (i.e., settlement or closing fee, title insurance) comprise 70% of the total variable closing costs*. Since title charges do vary significantly from title company-to-title company in DC, MD, VA, and FL, it is very important for a home buyer to comparison shop.
Ever wonder why most title companies force you to make contact with them in order to get a quote for title charges? Seriously, with today's technology, why won't your title company allow you to anonymously get a customized quote for their services so you can do some comparison shopping? Why do you have to contact them and wait for them to call or email you back with a quote?
Where is the demand from consumers on title companies? After all, mortgage lenders are soon to be required (by law - see http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm) to provide a Good Faith Estimate (GFE) that is subject to a "no tolerance" increase for originiation and lender costs. Shouldn't similar demands be placed on title companies?
Most title companies hope that the referring party sends the contract and/or title order and doesn't encourage the consumer to comparison shop for title services. In this instance, the consumer is a captive audience and will be charged accordingly. When the referring party does encourage the consumer to shop, most title companies force the consumer to call them or email them before they will provide a quote for services. They want to "feel you out" over the phone or via email to determine how hard you are shopping. If they sense a "hard" shopper, the price goes down; if they sense a "soft" shopper, the price may go up. In other words, their title charges are not consistent across the board and vary depending on how hard they have to try. Further, there is a belief among these same title companies that if they can just get you on the phone or make direct contact with you, they can "reel you in" and sell you on their service (even if the company's charges are above market). If you are like me, you really don't want to talk with anyone and have to haggle - JUST GIVE ME YOUR PRICE SO I CAN COMPARE AGAINST OTHERS!
Whether you are a "hard" shopper or a "soft" shopper, the charges are consistent and available online 24/7 at http://www.federaltitle.com/. You don't have to talk to us! We are so confident of our service and pricing, that we allow consumers to obtain, ANONYMOUSLY, a guaranteed quote for services using our QuickQuote https://www.federaltitle.com/titleagents/QuickQuote/Default.aspx feature. Give it a try and you will see that Federal Title & Escrow Company is the most transparent and consumer-friendly title company in the market.
*Accurately defined, "variable closing costs" are those non-recurring costs for which you can shop. Examples of variable closing costs include lender charges (i.e., appraisal fee, underwriting fee, tax service fee, flood certification, document preparation fee); title company charges (i.e., settlement or closing fee, title insurance premium); or ancillary services (i.e., location survey, property inspection, termite report, home warranty).
Items such as transfer taxes, recordation taxes, stamp tax, prepaid interest and escrow/reserves for taxes/insurance are not considered "closing costs" because these items do not vary among service providers and cannot be "shopped."
On average, title charges (i.e., settlement or closing fee, title insurance) comprise 70% of the total variable closing costs*. Since title charges do vary significantly from title company-to-title company in DC, MD, VA, and FL, it is very important for a home buyer to comparison shop.
Ever wonder why most title companies force you to make contact with them in order to get a quote for title charges? Seriously, with today's technology, why won't your title company allow you to anonymously get a customized quote for their services so you can do some comparison shopping? Why do you have to contact them and wait for them to call or email you back with a quote?
Where is the demand from consumers on title companies? After all, mortgage lenders are soon to be required (by law - see http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm) to provide a Good Faith Estimate (GFE) that is subject to a "no tolerance" increase for originiation and lender costs. Shouldn't similar demands be placed on title companies?
Most title companies hope that the referring party sends the contract and/or title order and doesn't encourage the consumer to comparison shop for title services. In this instance, the consumer is a captive audience and will be charged accordingly. When the referring party does encourage the consumer to shop, most title companies force the consumer to call them or email them before they will provide a quote for services. They want to "feel you out" over the phone or via email to determine how hard you are shopping. If they sense a "hard" shopper, the price goes down; if they sense a "soft" shopper, the price may go up. In other words, their title charges are not consistent across the board and vary depending on how hard they have to try. Further, there is a belief among these same title companies that if they can just get you on the phone or make direct contact with you, they can "reel you in" and sell you on their service (even if the company's charges are above market). If you are like me, you really don't want to talk with anyone and have to haggle - JUST GIVE ME YOUR PRICE SO I CAN COMPARE AGAINST OTHERS!
Whether you are a "hard" shopper or a "soft" shopper, the charges are consistent and available online 24/7 at http://www.federaltitle.com/. You don't have to talk to us! We are so confident of our service and pricing, that we allow consumers to obtain, ANONYMOUSLY, a guaranteed quote for services using our QuickQuote https://www.federaltitle.com/titleagents/QuickQuote/Default.aspx feature. Give it a try and you will see that Federal Title & Escrow Company is the most transparent and consumer-friendly title company in the market.
*Accurately defined, "variable closing costs" are those non-recurring costs for which you can shop. Examples of variable closing costs include lender charges (i.e., appraisal fee, underwriting fee, tax service fee, flood certification, document preparation fee); title company charges (i.e., settlement or closing fee, title insurance premium); or ancillary services (i.e., location survey, property inspection, termite report, home warranty).
Items such as transfer taxes, recordation taxes, stamp tax, prepaid interest and escrow/reserves for taxes/insurance are not considered "closing costs" because these items do not vary among service providers and cannot be "shopped."
Wednesday, May 27, 2009
Going Green - Federal Title ditches paper copies for USB Flash Drive
Federal Title Goes Green
The average closing takes approximately 200 sheets of paper. There are loan documents, closing documents, title and deed documents, letters to buyers, letters to sellers, letters to lenders etc. By using a USB Flash Drive to store your (borrower's) documents, we can reduce this number by an average of 32%. Let's do a quick translation of what you are saving*:
So by using Federal Title & Escrow Company, you are helping the environment by saving trees, water and energy. We will provide a complimentary flash drive or can load the documents on a flash drive you provide. Rather have it on email? We offer that option as well.
What is a flash drive and who can use it?
It is a small memory stick that is placed in your computer's USB port, from there you open it and can see all of your closing documents. We convert your package to Adobe PDF for simple browsing. With this easy paper reducing process, you simply print out the papers you need and browse the others.
What are the advantages of having your closing documents on a USB Flash Drive?
You can easily:
Federal Title clients already have an advantage of being tech savvy, you have ordered online, received an email copy of your closing costs and eliminated sending faxes back and forth. Take that savviness one step further by putting all of your closing documents on a USB Flash Drive - walk out of closing knowing you have saved trees, water, energy but most importantly, time.
*Information was calculated by referencing http://www.printgreener.com.
The average closing takes approximately 200 sheets of paper. There are loan documents, closing documents, title and deed documents, letters to buyers, letters to sellers, letters to lenders etc. By using a USB Flash Drive to store your (borrower's) documents, we can reduce this number by an average of 32%. Let's do a quick translation of what you are saving*:
- One tree provides 17 reams of paper (approximately)
- In an average month at Federal Title, we can save 15 reams of paper by using a USB Flash Drive
- In an average month at Federal Title, we can save almost THREE tons of water by using a USB Flash Drive
- The average cost of a wasted page is $0.06
So by using Federal Title & Escrow Company, you are helping the environment by saving trees, water and energy. We will provide a complimentary flash drive or can load the documents on a flash drive you provide. Rather have it on email? We offer that option as well.
What is a flash drive and who can use it?
It is a small memory stick that is placed in your computer's USB port, from there you open it and can see all of your closing documents. We convert your package to Adobe PDF for simple browsing. With this easy paper reducing process, you simply print out the papers you need and browse the others.
What are the advantages of having your closing documents on a USB Flash Drive?
You can easily:
- Email any of the documents as needed
- Print any of the documents as needed
- Browse your settlement documents
- Store 50-75 sheets of paper in an area the size of your thumb
- Add any other real estate documents to the Flash Drive so you have everything together
Federal Title clients already have an advantage of being tech savvy, you have ordered online, received an email copy of your closing costs and eliminated sending faxes back and forth. Take that savviness one step further by putting all of your closing documents on a USB Flash Drive - walk out of closing knowing you have saved trees, water, energy but most importantly, time.
*Information was calculated by referencing http://www.printgreener.com.
Tuesday, May 19, 2009
Closing Costs Explained Visually
Finally - our new video!!
We have been working on producing a video that explains closing and settlement costs, visually. Buying a house is a huge financial committment and one that should not be taken lightly. The number one question we get from buyers and borrowers is "How much is this going to cost?" While there is no easy way to answer this question, we have created a suite of tools to get buyers and borrowers started.
But this new video is the one we are most excited about, take a look and let us know what you think.
We have been working on producing a video that explains closing and settlement costs, visually. Buying a house is a huge financial committment and one that should not be taken lightly. The number one question we get from buyers and borrowers is "How much is this going to cost?" While there is no easy way to answer this question, we have created a suite of tools to get buyers and borrowers started.
But this new video is the one we are most excited about, take a look and let us know what you think.
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