Spooky Claims 2018 Stephen C. Reid, III October 18, 2018 The - - PowerPoint PPT Presentation
Welcome to todays webinar! Spooky Claims 2018 Stephen C. Reid, III October 18, 2018 The webinar will begin shortly. In order to obtain a CE Certificate or CLE Credit, you must listen to the webinar for a minimum of 55 minutes
The webinar will begin shortly.
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Because of opinions expressed by the Texas Department
available only to: Attorneys who own title agencies that are Stewart Title Guaranty Agents Attorneys employed by a title insurance agent licensed with Stewart Title Guaranty or Stewart entities Fee attorneys who have an Escrow Officer license through a Stewart Title Agent or Stewart entity
We welcome any other lawyers to listen, but cannot provide continuing education credit to you.
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Stephen C. Reid, III
Underwriting Counsel
SW Regional Underwriting Office Stewart Title Guaranty Company
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In 2013, owner borrowed $2.5 M secured by a $1.5 M first and a $1 M second on commercial tract. Neither DT was recorded. In 2015, owner borrowed another $1.5 M from a second lender to be secured by the same property, which was insured as a first.
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Legal description for completely different property owned by borrower, but already mortgaged, is attached to the insured DT. 2016 first lender records both its first and second DTs. Later in 2016, title company that closed insured loan learns
copy of DT with correct legal attached, which is not legally effective
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Adverse lender files suit to foreclose and joins insured to establish priority. Insured notifies underwriter and we retain counsel to defend. Our insured was BFM because it made its loan before the prior lender recorded its DTs, BUT the other lender recorded against the correct property first.
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Court finds that the first correctly filed lien has priority.
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corrections. In this case it would have been a material change because it was adding land to a deed of trust that correctly conveyed
Material changes must be executed by each party to the
assigns.
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May 2012, 1st Mutual provides purchase money financing for new windows
– Windows installed in July 2012
Owners default on mortgage payments in 2014 and property is foreclosed. We insure purchaser in 2016.
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In early 2017, owner files a claim after being served with lawsuit to foreclose. 1st Mutual filed litigation to foreclose on the security interest related to the windows. The security interest was documented by virtue of a fixture filing in County Recorder’s Office.
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Even the claims handler was confused… The policy didn’t take exception for a recorded fixture filing, so the claim was covered…but there was a foreclosure of a prior lien…
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Claims handler argued the foreclosure of a 2010 deed of trust wiped out the fixture filing recorded in 2012. 1st Mutual disagreed. It argued timely perfection of its security interest by recording a fixture filing within 20 day period of time set forth in the UCC.
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UCC §9.334 provides that 1st Mutual’s fixture filing has priority where the debtor has an interest in the property or is in possession of it and
a) purchase money security interest in goods is granted to 1st Mutual and b) the competing lien arises before installation and c) 1st Mutual perfects its security interest by recording a fixture filing w/in 20 days after the goods become fixtures
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acquires priority over existing liens if it is filed within 20 days of installation.
wipes everything out. If in doubt – ASK UNDERWRITING!
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$850,000 deed of trust that recorded shortly before the 2006 $50,000 prior deed of trust (in the gap)
show as an exception on the policy
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Hope Equitable Subrogation Works Here…
permitted to enjoy an unearned windfall
loan, the new loan is then “equitably subrogated” in the amount used to pay off the prior loan
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likely what had happened with the omission of the $850k deed of trust on the prior 2006 report.
risk and pay attention to the dates. A quick search from the date of the deed of trust being paid off would have revealed this prior.
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Our insured hired an architect to complete some remodeling
He is aware of a 5 foot public easement that affects the Northeastern portion of his property and the plans are drawn up to accommodate this easement.
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The insured goes to get a building permit and the City refuses to issue, citing a 10 foot public easement. The easement substantially changes the landscape of the portion of the Property that is now available for remodel. The insured files a claim and the easement is found as an exception in Schedule B, however it contains an erroneous description.
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The exception specifically indicated a 5 foot (in width and scope) area of affected Property. As a result of the specificity, the exception was limited by the 5 foot description, when in actuality, a reading of the easement document would have revealed it was 10 feet in width and quite longer in length.
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We have had numerous claims related to mistakes regarding whether a prior lien was released. Following are a few examples:
released in a prior transaction, although no release was of
contain an exception for the lien, however it was later determined that the insured property was excluded from the legal in the prior policy.
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transaction, although no release was of record.
exception to the DT.
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$2,000,000 line of credit loan.
but never received a release.
commenced foreclosure after the borrower defaulted.
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it received and cashed the payoff check.
was sent, barring LOC lender’s claim. Part of the evidence was whether the original check had staple holes, as testimony showed payoffs were routinely stapled to close
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Mortgages”
advanced lenders “forget” about the close out letter. Send a second copy of close out letter with follow up request.
§12.017.
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GO Properties was formed as an LLC with two members: Olicorp Properties, LLC (Olicorp), and Gracie Properties, LLC (Gracie). Olicorp's sole member was Larry Oliver; Gracie's sole member was Stacy Phillips. The GO Operating Agreement named Olicorp as the sole Member Manager.
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On August 1, 2013, Phillips, without any authority under the GO Properties Operating Agreement and without notifying Oliver, filed a Notice of Change of Registered Officer or Registered Agent with the Secretary of State, which changed the registered agent from Olicorp to Gracie.
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She also filed a Notice of Change of Principal Office Address, which changed GO Properties' principal address from Olicorp's business address to Phillips's home address. Phillips handwrote her title as "Owner" of GO Properties on both documents.
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The issuing agent relied on Phillips's representation that she was the owner of GO Properties, and the change of registered agent and change of principal address as it conducted its examination and later acted as closing agent for the transaction.
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At trial evidence of underwriting standards for insuring a sale from a LLC was introduced. That evidence showed that to insure a sale from a LLC it is necessary to obtain a copy of the LLC's operating agreement, any and all amendments thereto, and a certificate that the operating agreement is a true and correct copy of the agreement in effect at the time of the sale.
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The Court found that Phillips did not have authority to sell the property and therefore the sale was void.
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Insured files a claim after being named a defendant in litigation filed by the neighbor related to a 40 foot access easement. The neighbor wants to enforce the easement agreement and terminate a subsequent Designation of Easement Location document that was recorded prior to the Policy being issued.
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The Easement itself was listed as an exception in the final title Policy. But the Designation of Easement Agreement, which defined the specific location, was not. The location defined severely impacted the Insured’s ability to build on the Property.
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When there is more than one document that relates to a specific exception that is found in the public record, it is important to review all additional documents and may be important to include all of these as exceptions on the Policy, even if the easement itself is excepted from coverage.
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Insureds filed a claim when they discovered they did not have a legal right of access to use the driveway that crossed a neighboring property (and was the access they had been using and relied on at the time of purchase). We had issued a T-23 which affords both actual vehicular and pedestrian access.
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Review of the chain of title found that the actual recorded right of access was up the hill and not anywhere close to the driveway location. In fact, it did not even front the property and abutted a different street then that specified in the endorsement.
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P-54 Non-residential only Underwriting requirements:
inspection that the easement abuts and provides actual pedestrian and vehicular access to the Street.
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Verify by survey, review of available MPAs or inspection that the Street appears to be physically open and publicly maintained and that existing curb cuts on the easement provide actual access to the land from the Street. Must have existing improvements, no undeveloped land without underwriting approval.
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A letter from an appropriate city or county official confirming that the street or road is open and publicly maintained may be used with underwriter approval. Each named street requires a separate T-23 endorsement but only one R-30 premium is charged.
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We insured a metes and bounds legal description that includes calls located west of the right of way of a railroad The problem is that the insured property lies west of the RR right of way, and the public road is located on the east side
So the RR right of way sits in between the easterly side of
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The T-1 and T-1R both insure the right of access but there is no easement or other reserved right to cross the RR right of way. Even if there is an existing crossing in use, it may be by way
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In this case the problem could have been caught by a careful review of the legal description which would have revealed that the property was entirely west of the right of way, did not abut a public street and there was no recorded easement.
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Borrower owns property encumbered by a mortgage in favor
Issuing Agent is being asked to issue a Loan Policy on a $296,000.00 refinance transaction The payoff received from First National Bank states that “existing mortgages filed against 1 ABC Lane will be
$55,000.00 will be filed and subordinated”.
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An e-mail from First National Bank indicates that it will send its mortgage to agent for recording “so that it is in a 2nd position to New Lender”. Refinance transaction is closed and funded on June 10, 2009. Disbursements are made, including payoff to First National Bank, on June 10, 2009.
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Recording is sent to courthouse on June 18, 2009. During run-to-date at the courthouse, it is discovered that a mortgage was recorded on June 17, 2009 in favor of First National Bank in the amount of $52,000.00. Should be easy fix, get subordination from First National Bank, but unfortunately they will not give subordination
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recording and advise lender that it is returning funds pursuant to lender’s closing instructions.
the agent sat on the documents 10 months before
bankruptcy in the interim.
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The insured lender is named in foreclosure suit, seeking to declare its lien subordinate to the $52,000.00 First National Bank lien. That note is now held by a very large lender who refuses to recognize the apparent agreement to subordinate. The loan
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Once the funds are disbursed it is best to record. Waiting to record will only create more problems. Notify underwriting counsel as action may taken early on that may not be available later.
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Underwriting Counsel
Stewart Title Guaranty Company Houston, Texas
800.252.5712 streid@stewart.com
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Claims 2018” In the body of your e-mail:
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For Questions/Comments Email john.rothermel@stewart.com
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