5730 Commons Park Drive
East Syracuse, New York 13057
(877) 479-4500

Red Flag Title Insurance Issues

1. Legal descriptions: 

There are situations where the borrowers own a large tract of land, however, the lender only wants 1 acre. It is necessary to have a survey prepared with a legal description for the necessary acreage. A new deed needs to be prepared and filed at closing with this legal description. Certain municipalities require zoning approval for this split. Even though there is usually no problem, this may take time and require appearance at Board meetings. Also, there are times that the legal description is not readily discernable.

2. Addresses:

Many times the address the borrower gives you is not the proper legal address. This occurs in the less developed areas. This is a result of the imposition of 911 operations. It is important that all the addresses match. The mailing address may be different than the legal address.

3. Ownership/Land contracts:

The person who applies for the loan may not necessarily be the "legal" owner of the property. Many times land contracts are not filed and therefore a search will not reveal the ownership of the borrower. It is important to indicate if there is a land contract and the name of the current owner.

4. Co-signers:

Are all parties going to be in title? If so, then a deed may need to be completed. Anyone can sign a Note but only people in title (on-the-deed) can sing the mortgage. IN the event of merely co-signer, this person needs to sign Note, Mortgage, TIL Documents and Right of Rescission.


5. Surveys:

Most times a survey will not be needed. However, it is necessary to identify the times that it will be required. It will be needed in the following situations:

        a. New Construction
        b. Reducing the acreage being mortgaged;
        c. Poor legal description.

Whether or not a survey will be required for a poor legal description may be up to your office. 

6. Life uses:

Many people use this as a manner to protect older persons. The typical example is the Widow who deeds the property to her son and daughter in law but wants to live in the house until she dies. The deed reads: "Mary Widow to Fred and Wilma as Husband and wife and Mary Widow for her natural life."

In this situation, Fred and Wilma can not mortgage the property without dealing with Mary Widow. They have the following options:

        a. New Deed from Mary Widow to Fred & Wilma;
        b. Mary Widow signs the Mortgage, TIL, Itemization of Amount Finance; Rescission and nothing else;
        c. Mary Widow signs all the documents;
        d. Mary Widow is dead and proof of death is provided.

7. Real Property Taxes:

Every parcel of property pays some sort of real property taxes. These include the following taxes: County, Town, City, Village, School, Water & Sewer charges, street repairs, condominium common charges and other local charges.

Property taxes are always a lien on the property and can defeat the lien of a mortgage. This is true even after the mortgage has been recorded. This is the reason that lenders require taxes to be paid in full at closing. Also, the lender keeps track of tax arrears and will make tax payments to keep the taxes current.

In the event of serious arrearage, the eventually the municipality will commence a tax sale. This is a generally lengthy procedure which ultimately vests title into the municipality. Payment of taxes will not necessarily stop this, because the municipality may credit payment to current taxes and not arrears. With tax arrears, we need to obtain certain documentation from the municipality. 

NOTE: If taxes are due prior to the date of the first payment on their new mortgage, the money will be deducted at closing and we will pay the taxes for the borrower. This guarantees that the taxes will be paid in full and on time. You must always include these amounts in your calculations at these times of the year when the taxes are due. 

8. Deeds:

In various States there are more than just the Deed document that needs to be filed. For example, in New York in order to record a Deed there are three documents that the County Clerk requires:

        a. Actual Deed;
        b. Gains Tax Affidavit;
        c. Equalization and Assessment Statement

9. Open Mortgages:

Pay off letters are normally requested and obtained. However, there are times that these are not valid. It is important to be careful with reviewing the payoff letters.

After the lender receives payment in full according to its payoff letter, it will send a mortgage satisfaction which will be filed in the appropriate office. It is also important to remember that interest on this mortgage will continue to accrue until the date payment received. Open mortgages must be resolved in one of the following manners:

        a. Paid prior
        b. Paid at closing
        c. Subordinated to current mortgage
        d. Not an issue (2nd mortgage situation)

10. Satisfactions of prior paid mortgages:

If the title indicates an unpaid mortgage but your Borrower tells you it is paid we need to obtain a satisfaction of that mortgage in order to proceed to closing. We can also close if we have a letter from the prior lender indicating that this was paid prior and that a satisfaction is being sent. As soon as possible please provide our office with the following:

        a. Name, Phone Number and Address of Borrower
        b. Name and phone number of the bank involved

11. Private Mortgages:

It is important with Private Mortgages to obtain a mortgage satisfaction prior to funding the loan. This is due to the fact that the Mortgagee could die prior to executing the document or change his/her mind. Many times the Mortgagee will not sign the satisfaction without being paid. In these situations, we need to arrange an exchange with either the Mortgagee attorney or an escrow agent located convenient to the Mortgagee. 

12. Judgments:

We need to have pay off letters. Also, as with Mortgages, if the Creditor is private, the satisfactions must be obtained prior to closing. It is important to let us know if you will be negotiating a judgment for a borrower. In this manner the judgment may be reduced by negotiation. 

Many States impose interest on the judgment. For example in, in New York judgment creditors are entitled to their base amount together with interest at the rate of 9% from date of Judgment. Therefore, when factoring payoffs and amounts necessary, always add this amount. 

Judgments are resolved as follows:

        a. They were paid prior to the closing and not open;
        b. Paid at closing
        c. Subordinated to the new mortgage
        d. Released
        e. Not an issue (Purchase money mortgage)


13. Satisfaction, Release, and Subordination:

The definition are as follows:

        a. Satisfaction: The borrower will not owe any more on this item it is paid in full. 
        b. Release: The borrower still owes the money, but the current lender or creditor will
            allow the real property to be mortgaged without having to be paid. This is common with
            bankruptcy situations.
        c. Subordination: The Borrower still owes the money and the real property is still being used as
            collateral. However, the current lender or creditor allows the lender to place its mortgage in
            front. This is a common devise with government grants, low interest government loans or
            Social Service liens.

14. Issues Found at Funding:

After the rescission period or at the funding of the loan, the Mortgage and other necessary documents are forwarded to the Abstractor for recording. Prior to recording, the Abstractor searches the record from the last date to the minute prior to recording. If nothing new is found, then the papers are recorded. If something is found, then the Abstractor contacts us to determine what it is and what to do with it. If a new judgment has been recorded, it must be paid.

15. Bankruptcy:

It is important to have a "heads" up on this prior to closing. 
As you are aware, in the event of a Bankruptcy, all judgments become null and void. The creditors can not continue collection efforts. However, these judgments become a lien on real property and must be removed prior to placing a new mortgage.

We need to make the following determinations:

        1. Was the judgment listed in the Bankruptcy petition;
        2. Was a Discharge of Bankruptcy issued;
        3. Was the judgment obtained prior to Bankruptcy;
        4. Was the borrower the owner of real property at the time of bankruptcy.
        5. Did the Bankruptcy lawyer obtain a specific release of the judgment from the real property
            as part of the bankruptcy.

These are the questions that need to be asked and determined. 
In the worst case scenario, we would need to obtain a release from the creditor. Usually the borrower would pay a small amount for this release. If a release can not be obtained, then the borrower would have to obtain a Court Order releasing the lien. 

In New York, it would cost the borrower about $ 1,200.00 to go to Court to remove these and about 6 months of time. It therefore becomes a balancing act as to which is better for the Borrower. Please forward bankruptcy documents to us so we can review prior to closing.

16. Estates:

This area is very State specific. In New York, the Probate Procedure proves validity of Will. This occurs in Surrogate's Court in New York. The Court appoints a fiduciary; either an Executor (Male) or Executrix (Female.) This person then settles the estate, marshals the assets and pay the bills per directions in will. The issue of Estates is an important title issue. This arises in the following situations:

        (1) Husband & Wife; 

Estate Status: Husband dead
Mortgage: Wife refinances house. 

Issues: 

Estate Tax Release: Not Needed
Death certificate: Required for Husband
Probate Issues: Not Needed
Other: Proof that married at time of death

        (2) Husband & Wife; 

Estate Status: Both dead; title is still in Husband & Wife
Mortgage: Son is re-financing. He states that he owns the house and now he wants to re-finance.

Issues: 


Estate Tax Release: Needed
Death certificate: Needed for Both
Probate Issues: Needed for last to die
Other:      

        a. Proof all Estate Heirs are/will be satisfied; 
        b. Administrator's Deed or Executor's Deed;
        c. Deed from all heirs at law;
        d. Affidavit of heirship
        e. Indemnification Agreement from Heirs 

3. Husband & Wife; 

Estate Status: Both dead; Title is Vested in Son by Executor's Deed.
Mortgage: Son is re-financing. 

Required: Depending on the time period of the Deed, if no mortgage that is being paid off with new; and within 2 years of the date of re-finance, then will require the same as B; after 2 years or if Mortgage then no other issue.

        a. Home harmless affidavit from Executor
        b. No consideration, then more information

17. Trusts:

This is becoming a more frequent issue. Trusts are used for estate planning purposes and tax planning. The Trust is on the same status as a legal entity such as a Corporation. As such, the Trust can own and sell real property. Unlike a Corporation or other business, the Trust powers are limited to it by a Trust Agreement. This is a document which sets forth the Powers of the Trust. This document also sets forth the person who is in charge of the Trust, (Trustee). This person has the power to sign for the Trust. Therefore, whenever there are trusts we need the following:

        1. Copy of the Trust Agreement;
        2. Name, Address & Phone number of Trustee;
        3. Deed from the Trust

Types of Trusts:

        1. Testamentary Trust
        2. Spendthrift Trust
        3. Inter Vivo Trusts 

18. Powers of Attorney:

Death voids a power of attorney. The property cannot be transferred to a the Power of Attorney by him/herself. This type of deed is void and not insurable.

19. Capacity of Borrowers:

It is always an issue that the Borrowers know what they are doing. There are some times that you may know that the borrowers have a physical or mental problem, or may not speak English well. This does not necessarily mean that the closing cannot take place, but rather, we must take extra care. In some situations, we require the Borrowers to have their own attorney, interpreter or other assistant. This is to protect the lender in the event of a foreclosure action, it is harder to allege that they did not know what they were doing. The more time and notice we have of these issues, the smoother the closing. 

20. Common Endorsements:

        a. Environmental Lien Endorsement;

This insures against loss or damage suffered by the lender as a result of recorded environmental protection liens or litigation. These may be super liens or secret liens without any requirement that an instrument be recorded.

        b. Waiver of right of Arbitration;

This deletes the arbitration clause in the standard ALTA policy. It gives more protection and rights to the lenders.

        c. Survey Endorsement: 

Protects the lender without the necessity of providing a survey. Can only be used on property less than 5 acres in size and not for farm land. 

21. Departmental Searches ("Municipal Searches)

These searches include Certificates of Occupancy; Streets; Vaults; and other such searches. These are not title issues, but are rather done as a consideration for the lender. The issues contained in these searches are only for reference only.

22. Miscellaneous Issues: 

Corporations; Indian Land Claims; and Unrecorded mortgages; unrecorded land contracts; or other unrecorded liens