Tag: insurance

Commitment Issues, Vol. 2 – Commitment Jackets

As we discussed in the first volume of this series, which can be viewed here, “issues” does not refer to problems that you may find with the Commitment, but issues, such as a magazine or a publication series, about Commitments. In the first issue, we covered the generalities of the Commitment to help landscape the idea of exactly what it is (and is not) and the purpose it serves. Now let’s dive into the finer details of different aspects of the Commitment itself.

As a Whole

As we discussed previously, “the Commitment Jacket is general, non-specific coverage that is issued from an insurance underwriter (the Insurance Company).” The term “jacket” refers to the pre-digital era, before commitments and policies were computer-generated. Everything was simply put into a paper folder with inserts. Nonetheless, the name still carries on today.

The Jackets from each insurance underwriter are fairly standardized across the board from the American Land Title Association (ALTA) and contain a notice, commitment to issue policy, and conditions.

The Nitty-Gritty

Or in other words, the jacket is the part you usually just scroll over to get to the schedules. But here is a brief summation of what each of the 3 parts is stating.

The Notice lays out what the Commitment is and what it is not. For instance, it is not an Abstract of Title, condition of Title, legal opinion, or title policy. Rather, just a Commitment to issue Policy.

The Commitment to Issue Policy section may sound redundant, however, this is the Insurance Underwriter’s obligation specifically to issue the Policy subject to the Notice, as stated, and the Commitment Conditions, Schedule B I – Requirements, and Schedule B II – Exceptions. Also included in this section is a statement giving the life of the Commitment from the underwriter. Some insurance underwriters give different lengths of time for the requirements under Schedule B I to be met before the Commitment is no longer valid. If a Lender is involved, they may have their own stipulations on how long they will accept the Commitment.

The Commitment Conditions will give definitions of terms that are pertinent to understanding the Commitment, all the components necessary to make the Commitment valid, the Company’s right to amend, and liabilities from the Company to the proposed insured. Some insurance underwriters will have more conditions than others but will include a vast majority of the same.

As you can see, the Commitment Jacket provided contains general provisions and agreements of the relationship between and from the Insurer and the proposed Insured. A Commitment Jacket will always be provided from Tallgrass Title on every transaction that we are insuring and issuing a Policy.

Be sure to keep an eye out for the next blog in the series, as we will be covering the components and aspects of the Commitment issued by the Title Company. You, too, can be Title Commitment literate and savvy!

And even if after reading this you still need clarity and have further questions, please don’t hesitate to reach out and get ahold of us. Title is what we do!

Title Searches w/Thais: Title Examiner: Boring Job or Not?

I have been asked many times, “so what exactly do you do for your job?” My first attempt at a succinct answer is to say, “I work with title insurance”. However, this generally seemed to lead to the misconception that I was somehow a telemarketer and tried to sell insurance to people over the phone. This mistake on my part led me to believe that a lot of people do not really know what goes on behind the scenes when they conduct a transaction through a title company. And when they do find out, they then assume I have a very boring desk job sitting in front of a computer all day. While I will admit that this 8-5 is not the most, shall we say, exhilarating, I think it is arguable that a Title Examiner can have a very interesting job at times.

To sum up the job of a title examiner, our job is to conduct a search of the public records at the county in which the property in question is located, and to write a Title Commitment, which is the Title Company’s binding promise to issue an insurance policy based on the terms and conditions laid out within it. These 8 or so pages often appear to just be a lot of legal mumbo jumbo, once again giving the appearance of a very boring job. But whenever there is an issue that requires further investigation on our part, we often stumble on some fascinating things, things that often can tie into the history of Kansas, and sometimes even the history of America.

Sometimes, when tracking the ownership of land, we find out that a property has been owned by generations of the same family, even tracking back to the Land Patent – the transfer of title to land owned by the government to an individual. Most of these occurred in the 1800s. Following this chain can lead to discoveries such as very old probates and obituaries, which can lay out the whole reason they moved to Kansas in the first place, and how it passed through children and generations to the current day.

Did you know that according to certain research, there are over 300 ghost towns in Kansas? [1] Some of these were just a result of a failed settlement, but others were caused by events such as the creation of the Tuttle Creek Dam, which everyone knows exists. What might not be so commonly known is that this wiped out multiple small towns in Midwest Kansas. Cleburne, Kansas [2], was one of these. Remnants of the town can still be seen today, but it has been uninhabited since the mid-1950s. Running into documents during a search that reference a town which is nowhere to be found in the present day, instigates a little bit of digging to find out the story of what actually happened.

Every job has its high points and low points, but a Title Examiner is given the opportunity to learn many interesting things, all while doing a stellar job at producing a title commitment at the end of the day. And, thankfully, not spending their day on the wrong end of a telemarketer phone call.

Closings with Karissa: Why Title Insurance?

I routinely hear the question: Is Title Insurance worth it?. My answer, is yes, it is quite important. You wouldn’t buy a house without homeowners’ insurance or buy a car without car insurance. I’m sure you have Health and Life insurance. If you are protected in other aspects of life, why would you not protect the title to your home as well?  and does not have liens attached? The best part is that title insurance is a one-time fee that is paid at closing and you never have to worry about it again. As long as you own the property it is protected. So it would be crazy not to do it!

Who thought up Title Insurance… and why?

Title Insurance used to be done by opinions given by Conveyancers prior to 1876 when Joshua Morris founded Real Estate Title Insurance Company of Philadelphia.  The purpose was to have land conveyances financially guaranteed instead of the old system of relying on opinion-based reporting without financial backing.  Now, instead of “trust me” the industry offered “if we are wrong, I will pay you.” Other companies in Chicago, Los Angeles, Minneapolis and New York followed shortly after and ALTA was created to assist in standardizing and unifying the Title Insurance industry.

What is ALTA?

In 1907 the American Land Title Association (ALTA) formed as the primary association of the Title Insurance industry. The association set the precedence for title insurance, they did not standardize title insurance policies nationally until 1929.

What can Title Insurance protect against?

Title insurance protects against hidden issues, liens and encumbrances that can be costly to the new homeowner. The following are examples of potential issues:

  • Lack of Access
  • Unpaid Mortgage
  • Seller claims to have ownership, but do they really?
  • Neighbors have an easement through the property
  • Previous owners deceased family member is buried on the property
  • Legal Judgment for previous owner that attached to the property

No one is exempt from uncleared title issues. Even Abraham Lincoln’s father lost his home to title defects when Abe was a little boy…Twice.

So, why title insurance?

No one wants to live with the fear of losing their home due to a claim by someone else or from a lien that could put their home in foreclosure. Especially if they the option to have an insurance policy that says they own their home and no one else has a claim to it. Title Insurance, while not required, is still very important.

Title Insurance can sometimes be overwhelming and appear confusing.  However, the Tallgrass Title team is here to assist with your title insurance questions, just give us a call!

 

Closings with Karissa: Security & Real Estate Transactions

Real estate fraud is alive and well as fraudsters find new ways to cheat people out of their money. Whether it be through fraudulent emails or posing as a realtor and calling clients to get them to send money. Title companies, banks and realtors strive to protect buyers’ and sellers’ money as if it was their own money. It is our job to protect our clients and ensure a smooth closing process for everyone. We were asked recently what we do to protect our clients’ sensitive information and protect their assets.  We take this very seriously and want to share a few ways we do this.

ID Verification

When Sellers come to our office to sign documents to sell real estate, we check photo identification. We ensure the party “selling” is in fact the party in title and not a fraudster claiming real estate as their own.

Remote Online Notarization (RON)

Believe it or not, signing documents through a RON environment is more secure than signing in person. Signers must submit their photo ID while on a live audio-visual session, like in person.  But they also answer KBA (Knowledge-based authentication) questions to verify their identity. We simply do not have that kind of capability in person and this adds an extra layer of identity verification.

Secure Wire Instructions

We work with CertifID to send and verify wire instructions. It takes a little extra time to verify your identity and banking information with this process. However, we do this to guarantee funds are getting to where they are supposed to be instead of being sent to a fraudsters personal account.

Earnnest

“You spelled that wrong.”

We hear this a lot, however, I assure you we know how to spell. Earnnest is a payment portal we use to request earnest money from our clients to satisfy the terms of the contract. It works a lot like Cash App or Venmo, is secure, and the Earnest Money goes straight from the buyers bank account to ours. We simply send your buyer a link to our custom payment portal and they complete payment.  This reduces the need to navigate wire instructions and the possibility for human error. There is also a cost savings over cost of sending a wire, in most cases.

E-Signature Platforms

Our office utilizes Dotloop and HelloSign to get documents to clients securely. We can send view only documents or we can send documents with a request for information and signatures. This eliminates the requirement for password protecting a PDF in email and still applies the security necessary to protect sensitive information.

Password Protected

If our office does send out sensitive information via email, we will always password protect it to secure information that is not public knowledge, such as settlement statements. At any time, a fraudster could be hanging out in your email and open attachments that are not secured to see what the proceeds would be for a transaction, then reach out to you with bad wire instructions requesting you send your hard-earned money to then instead of to the title company for your transaction.

Why?

Wire fraud and other forms of cybercrime in the real estate sector resulted in $350 million in losses in 2021, up from $213 million in 2020. While only 12,000 people a year are victims, one in three real estate transactions is a target. This is why we remain vigilant in our own practices and in our efforts to educate our clients.[1]

A staggering 35% of fraud attempts reported in 2021 were traced back to email. If you suspect a fraudulent email was sent to you, do not respond to it, click any links, or open its attachments. Reach out to your realtor, title company, lender, client using known information from a source outside of the email. Stay tuned for a follow-up blog on email security tips!

We are here to answer any questions you may have, protect your information, and help make your closing experience as smooth as possible.

[1] https://blog.alta.org/2022/03/cyber-losses-hit-69b-in-2021.html

But really, have you met RON?

Ever since the State of Kansas passed and implemented permanent RON legislation, we’ve been hard at work to get RON off the ground and running.

We’re thrilled to introduce you to our friend RON.

Who/what is RON?

RON stands for Remote Online Notarization. This is the process of a signer appearing before a notary public (with RON designation) via a recorded audio-visual call. The documents are signed and notarized electronically, and the signer must complete KBA (knowledge-based authentication) identity verification prior to signing.

The implementation of KBA identity verification makes completing a signing and notarization with RON technology even more secure than in-person.

Why does RON matter?

Over the past few years we have come to understand the need to be flexible and introduce remote solutions. Beyond quarantine and illness, we’re living in an increasingly digital world. If you can order your groceries from your couch, why not buy or sell your house? Both are inevitably quicker and contact free.

The significance of RON goes beyond a matter of convenience. Sellers often move before the sale and buyers aren’t always available to close. Our Kansas RON notaries can complete a notarization with a signer anywhere in the United States. Over the past month, we’ve completed deed packets with sellers in Colorado, Iowa, Texas, and right here in the Flint Hills.  These signings took no more than 15 or 20 minutes, proving to be quicker and more cost effective than overnighting documents back and forth to out of state parties.

How does it work?

Tallgrass Title has partnered with the RON platform Pavaso in order to complete seamless notarizations. Like many other RON platforms, Pavaso boasts KBA identity tools and an environment to perform audio-visual sessions, that are recorded and stored for 10 years (should there ever be any question about a particular signing or document).

Pavaso also allows for your Tallgrass Title closers to act as the notary during these RON sessions, whereas many RON vendors require that you use their contracted notaries. We understand that relationships make up 90% of the work that we do – if you and your client utilize RON through Tallgrass Title, you and your clients will be meeting with your beloved Tallgrass Title closers.

If we decide that RON will be right for your next transaction, we will send the signer and any requested observers links to sign up for Pavaso in advance of the scheduled “closing” time. During this time, the signer will have access to review the documents they will be signing in advance. We feel that this gives the client opportunity to prepare questions for the closing agent and avoid the “rush” feeling that often accompanies in-person signings.

When will this be available?

It’s available now! We have been using RON to complete deed packets for several months now and have found this to be an excellent resource for sellers. We hope to utilize RON for loan packets in the future, but approval will always be up to the individual lender’s discretion. If your lending institution is interested in or already using RON, let’s talk!

That’s a wrap!

If your team would benefit from more information about this awesome resource, we’d love to sit down and provide you with more information and/or a demo! Please keep this awesome resource in mind for your next transaction. And as always, let us know how we can best serve you and your clients – it’s what we’re here for!

Closings with Karissa: Property Taxes

Closings with Karissa is back with a few helpful reminders on property taxes and second half payments.

It’s that time of year again.

Real estate taxes are due to the county treasurer. Do you pay them before closing? Will the Title Company pay them before closing? What if the seller’s lender pays them before closing and the Title Company collects for them too? These are some of many questions that might swirl around homeowners’ heads right before closing.

First & Second Half

Taxes are available for payment in November of the current year with due dates of December 20th of the current year and the following May 10th. Taxes can paid in full in December or paid half and half in December and May. They first half is considered delinquent on December 21st and will start accruing late fees and penalties on that date. The second half is considered late on May 11th and will start accruing late fees and penalties on that date. If your closing is taking place after one of those dates and you do not have taxes set up in escrow, it is advisable for payments to be made prior to closing to avoid extra charges.

Taxes & Your Closing

Taxes are considered a lien on real estate. They are always there (unless the landowner is tax exempt) and will be in first lien position to all other liens – including mortgages. This means that taxes will always be paid out first in the event of a court action and your closing agent will make sure that tax payments are up to date.  If current taxes are not yet paid, they will apply that payment to your settlement statement to be paid at closing, including any applicable fees.

If closing takes place in October or November, it is likely that the seller rather than the buyer will receive the annual tax statement.  This is because the county treasurer’s office may not have new owner information updated prior to mailing out November tax statements.  If this happens the taxes are still the responsibility of the party that agreed to pay the year’s taxes as part of the real estate contract.

Things to remember:

  • Taxes are due December 20th and May 10th
  • The Title Company will pay off taxes based on the terms of the contract
  • The Title Company will never keep funds collected for taxes already paid, they will always refund payments rejected by the treasurer for previous payment.

If you have more questions about taxes, please reach out to your closing agent and they will walk you through taxes and prorations. It is our job and our pleasure at Tallgrass Title!

Reverse Mortgages and You!

What is a reverse mortgage?

Can I sell property with a reverse mortgage? Should my grandma get a reverse mortgage?

With a conventional mortgage, a person borrows money from a bank and the bank files a mortgage on the person’s real estate.  If the individual fails to pay back the loan to the bank, the bank uses its mortgage to sell the real estate.  Simple enough. Most residential real estate transactions involve the buyer obtaining financing from a bank to purchase the real estate.  The bank in turn files a mortgage during the process.  The funds are distributed in a lump sum to the sellers.  In a reverse mortgage scenario, funds are distributed slowly, over time to the party owning the real estate.  The lending bank files a mortgage just like a traditional purchase money transaction.

Wait.  Why would the bank make payments over a period of time to the consumer and not the other way around?

Commonly, elderly individuals that own their home and do not currently owe money against it utilize reverse mortgages.  For example, if an elderly person owns their home free and clear of liens but is on a limited income, it can be difficult to pay for day-to-day expenses of living.  At the same time, that person may have tens or hundreds of thousands of dollars in equity in their home.  House rich and cash poor.  A bank would likely not make a conventional loan to the individual because they have no source of income for repayment.  The only option for this person may be to sell their home to realize the equity.

However, a reverse mortgage will loan the individual money, typically in the form of a monthly payment, and secure the loan with a mortgage on the house.  This allows the person to realize their equity while remaining in their home. When the borrower passes away or moves out of the house, the mortgage company is either paid in full from the sale of the home or forecloses the property to sell and satisfy the debt.

Sounds decent, what’s the catch?

There are a few catches.

Unscrupulous Marketing

Many reverse mortgage companies use unsavory marketing tactics to target elderly folks.  Oftentimes folks entering into reverse mortgages do not actually require the payment to live have been convinced otherwise.

Excessive Cost

Interest rates with reverse mortgages tend to be much higher than conventional loans and reverse mortgages can carry multitudes of hidden costs to the borrower.  The interest also compounds over the life of the loan as opposed to a conventional loan, rendering reverse mortgages much more expensive.  Even worse, many reverse mortgages will only provide monthly payments for a set amount of time. So, an elderly person living off reverse mortgage payments could still be forced to sell their home and then have no money left to live.

Fine Print

Lastly, reverse mortgages are difficult to understand.  The documents are cumbersome for even a trained real estate or lending professional.  These loans can be quite one-sided in favor of the lending institution, yet many consumers enter into these types of loans without fully understanding the fine print.

Can I sell a house with a reverse mortgage?

Sure, probably, maybe, perhaps. 

Just like a conventional mortgage, if the underlying debt is paid, the mortgage will be released and the property may be sold free and clear of any liens.  Problems arise when the debt owed against the real estate outweighs the value of the home.  This is often the case with property subject to a reverse mortgage.  It is possible that the bank could agree to a “short sale,” where the bank will agree to accept less than the amount of the debt.  However, this process is typically quite cumbersome and can take several months to complete.   Additionally, there are no guarantees the bank will agree to a short sale. Several months of negotiations could result in the property not being sold.  Further, additional costs and interest continues to accrue while attempting to obtain a short sale arrangement.

Long story short, yes, a person may sell a house with a reverse mortgage.  However, best practice would be to contact the bank and request a “payoff” prior to entering into a contract for sale.  The payoff is the amount that the bank will accept for release of its lien.  If the payoff is greater than the sales price, this may be an issue that could delay the transaction.

As stated above, reverse mortgages can be quite challenging to navigate in a transaction.  That’s why Tallgrass Title has real estate professionals and attorneys on staff to assist in navigating these issues.  Give us a call, it’s our job!

MHK Office

 

As most of you know, we recently opened an office in MHK. We had the opportunity to talk a little about our new adventure! Check out the video below!

 

 

HELOCs and Second Mortgages

When most consumers purchase a home, they obtain conventional financing for the purchase.  This often takes the form of a 30-year, fixed rate loan.  In order to secure the loan made to you, the bank files a mortgage with the register of deeds.  This document tells the world that the bank has a first-place lien against the house and if any other creditors file a lien, that lien will be inferior to the first-place loan.  Now, let’s say that the same homeowner would like to make improvements to their home, add a pool or build a garage and would like to borrow additional money to do so.  The homeowner may also want to borrow funds for reasons unrelated to the home such as consolidation of credit card debt, assisting a child with college tuition or a business venture.

So, rather than to refinance the entire home loan and file a new mortgage, etc, to account for the increase in the loan, a bank will often file a second mortgage.  This can also take the form of a home equity line of credit type mortgage (HELOC) which is also usually a second mortgage as well.  The difference is typically the bank will automatically release a second mortgage upon payoff.  With a HELOC, the bank will keep the mortgage filed and the note open to allow a consumer to re-advance funds as needed.  Only upon request of the homeowner will the bank release the mortgage upon payoff.  This saves the costs and expense of making a new loan every time a homeowner wants to borrow funds.

HELOC’s and second mortgages can be obtained with the bank that made the first purchase loan or with a different institution as selected by the homeowner. The bank handling the loan will usually order title insurance to insure that the mortgage is secured against all liens, besides the first place mortgage.  If a consumer with a second place mortgage or HELOC later decides to sell the real estate, the title company simply pays off the second mortgage the same as it pays the first at closing.  The only additional step is to request additional payoff information.  Of course, there are many different types of second mortgages and HELOC’s.  it is a good idea to discuss options with a finance professional.

Here at Tallgrass Title, we deal with second mortgages and HELOCs on a daily basis.  Should you have any questions during your purchase, sale or refinance, feel free to contact our title professionals.  We are here to help, its our job!

Thank you Manhattan!

Last week we officially opened a Manhattan, Kansas office.  This move follows requests from real estate professionals to locate an office to better serve their regional needs.  You asked, we listened!  Our Manhattan office (TGT MHK) is located at 210 N. 4th, Suite A in the Hartford Building.  We are fully staffed Monday – Friday from 8:00 am to 5:00pm and are open over the noon hour.  A drop box is located on the front of the building for after hours drop-offs.  Both the Wamego and Manhattan offices are equipped to deal with closings, escrow deliveries, deed packet deliveries and notary services.  Additionally, TGT MHK will continue to offer free courier service in the Manhattan area as well as mobile closings.  We are here to serve your needs!

At Tallgrass Title, we love feedback about how we may better serve your needs.  Feel free to speak with any of our title experts about your needs as a real estate professional.