Issue #20 | 2019
AGENTconnect
A COLORADO AGENCY NEWSLETTER
LOAN SLAMMING Loan Slamming or Loan Shotgunning occurs when multiple loans are obtained with different lenders and recorded simultaneously on the same property. Fraudsters take advantage of the time gap between recording of the mortgages and when mortgages are indexed and can be viewed by settlement agents in the public records. The result is that neither the settlement agent nor lender are likely aware of the competing transaction. For this scheme to work, deals must be closed quickly, so fraudsters may target lenders who require less regulation and operate just outside of traditional mainstream lending practices. These lenders tend to rely more on the equity in the property than the ability of the borrower to repay the loan. As a result, these lenders often have fewer safeguards to detect fraudulent activity. Fraudsters make every effort to ensure both loans record almost simultaneously so the closing units or title company don’t pick up the recording of the alternate mortgage. Timing on this scheme is key.
Page
In This Issue
1-2
Loan Slamming
3
How Errors in the Public Records Can Affect Title
4
Hemp Decriminalization & Marijuana Related Transactions
5-6
Safe Escrow
7
News Flash!
7
Commercial Real Estate Market Facts
8
Content Corner
8
Colorado Agency Team
Continued on next page
The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice. Readers should not act upon this without seeking advice from professional advisers. First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.
First American Title | AGENTconnect | 2019 - Issue 20
AMD: 04/2019
Page 1
©2019 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF
LOAN SLAMMING Identification When the chain of title is pulled for a property that has been subject to a loan slamming scheme, it may look something like this:
If the loans were intended to be concurrent (1st loan with a HELOC), they should have recorded sequentially, and certainly not on different days. A closer look at the documents would reveal they were recorded by different title companies, with different policy numbers. Don’t let the release documents fool you! Make sure to review the releases and their timing. Does the release align itself with a transaction capable of paying off the existing lien? If not, it might be a red flag worth reviewing. Red Flags »» Multiple orders on property; different agents/ underwriters »» Parties pressuring to close IMMEDIATELY »» Hard money loans, especially rush closings »» Quick resale or “flips” »» Reconveyances or release documents involving individual lenders »» Two mortgages recorded within a very short time period
»» Uninsured loans appearing and being quickly reconveyed »» Naked Releases; release appears in the chain of title with no corresponding transaction that could have paid off loan »» Release appears mysteriously at the closing table »» Questionable authenticity of recorded documents; can you spot a notary stamp that has been cut and pasted?
If any red flags are spotted, carefully read and review the release documents. Potential issues can often be avoided by closely examining forms, signatures and notary acknowledgements on a suspicious release. Consider reviewing any releases recorded just prior to a policy in favor of hard money lender being used as a starter in a search. This is especially important for any documents recorded in the recording gap.
Prevention »» Don’t let your guard down. Good customers should notinfluence good policy. Don’t deviate from a best practice just because you trust your customer. Closers should remain in control of their transaction and should not feel pressured by outside influence, job titles, hasty timelines, or insistent parties to close transactions without proper due diligence. »» Trust your customers, but validate their actions. Atrustworthy customer will understand that we need to validate each document presented to us. After all, our job is to protect the customer and our company.
»» Follow your gut. If you suspect fraud, stop and carefullyreview the questionable documents to uncover any red flags, mis-matched signatures, incorrect assignees, fraudulent notary stamps, etc. »» Ask for help! It’s a team effort. It can be hard for closersto find the extra time needed to carefully review a file with possible red flags. Closers should elevate the transaction to a supervisor, their underwriter or someone on their team that can review the documents.
Contact for questions:
Randy Paslay, VP, Regional Underwriting Director Southwest Region rpaslay@firstam.com First American Title | AGENTconnect | 2019 2018 - Issue 20 17
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HOW ERRORS IN PUBLIC RECORDS CAN AFFECT YOUR COMMERCIAL PROPERTY’S TITLE
Although the commercial property you just purchased is new to you, it has a history, and sometimes, these histories can include unwanted baggage. During a real estate transaction’s closing process, a title search on the property is completed to determine whether there are title defects that can have an effect on the purchase. One common title issue buyers face when completing a title search is an error in public records. Humans aren’t error-free, and a clerical or filing error regarding your commercial property can have an effect on the deed and result in costs you may not have expected. A title search is performed in order to determine if your property’s title is clear, as well as to find any mistakes that could have been made in public records. An example of an error that could be filed in public records is a description of the property that may appear to be accurate but isn’t, such as an incorrect statement of the square footage of the property or missing reservations, covenants and restrictions. If the actual legal characteristics of the property are different than what is listed on the documents, commercial buyers may run into issues with their neighboring property owners, the legal requirements associated with the use of the property, and many other problems.
HOW TO AVOID ERRORS IN PUBLIC RECORDS
Completely avoiding errors in public records is nearly impossible because buyers of commercial property have no control over a property’s past or a mistake that could have been made by those filing and recording these documents. And not all errors can be detected prior to closing. However, an Owner’s Policy of title insurance will help protect your ownership rights from errors and defects found in public records. This insurance may cover both the legal costs to defend your interests as well as certain losses sustained as a result of a covered title defect.
Improperly filed legal documents or mortgage releases mishandled by public records can also result in additional headaches for the buyers until these issues are resolved. First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.
First American Title | AGENTconnect | 2019 - Issue 20
AMD:03/2017
www.firstam.com
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©2017 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF
HEMP DECRIMINALIZATION MARIJUANA RELATED TRANSACTIONS
&
A new Underwriting Communication has been posted to AgentNet® with detailed information related to Hemp Decriminalization and Marijuana Related Transactions. To access the communication, log on to AgentNet https://agency.myfirstam.com, select Content Library and enter NA-2019-002-STANDARD - Hemp & Marijuana Transactions in the Search field.
Wishing you a joyous springtime and a
Happy Easter!
First American Title | AGENTconnect | 2019 - Issue 20
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A proven process for added peace of mind Continued on next page
First American Title | AGENTconnect | 2019 - Issue 20
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PCN Network, PC Law Associates, LLC and Safe Escrow, LLC make no express or implied warranty respecting the information presented and assume no responsibility for errors or omissions. Safe Escrow® and PCN Network are registered trademarks or trademarks of PCN Network, LLC and/or its affiliates. AMD: 08/2018
First American Title | AGENTconnect | 2019 - Issue 20
©2018 PCN Network, LLC and/or its affiliates. All rights reserved.
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Did you attend our Quarterly Agency Roundup webinar on Entity Authority Documents and Claims Stories? If you missed this crucial information presented by our most senior underwriters, a recorded webinar presentation is available on AgentNet®. Log on to AgentNet https://agency.myfirstam.com »» Select Eagle Academy CE/CLE Learning under the Helpful Links tab »» Select Catalog »» Enter Entity Authority Documents and Claims Stories in the Search field.
C O M M E R C I A L R E A L E S TAT E M A R K E T FA C T S 2018 COMMERCIAL REAL ESTATE MARKET COMPOSITION
TOP COMMERCIAL
R E A L E S TAT E M A R K E T S TRANSACTIONS
16% 54%
15% 6% 9%
$396 billion in total CRE
MANHAT TAN LO S ANG E LE S
11.4% increase in total acquisitions
DALLAS
US deal volume in 3Q 2018 highest since 4Q 2015
CHICAG O
OFFICE
INDUSTRIAL
HOTEL
APARTMENT
.0107% slight increase of $2 for retail space
18%
AT LANTA
price increase for overall office space
S E AT T LE
10%
WAS HING T O N, D.C. RETAIL
11% price increase for apartments
acquisitions in the first three quarters of 2018
over the same period in 2017
PRICE
PER SQUARE FOOT/UNIT YOY
AUS T IN
price increase for hotels
17% price increase for industrial space
Data pulled from Expectations and Market Realities in Real Estate 2019 - Uncharted Territory Published by Deloitte. | National Association of REALTORS® | Situs RERC®
First American Title | AGENTconnect | 2019 - Issue 20
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Content Corner Colorado Agency has a fresh look and wants to connect with you! We invite you to head over to Facebook and like our new pages to stay up to date with Colorado hot topics. Save time managing your weekly Facebook posts by sharing our fresh content with your clients on your own business page. It is also a great place to be reminded of our exclusive seminars, webinars and underwriting bulletins. Search @FirstAmCO on Facebook or go to http://www.facebook.com/FirstAmCO to like and follow the First American Colorado Agency page. Mary Cross, your Colorado Agency Representative, also has a very informative page you can visit at https://www.facebook.com/profile.php?id=100028090954691.
COLORADO AGENCY TEAM
AMIE VOSS
SANDY PLAVEN
VP, CO, MT & WY Agency State Manager D: 303.305.3358 abvoss@firstam.com
Senior Underwriter D: 303.305.3361 splaven@firstam.com
BOBBI ESPINOSA
PAUL NEWTON Mountain Region Underwriting Counsel D: 801.316.0616 panewton@firstam.com
PAM RUTHERFORD
Associate Underwriter Senior Agency Support D: 303.305.3363 D: 303.305.3362 bespinosa@firstam.com parutherford@firstam.com
MARY CROSS Agency Account Representative D: 720.955.8424 mcross@firstam.com
RANDALL PASLAY
WARREN A. “RIP” ROBINSON
VP, Regional Underwriting Director - Southwest Region D: 714.250.8607 rpaslay@firstam.com
Claims Center Director North Central Region D: 720.264.8700 warobinson@firstam.com
First American Title | AGENTconnect | 2019 - Issue 20
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