2019 | ISSUE 7
BIG SKY Review
~ A M O N TA N A A G E N C Y N E W S L E T T E R ~
Page In This Issue
1-2
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.
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
Administrative Professional Day
8
Contact List
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. AMD: 04/2019
©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 | Big Sky Review | 2019 - Issue 7
Page 2
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 | Big Sky Review | 2019 - Issue 7
AMD:03/2017
www.firstam.com
Page 3
©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 | Big Sky Review | 2019 - Issue 7
Page 4
Central Management. Local Execution.
Imagine a new way to fund. Imagine not worrying about wire fraud
Imagine not worrying about
technology, compliance or post funding issues Imagine focusing all your
resources on your customers and growing your business
Why manage your own escrow account when you can use ours? Safe Escrow’s underwriter-approved managed disbursement solution is here to make your life easier.
More control, fewer headaches. ▶ Print checks locally and execute funding anywhere ▶ Get rid of costs and risks of escrow accounts ▶ Post funding, Escheatment and regulatory audits all done for you
Safety of funds through SafeValidation™ ▶ Payee authentication to protect against wire fraud ▶ Validation of payoff accounts prior to releasing wires ▶ Industry-leading security and SOC 2, Type II certified controls
A proven process for added peace of mind Continued on next page
First American Title | Big Sky Review | 2019 - Issue 7
Page 5
Central Management. Local Execution.
Save money with Safe Escrow No investment in software. One fee per closed transaction.
$
Safe Escrow
0 0 0
Zero cost to get started
$
$
Zero monthly fees
Zero wire or bank fees
Safe Escrow
Title Agent
$
$
100
Safe Escrow costs $100 per completed transaction. No fee if the deal does not close.
130
*
Incorporates proprietary SES Technology™, Industry best control structure, cyber management and SafeValidation™
Independently Certified ▶ SOC 2, Type II ▶ ALTA best practices ▶ SAFE vulnerability assessment
Funding costs $130 per transaction. * Estimate from survey conducted by major underwriter.
Safe Escrow provides title agents a secure, proven solution to escrow funding with our underwriterapproved collaborative disbursement system. From opening a transaction to post funding, let Safe Escrow give you added peace of mind.
Speak to an Expert expert@pcnsafeescrow.com 412.444.1564 www.pcnsafeescrow.com
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 | Big Sky Review | 2019 - Issue 7
©2018 PCN Network, LLC and/or its affiliates. All rights reserved.
Page 6
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 | Big Sky Review | 2019 - Issue 7
Page 7
Administrative Professionals Day Wednesday, April 24, 2019 Since 1952, the International Association of Administrative Professionals has honored office workers by sponsoring Administrative Professionals Week. Today, it is one of the largest workplace observances, outside of employee birthdays and major holidays, and it highlights the important role administrative professionals play in all sectors of the modern economy worldwide. Locate the ecards below in the Pass-Thru Marketing program on AgentNet ÂŽ to say thank you to administrative assistants for their role in your success.
Amie Voss VP, Agency State Manager D: 303.305.3358 abvoss@firstam.com
Paul Newton Regional Underwriting Counsel D: 801.316.0608 panewton@firstam.com
Cindy Guanell
Lance Lewis
Regional Underwriter D: 208.321.5184 cguanell@firstam.com
Area Underwriter D: 208.321.5157 lancelewis@firstam.com
FI R ST AM ER I C AN TI T L E Russell Dalton VP, Area Underwriter D: 702.855.0837 rdalton@firstam.com
First American Title | Big Sky Review | 2019 - Issue 7
MONTANA AGENCY TEAM Page 8