Wisconsin Eagle's Nest: November/December 2022

Easements are For Parcels, Not People

By: James Powers, Senior Underwriting Counsel

Imagine you are purchasing a ten-acre parcel at the “bottom” of a forty. To get to your parcel, you need to travel south from the public road that runs along the northerly quarter line and through one of the northerly quarter-quarters.

The seller of the ten-acre parcel also owns the north twenty acres and grants you an easement to reach your parcel. Then he sells the north twenty, subject to the easement. You’re all set.

A few years later, you purchase a two-acre parcel that abuts the easement in the “North Twenty.” Can you use the easement? No, of course not.

Although easement grantees are humans who own or are purchasing real estate, the actual beneficiaries of easements are parcels, not people. In the above scenario, you were given an easement to a described parcel in the bottom twenty acres, not to any other parcel. If you acquire a piece of land anywhere outside the described parcel, the grant of easement does not apply.

Upcoming Holiday Closures

The State Agency Office will be closed on:

Christmas Day Holiday • December 26, 2022

New Year’s Day Holiday • January 2, 2022

Martin Luther King Jr. Day • January 16, 2023

Deeds in Lieu of Foreclosure: Merger and Anti-Merger Language

By: Steven Zablocki, Underwriting Counsel

A deed in lieu of foreclosure is a method for a lender to take title to a property without foreclosure.

The lender accepts a deed along with an estoppel affidavit and records the same. The estoppel affidavit recites that the grantor provides the deed freely and without duress. A deed in lieu speeds up the time and reduces costs related to a foreclosure.

Following acceptance of the deed in lieu and its recording, the lender becomes the owner. To accept a deed in lieu, the title has to be clear of all liens and judgments. However, buried in the deed is a curious statement. It usually reads like this, “This deed does not intend to act as a merger of title.” This is known as “anti-merger” language.

What is that? Here is a hypothetical: A lender wants to complete the deed in lieu, but before they recorded their deed, the former owner had a judgment entered and docketed against their interest. The judgment is now a lien on the title. If the lender accepted the deed and recorded the same after the judgment, that judgment creditor can now try and extort a settlement from the lender. The idea is that the lender’s mortgage “merged” along with the deed, and there is no longer a mortgage to foreclose. This comes from the notion that you can’t hold a lesser interest in a property where you own a greater interest.

For example, you can’t hold a mortgage on your property and you certainly cannot grant yourself a lease or easement. You own it all. These lesser interests cannot be created.

Anti-merger language permits a lender to go back into court following a deed in lieu and allows them to join that lien and foreclose it. The lender can then clear title of the interest and later convey marketable title.

This leads us to another issue. What happens when you have a new deal, and the mortgage was never satisfied where there was anti-merger language? It is somewhat of a paradox because the lender’s mortgage is still “of title” but they likely have conveyed or will convey by a special warranty deed. The special warranty deed recites the title is free from any items created or suffered by the lender. Yet, the lender’s mortgage is still of title because of antimerger language and the lender is obligated to defend against that mortgage.

When you see a mortgage not satisfied following a deed in lieu, we can often insure over for the reasons stated. The lender isn’t going to suddenly try and foreclose their mortgage once they come into title. Their mortgage lien interest is gone.

If you have any deed in lieu questions, please contact your First American underwriter.

Upcoming Teleseminars

NOTE: Seminar-specific phone numbers and passcodes will be sent out with registration reminders and materials for each seminar.

Contact Jessie O’Brien at jessobrien@firstam.com if you have any questions.

Foreclosure, Deeds in Lieu, & Workarounds

January 11, 2023

9:00am – 10:00am CST

Presented by: Steve Zablocki, Underwriting Counsel

Commercial Closing Issues

February 8, 2023

9:00am – 10:00am CST

Presented by: Steve Zablocki, Underwriting Counsel

Bankruptcy & Receiverships

March 8, 2023

9:00am – 10:00am CST

Presented by: Steve Zablocki, Underwriting Counsel

Employee Updates Reminder

Please contact First American Title to report all new or departing employees.

All licensed agent employees are required to be appointed to the Wisconsin Office of the Commissioner of Insurance by First American Title. Departing employees must have their appointment terminated, and any AgentNet ® accounts for departed employees must be deactivated as soon as possible.

Please send employee updates to: Ben Smaglick at bsmaglick@firstam.com or Jessie O’Brien at jessobrien@firstam.com

Endorsements That May Cause Eyerolls

By: James Powers, Senior Underwriting Counsel

If you close real estate transactions, you will inevitably encounter requests for title insurance endorsements that seem odd or unnecessary. A few come to mind:

f Policy Authentication

The ALTA 39 “confirms that the Company will not deny coverage solely on the basis that the Policy or any endorsement thereto was issued electronically or lacks signatures.” Co-signatures were omitted from Wisconsin policy forms for 2006 and 2016 and are unnecessary under the 2021 policy forms. You can still expect a request for the ALTA 39, regardless of what the policy says. It is free of charge.

f Date Down

This endorsement “updates” the effective date of a policy. This is acceptable in cases where a mortgage is re-recorded, or a buyer’s name is added. In other cases, the Insured is making a change that could increase our liability, such as asking for a date-down for a four-year-old policy (it’s happened!). Let the underwriters know if you get a request for a datedown endorsement that appears to reside outside of our underwriting parameters.

f Water Rights

The ALTA 41 series endorsements provide coverage against “enforced removal or alteration of certain surface improvements due to the exercise by a water rights estate owner of the right to use the surface of the Land to extract water.” Surface water rights are not an issue in Wisconsin, but let the underwriters know if you recieve a request.

f Arbitration

Yes, the “ARB” clause was deleted from Wisconsin commitment and policy forms years ago and remains deleted. Be prepared to issue the Wisconsin Deletion of Arbitration endorsement anyway. It is also free.

PRISM Flyer

Click on the flyer to learn more about PRISM.

Grow your business with customized, on-demand quotes and property reports. Visit go.PRISMpowered.com to see PRISM marketing and automation tools in action.

Need more information? Contact your local First American Title Agency Representative or reach out to sales@PRISMpowered.com.

Zoning, Title Insurance, and the ALTA 3 Series

By: Steven Zablocki, Underwriting Counsel

Cities are organized; we have areas designated for residential and commercial development and industrial parks. This is all thanks to the process of municipal zoning. It is why we do not have a chemical plant next to a daycare. While that is an extreme example, the fact remains that with zoning ordinances, our cities and towns prosper. In a standard title insurance transaction, municipal zoning is excluded from coverage unless an endorsement is issued. We are not insuring the property’s use or intended use is covered; rather, the Insured is on their own.

When a request is made to issue an ALTA 3 series endorsement, we must be mindful of several factors:

f What does the municipality say about the intended use?

Usually, a zoning ordinance regards land use through a series of codes. For example, code A1 may refer to an Agriculture zone where specific uses are permitted. In addition, the A1 code may contain certain restrictions, such as prohibition on industrial production.

f What is the customer’s intended use?

A copy of the zoning ordinance must be obtained when there is a request for a zoning endorsement.

It is important to understand these zoning ordinances relative to the property to be insured. In addition, a zoning letter should be requested from the municipality defining or explaining the current classification and whether the property complies. Contact underwriting immediately if there are questions or odd statements in the letter.

The endorsement requires you to input the zoning classification. The language is odd. If the classification is A1, you would enter that in the endorsement. The endorsement recites, “According to the Zoning Ordinance, the Land is not classified Zone ___”. Since we are insuring the land is A1, we insure against loss if it is not A1. As to the next section, prohibited uses, you could likely print out the zoning ordinance, attach it and recite “See attached.”

Further, zoning endorsements can be had for completed structures with the 3.1. In this case, you will need to obtain a zoning letter, verify there are no violations, and you may also need to obtain a survey depicting the subject improvement.

Finally, for land under development, you must obtain the zoning letter, verify no violations, and review the subject plans. With the issuance of any zoning endorsements, please contact Underwriting if you aren’t sure about the requirements or have questions.

OUR SINCERE BEST WISHES TO JAMES ‘JIM’ POWERS

Jim Powers, Wisconsin Senior Underwriting Counsel, has been with First American Title for 19 years and will be retiring on December 30, 2022.

An industry professional for over 31 years, Jim began his impressive career with First American as underwriting counsel in 2003 after working for an attorney agent in a small law firm in North Central Wisconsin and serving as staff counsel for a title insurer.

Jim’s commitment and dedication to First American and the title industry have played an essential role in the success of our Wisconsin agency operations. His years of experience have been a tremendous asset, and he has earned a solid reputation for providing assistance to our agents and invaluable guidance to his colleagues. Jim is looking forward to sailing adventures, road trips, and picking up his guitar again (after a long absence).

We are grateful to Jim for his service to First American Title. Employees, peers, and customers will miss his knowledge and dedication. Please join us in wishing Jim a retirement that is as successful as his career.

Jim may be reached at 608.294.7993 or jipowers@firstam.com.

Buyers Need a Six-Figure Income to Afford a ‘Typical’ Home; Here’s How to Reduce the Cost Experts say there are a few ways to reduce your monthly mortgage payment.

By: Kate Dore, CNBC, November 18, 2022

Read more

America’s Hottest Markets Right Now are Also Affordable—but Come with a Chilling Catch Many of the most desirable places for homebuyers are in the snowier Northeast and Midwest.

By: Andrea Riquier, realtor.com®, November 16, 2022

Read more

Study Finds Most Movers Want to Stay Near Home State

LendingTree analyzed the moving patterns of homebuyers in each of the nation’s 50 states; while most movers look to stay in state, a significant share looks to move elsewhere.

By: Demetria Lester, DSNews, November 9, 2022

Read more

Homebuyers Canceled a Record 60,000 Purchase Contracts in October

The high volume of canceled contracts is a reminder of how far the real estate market has moved away from low interest rates and intense competition.

By: Robert Davis, Business Insider, November 22, 2022

Read more

HUD OKs Private Flood Insurance Options for Homeowners

FHA to allow private flood insurance policies on insured single-family mortgages in special flood hazard areas.

By: David Krechevsky, National Mortgage Professional, November 21, 2022

Read more

COMMERCIAL

Companies Still Have Way Too Much Office Space, and They Can’t Sell It

Other than high-use leases such as medical offices and laboratories, few leaseholders can find buyers or tenants for unused office space.

By: Eric Rosenbaum, CNBC – The Bottom Line, November 5, 2022

Read more

Top Ten Marketing Tools for Commercial Real Estate

When it comes to technology and software available for use in the commercial real estate industry, the landscape of what is out there continues to grow and evolve rapidly.

By: inMotion Real Estate Media, November 22, 2022

Read more

Understanding Loan Ratios in Multifamily and Commercial Real Estate

When a lender is determining the amount it is willing to lend, on an apartment building or other piece of commercial real estate, , many factors come into play, such as property type, property class, location, sponsorship, and more.

By: Janover Multifamily Loans Content Team, November 17, 2022

Read more

Commercial Real Estate Metro Market Reports Q3 2022

These reports provide insights into the fundamentals and direction of the nation’s largest metropolitan commercial real estate.

By: National Association of REALTORS®, November 12, 2022

Read more

Five Ways to Make Better Project Decisions in Your Real Estate Development Business Managing all the moving parts in the commercial real estate process is made even harder when information is fragmented across systems.

By: UrbanMatter Staff, November 19, 2022

Read more