U.S. Foreclosure Activity for November 2014

U.S. foreclosure activity decreased nine percent this past November from the previous month, according to RealtyTrac’s Foreclosure Market Report. A total of 112,498 properties were reported having default notices, scheduled auctions, and bank repossessions. A little less than half of those properties started the foreclosure process in November while the other half had already begun the process. The number of foreclosure auctions was down sixteen percent from the prior month and total repossessions were down ten percent.

The states with the highest foreclosure rates were Florida (1 in every 462 housing units with a foreclosure filing), New Jersey (1 in every 478), Maryland (1 in every 581), Delaware (1 in every 693), and Utah (1 in every 750).

Florida was the only state, out of the five states with the highest foreclosure rates, to see a monthly decrease in foreclosure activity. Thirteen out of the last fourteen consecutive months Florida has had the highest foreclosure rate in the U.S., yet the state has seen an annual decrease of fifteen percent.

When asked about the Foreclosure Market Report for November 2014, the Vice President of RealtyTrac, Daren Blomquist said, “The housing market is struggling to find the new normal when it comes to a tolerable level of foreclosure activity in this post-Great Recession economy. Finding that new normal requires striking a balance between too much loan risk, which would result in another housing meltdown, and too little risk, which could result in a stunted recovery. Foreclosure rates on 2014-originated loans are actually higher than 2013-originated loans nationwide and in many markets, indicating that lenders are open to a slightly higher level of risk than we’ve seen over the past five years of extremely tight lending standards, but it’s unlikely that lenders will dial up that risk level too quickly going forward given that many are still dealing with working through a lengthy and messy foreclosure process on risky loans from the last loose lending spree.”

Will the U.S. housing market be able to “find the new normal” in foreclosure activity and reach the required balance between too much and too little loan risk? Only time will tell.

Title Insurance Policy: Coverage, Costs, & Current News

insurance policyA title insurance policy is similar to other types of insurance policies you would buy, such as car insurance, homeowner’s insurance, or health insurance. They cover for risks, defects, or damages to something in the future, in this case the property title. A title insurance policy is a one-time premium that covers you as long as you own the property. The policy is sold by an insurer certifying that if a title issue arises on a property, they will pay to correct it or pay the maximum the policy was for. Title insurance does not guarantee repair of a title defect or cloud on title, but it does provide financial compensation for the policyholder if a defect is discovered in the future.

So what goes into a title insurance policy and what does it cover? First, a title search must be run on the property to search for existing liens, mortgages, encumbrances, or clouds. If any are found during that title search they will be excluded from coverage and be listed on page one of that title insurance policy. The title insurance policy would cover if something is hidden on the property, for example, a forged signature on a deed fifty years ago, or claims against the property that the title search missed.

After the initial title search is complete a few more reports are analyzed. Usually the title insurance company will require a property survey to find out where the boundaries of the property actually are. Next, a credit report on the current or prior owner will be run to make sure there are no pending judgments or pending lawsuits against the owner that could turn into a lien against that property. Depending on the property and the insurer, some other types of research might be done additionally; otherwise the insurer will complete the policy.

The turnaround time for a title insurance policy is typically around 30 days. This includes the time it takes to get the underwriting and background checking complete on that title insurance policy.

The cost for a title insurance policy varies. It is based on the purchase price of the property and it is based on whether or not the property is being financed. If the property is being financed it will most likely cost a little extra to cover the lender in addition to covering the owner. However, the cost is essentially based on the selling price of the property which is usually going to be a few hundred dollars per thousand. For example, if the property was $500,000 then the policy could be a $1,500 or $2,000 premium altogether. Yet, keep in mind that the title insurance company will probably want to do the closing for that transaction so you may also incur some closing costs or escrow fees on top of the title insurance policy.

shredded-document-fraudWhen choosing a title insurance company and insurer, be sure to do your due diligence beforehand. There have been many cases of title insurance fraud in the United States. For example, the article by Moe Bedard titled FBI Charges Pennsylvania Lawyer in Title Insurance Fraud Scheme describes a case in which Susan Kevra-Shiner was recently charged for fraudulently offering title insurance policies to approximately 76 homeowners and/or lenders and receiving $72,000 from fraudulent title insurance premiums.

If you would like more information regarding title insurance policies, check out the following videos: What Goes Into a Title Insurance Policy, Title Search vs. Title Insurance, Insurance Underwriting Standards and Title Searches.

August 2014 – Foreclosure Filings Increase Seven Percent In U.S.

Foreclosure houseU.S. foreclosure activity increased seven percent this past August. According to RealtyTrac’s U.S. Foreclosure Market Report for August 2014, “foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 116,913 U.S. properties in August, an increase of seven percent from the previous month but still down nine percent from a year ago – the smallest decrease in the last 47 consecutive months of year-over-year declines in U.S. foreclosure activity.” The report also shows one in every 1,126 U.S. housing units with a foreclosure filing during the month. The states with the highest foreclosure rates are Florida (1 in every 400 housing units with a foreclosure filing), Maryland (1 in every 532), Nevada (1 in every 524), New Jersey (1 in every 553), and Georgia (1 in every 582), this past August.

At 51,192 scheduled U.S. property foreclosure auctions during the month, we see an increase of one percent from a year ago but a decrease of one percent from the prior month. This number of scheduled foreclosure auctions increased in 24 states, including Colorado, Oregon, Connecticut, New York, and Oklahoma.

If we break down the current distribution of foreclosures based on the number of active foreclosure homes in the U.S, pre-foreclosures make up 33.7%, scheduled auctions make up 43.8%, and bank repossessions make up 22.5%. Compared to July 2014, the amount of new foreclosure filings is up 12%.

According to Daren Blomquist, the Vice President at RealtyTrac, “The August foreclosure numbers demonstrate that although the foreclosure crisis is well behind us, the messy business of cleaning up the distress lingering from the housing bust continues in many markets. The annual increase in foreclosure auctions — the first since the robo-signing controversy rocked the foreclosure industry back in late 2010 — indicates mortgage services are finally adjusting to the new paradigms for proper foreclosure that have been implemented in many states, whether by legislation or litigation or both.”

 

How to Choose Which Type of Title Search to Get

Do you need a title search but you’re not exactly sure which type to get? There are a couple different options as to how you can approach getting a real estate title search. You can have a professional examiner prepare a certified title abstract for you. You can do the search yourself. Or you can buy a basic electronic data report from an online website. So how do you decide which way to go?

First you need to ask yourself what the purpose of this search is. Do you need accurate, detailed information for a legal purpose or because you are considering buying a property, or do you simply want a title search done out of curiosity. Then, ask yourself if it is okay for the report to have some missing information. If you’re making a decision about a several hundred thousand dollar property, for example, you may want to make sure the due diligence is as complete as possible. Also, determine what your budget is for a title search because the prices vary.

When you know the answers to those questions, consider your main options:

  1.  Certified Title Search: A full certified title abstract prepared by an examiner will have the most complete and accurate information. However, it is the most expensive option and may cost up to several hundred dollars, depending on the type of property and search. Yet, you are getting what you pay for. If you need an extensive and precise title search, this is the way to go. All liens, mortgages, current property ownership information, tax assessors’ records, judgments and other encumbrances will be provided and copies of the official documents are available. For more information, read The Difference Between a Certified & Non-certified Title Search or What is a Title Search & Why do You Need One?
  2. Basic Title Search Report: A basic report from online web-sites may not have as much information as a full certified title search, but it will be cheaper. For example, LienList.com offers a basic search for $69.00. It includes a legal description of the property, purchase mortgage data, liens, tax assessors’ records, and grantor/grantee listings for the current ownership.
  3. Do It Yourself: If you do not want to spend money on a title search then you can do it yourself. However, it might take six or seven hours going through documents in various land records offices to do so. Most people who do a title search themselves will actually get about ninety percent accuracy. So, if there is no room for error on your title search you might want to hire a professional. If you still want to do your own title searching, spend the time learning how to do a search correctly, that way it’ll be close to what a professional title examiner would present to you on a certified title abstract. To learn more, read Do It Yourself Title Search.

Quiet Title Action & Foreclosure Defense

court rulingQuiet title action is a way to clear or extinguish claims or encumbrances against a property title. It is performed as a court case, normally in civil court, possibly in circuit court depending on the jurisdiction. A property owner basically sues for quiet title in joining all third parties from ever making a claim of ownership, lien, or mortgage against the property. The case is presented to the court and there are certain conditions that the judge requires to be met. For example, the judge may require that notices be sent to potential claimants or the judge may require public advertisement of the quiet title action. And then anywhere from thirty to ninety days is allowed for potential claimants to bring their documentation.

Originally quiet title was used to resolve uncontested boundary disputes or used in cases where a company or another party is missing and can’t be contacted to sign off on a release of lien or release of mortgage. In the last couple years quiet title action has been used more often for foreclosure defense.

There are some advantages as to why this method of foreclosure defense is popular. First of all, the quiet title occurs in civil court which is a less lender friendly venue than foreclosure court. When lenders are in front of a foreclosure judge, the lenders typically prevail. On the other hand, it is a more even playing field for a borrower and a lender in a civil court. In a foreclosure court the lender can drag out a foreclosure for months and months, sometimes more than a year. In quiet title there is a statutory limit on how long the action has to take so the lender has a certain amount of time to respond with correct paperwork. Additionally, there are no “do overs” with quiet title action in civil court. If a lender’s paperwork is incorrect then it cannot withdraw and refile like foreclosure courts allow. Judges in civil court are more likely to be interested in the letter of the law where mortgage note documentation is either right or wrong and there is no room for error, while in foreclosure court there are sometimes allowances for slight deviations from accepted title practices.

Once a quiet title action is complete, the owner is given a final judgment of quiet title. This is recorded in the land records in joining all other claimants other than those listed on the quiet title from ever brining claim against the property or against the property owner.

So how does one start a quiet title action? Start by getting a certified title search done to find out what items are currently showing against that title, what claims are being made, and what encumbrances or clouds are on that title. By knowing and understanding what clouds are on a title you can then figure out what the best avenue is to clear a property of encumbrances or claims through quiet title action.

5 Common Types of Deeds

deedA property deed is a legal document that is used to transfer the ownership of a property from one person to another. Most deeds have at least four things in common. A legal deed should indicate who the grantor is, which is the individual giving away the property rights, and it should identify who the grantee is, which is the individual receiving the rights. There also should be a description of the property and the deed should have a witness’ or notary’s signature validating that the grantor and grantee who signed the deed are who they say they are. However, there are different types of deeds. The five most common types of deeds are warranty deeds, quit claims deeds, sheriffs deeds, bargain and sales deeds, and grant deeds.

A warranty deed is the most protective type of deed that a buyer can receive. This document ensures that the seller or grantor is the rightful owner of the property and it guarantees that there are no liens or encumbrances associated with the property. Warranty deeds, in many states, come with covenants and there are four common types of covenants. The first covenant, the right of seisin, means that the seller promises that he or she has real title to the property. The second covenant is the right to convey, which means that the grantor not only owns the property but also has the right to transfer the ownership. The third covenant is against encumbrances to make sure there are no liens or mortgages on the property. The fifth is the covenant of further assurances. So, if an issue arises with one of the covenants, for instance if liens are discovered after the transfer of ownership, then the seller will have to assist the buyer and deal with the liens.

The second most common deed is a quit claim deed. With this type of deed, the seller does not guarantee that their title is valid. A quit claim deed is a type of transfer that doesn’t warranty any type of insurances from the grantor. It basically transfers the grantee any rights that the grantor has to the property and if the grantor doesn’t have any rights then the grantee does not receive any rights. A quit claim deed carries the least amount of insurances for the buyer which is a disadvantage because the buyer isn’t guaranteed to receive the property rights. That being said, this type of deed is usually used to change names on a deed or to correct a misspelling and there is usually no monetary exchange.

A sheriffs deed is often used by the government during a foreclosure. Typically this type of deed is used in a judicial state where the foreclosure has to go through the court system. Once the foreclosure process is complete, the sheriffs deed is given to the successful bidder. Although, sometimes a sheriffs deed comes with a right of redemption which means the person who was foreclosed upon has the right to pay to get the property back for a certain amount of time with added penalties.

A bargain & sale deed applies ownership like a warranty deed but does not guarantee the ownership. It is also similar to a quit claim deed but the property is sold rather than relinquished. It basically states that the grantor believes in good faith that they own the property and sell it to the grantee, but they don’t guarantee anything.

A grant deed is similar to a warranty deed but without the covenants. It is used by an individual with the understanding that they own a property, have the right to transfer their ownership to another person, and they don’t believe there are any liens or encumbrances on the property. Yet, they aren’t guaranteeing that; if an existing lien that was not known before were to come up after the ownership transfer than the grantor would not be liable for it.

Property Owners’ Frustrations with Mineral Rights Owners

West Texas oil well pumper and black brama cattle.
West Texas oil well pumper and black brama cattle.

When mineral rights exist on a property there may be easements associated with those rights. For example, a mineral rights transfer often carries an easement with it to allow the grantee of those rights access to the property.  It may allow the grantee to transgress across the property, to install a well or some sort of structure on the property, and to extract minerals from subsurface on the property. This may affect what the land owner can do to develop the property and it may affect any existing plants and agriculture on the land.

However, laws regarding mineral rights vary state to state. North Dakota, for example, allows the owner of surface rights to receive some compensation for damages done to their property by mineral rights owners, but the compensation does not cover lost farmland and disruption of normal farming and ranching practices. Jonathan Knutson explains, in his article North Dakota ranchers say mineral rights get too much emphasis, how Kim Shade, a rancher in North Dakota, estimates a $25,000 loss from oil vehicles killing cattle on his land and an additional loss of 15 calves who died from a chemical spill by an oil company, all of which are not covered by insurance. Other negative effects include harm done to crops from dust raised on unpaved roads by oil industry trucks and poorly sited oil wells which create sections of land that are too small to farm with modern equipment.

In Texas, mineral rights supersede property rights; therefore, oil companies who own the mineral rights to a property can come onto privately-owned property and start operations. When this occurs land owners are paid a leasing fee from the mineral rights owner. Yet, property owners in Texas are also having issues with mineral rights owners starting drilling operations on their property. Joshua Brown discusses the frustrations of an upset Texas property owner in his article Home (and oil) on the Range. Aside from the unpleasant aesthetics, some of the problems faced by the property owner include a huge tree dying from nearby oil drilling, a smelly retention pool filled with water and oil runoff, and fumes created by flare stacks that accompany each well.

If you own a property, it is advised to review the mineral rights deed associated with the property. Don’t just look at who the owners are of those rights but get a thorough mineral rights title search. This will help you understand the easements associated with it and what rights have been given up in addition to the access of minerals from subsurface on the property.

National Foreclosure Trends for July 2014

foreclosure 3The United States foreclosure activity has increased by two percent this past July. According to the U.S. Foreclosure Market Report for July 2014 by RealtyTrac, “foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 109,434 U.S. properties in July, an increase of 2 percent from the previous month but still down 16 percent from a year ago. The report also shows one in every 1,203 U.S. housing units with a foreclosure filing during the month.” The states with the highest foreclosure rates are Florida at 1 in every 469 housing units with a foreclosure filing, Maryland at 1 in every 553, Nevada at 1 in every 639, Illinois at 1 in every 747, and Ohio at 1 in every 839, this past July.

According to Daren Blomquist, the Vice President at RealtyTrac, “July was the 46th consecutive month where U.S. foreclosure activity was down on a year-over-year basis after nearly four years of falling foreclosures, we are starting to see evidence that foreclosure numbers are normalizing at the national level. The 16 percent decrease in July was exactly half the annual decrease we saw a year ago in July 2013, when U.S. foreclosure activity was down 32 percent on a year-over-year basis.”

If we break down the current distribution of foreclosures based on the number of active foreclosure homes in the U.S, pre-foreclosures make up 29.2%, scheduled auctions make up 47.1%, and bank repossessions make up 23.7%. Compared to May 2014, the amount of new pre-foreclosure filings is down 4.9%, scheduled auctions are up 10.4%, and bank repossessions are down 3.5%. Compared to the prior year, pre-foreclosures are down 21.3%, scheduled auctions are down 3.4%, and bank repossessions are down 29.8%.

The Difference Between a Certified & Non-certified Title Search

certifiedA title search can mean different things to different people. One way to insure that the report you get as a “title search” answers all your questions and provides the necessary information you require is to get what is called a Certified Title Search. This means that the search is done to certain standards, that all the procedures are followed, and all of the places where potential clouds on the title might appear are checked when the title search is prepared.

Essentially, anybody can do a non-certified title search. If an individual goes to the land records office, visits all four or five of the offices, pulls all the necessary documents to review and reads through them to create a summarized report, you can call that a title search. Even if it is hand written on a piece of paper, you could name that a title search and some people might even be willing to pay for that and call it a title search. However, it would not be an official certified title search.

A certified title search is a research project performed by a NALTEA (National Association of Land Title Examiners & Abstractors) certified title abstractor or title examiner. These certified examiners and abstractors will do all the necessary research according to certain industry standards.  To be a NALTEA member an individual must pass a rigorous exam, demonstrate that they have experience in the industry, and continue their education every year by showing that they have attended training or other industry events to show that their knowledge is improving. These certified examiners are qualified and trained to know what to look for, to make sure all liens and encumbrances on a property are found and that all sources are checked. The format of a certified report also meets certain obligations that will hold up in a court of law, if need be.

Understanding Mechanic’s Liens

house constructionA mechanic’s lien is a very particular type of encumbrance on a property that’s afforded credit and protection for a contractor or other builder that’s done work on the property. It is a process enacted usually by statute in a state where it protects contractors or builders for doing work on a property when they don’t get paid for it.

In many states a mechanic’s lien doesn’t even need to be filed as an official document in order to protect the general contractor. For example, if a contractor installs a new roof on a house and the property owner doesn’t pay the bill, a mechanic’s lien is in place even before any paperwork is filed. The person who completed the work on the property is thus covered for any forgone payment of their services.

Additionally, many states extend protection to subcontractors or companies that have delivered materials or provided labor to a project even if it was managed by a general contractor. If a property owner pays a general contractor for work done to their property and the general contractor doesn’t pay any subcontractors, even though the general contractor was paid in full by the property owner, that property may be encumbered by a lien placed by a subcontractor who didn’t get paid for his work.

However, this is not always the case; mechanic’s liens vary due to state laws. For example, in California there are certain filings that must be made for a mechanic’s lien to be valid. A subcontractor that wants to assert a mechanic’s lien must have previously served the owner, and original contractor or construction lender if necessary, with a “preliminary 20-day notice” stating what is being done on the property. Failure to properly serve a 20-day notice essentially renders any mechanic’s lien invalid. Once the project is complete contractors and subcontractors only have 90 days to file a mechanics lien. However, there are a couple exceptions to that 90 days rule. For instance, if the property owner files a Notice of Completion within 10 days of the project being finished it will shorten the time for a mechanics lien to be filed by a general contractor to 60 days and 30 days for subcontractors.

If you are a property owner and are doing any sort of remodeling, be sure to check what the laws are for mechanic’s liens in that state. In addition, if you are purchasing a property in a state which doesn’t require mechanic’s liens to be filed, you should see what work has been done on that property recently, make sure all contractors and subcontractors were paid and that no mechanic’s liens are in place. A standard title search on a property would indicate if there is a mechanic’s lien placed on the property, along with identifying any other current liens.