Avoid Claims Against Your Transactions
Every real estate transaction carries its own challenges and risks, but what are the signs that you may be in for unexpected and unwelcomed claims? To help you avoid the many complications that can lead to claims against your agency, we’ve compiled a list of the best practices to consider when handling your transactions.
Avoiding Home Equity Line of Credit Claims
Home equity lines of credit (HELOCs) are a popular choice with consumers in search of a convenient credit option – but without clear communication between the borrowers, lenders and title companies, they can also lead to confusion.
Be aware that the loan in question is a home equity line of credit.
Once you understand exactly the type of loan you are working with, you’ll find it’s much easier to handle it correctly.
Review the commitment to ensure all parties understand a home equity line of credit is involved.
It’s important that you review your commitment to make sure everyone involved has properly reviewed the actual document.
Follow the process for home equity lines of credit outlined in Bulletin 2008-15 on vuwriter.com.
This important bulletin is typically reissued annually as a helpful reminder of the key precautions to take when working with home equity lines of credit – especially for those who aren’t used to dealing with them on a regular basis.
Ensure you’ve taken all steps necessary to fully close the line of credit.
Be certain that you’re getting all necessary signatures and sending them back to the lender so they have everything they need to close the credit line.
Follow up with the lender to confirm the credit line has been closed.
It never hurts to double-check with the lender that they’ve successfully closed the line of credit. Taking the time to confirm this now could save you a huge amount of time and hassle down the road.
Avoiding Title Search and Examination Claims
With title searches and examinations producing more claims than any other aspect of the industry, today’s title agents simply can’t be too careful when reviewing title records.
Always use a reputable title plant or title searchers whose work you know and trust.
You need to have total confidence in the people performing the search. Our final policy is only as strong as the title evidence that we’re relying on.
Use a checklist to ensure all required searches have been conducted and all results have been received.
Ask your abstractor for a copy of their checklist if they already have one. If they don’t, develop your own and share it with them.
Read and review every document in the search process.
Every word or every document needs to have been reviewed. Extra care should be taken when dealing with issues surrounding restrictions and determining whether or not the property is affected by something in the chain of title. However skilled your searcher may be, the examiner is in the best position to make the call surrounding these issues.
Account for every item disclosed in the search.
Be alert to the basic title facts like fee simple ownership versus a life estate or the possibility of missing interests, or apparent irregularities in signatures, acknowledgements or recitals of a signers’ authority.
Don’t assume that an unreleased mortgage is a cleanup only.
Take exception and use a service like reQuire™ to get them off record.
Trust your instincts!
Don’t give in to protests or arguments from a bulldozing applicant. Experience tells us that they are trying to get away with something. Our underwriters are always available to assist and play the bad cop in these situations.
Visualize the transaction you’re insuring.
Mentally walk yourself through each step to be sure that everything makes sense. If not, give your Stewart underwriter a call.
Always proofread your commitments before sending them out.
Verify there are no overt errors or missing items. Alternatively, have someone else in the office review your commitment to make sure that it is complete and contains no recognizable errors.
Avoiding Power of Attorney Claims
In the title industry, power of attorney is used when one of the parties to the transaction cannot be physically present at the closing. Transactions involving a power of attorney are ripe for fraud and errors.
Review the power of attorney document to make sure it meets all technical requirements of your jurisdiction.
Not all power of attorney documents meet the specifications of every jurisdiction, so take the time to ensure all aspects of your document are valid and technically sound. Not sure about the specific requirements in your state? Contact your Stewart underwriter.
Carefully examine the document to ensure it grants the specific authority to sell or mortgage.
Take special care to ensure that the document specifically grants the power to sell or mortgage the property. Be sure that the power to do so has not expired, that any conditions set forth have been met and that any restrictions named in the document are being honored.
Ask questions to determine why power of attorney is necessary.
For many thieves, power of attorney provides a convenient way to access their victims’ information and accounts without arousing suspicion. Don’t hesitate to ask the hard questions to determine where the principal is and why power of attorney is being used. It’s hard to identify fraud if you don’t question those things that seem out of the ordinary in the first place.
Verify the validity of the power of attorney.
Contact the principal to confirm the document wasn’t revoked and make sure they still want to sell or mortgage the property. In addition, search the public records to check for any pending bankruptcies, declarations of incompetence or death notices in the principal’s name. Finally, be sure to perform your due diligence when the principal’s friends or family are involved, as these situations are ripe for misrepresentation.
Be sure the lender is aware that the power of attorney is being used.
Since some lenders have additional requirements when power of attorney is involved, it’s always a good idea to double-check that they know it’s being used.
Review the documents signed at closing to ensure proper execution and notarization.
The attorney-in-fact cannot simply sign his or her name or that of the principal. Rather, the notary clause must identify that the attorney-in-fact is signing on behalf of the principal. Without proper notarization, the power of attorney document could cause big problems.
Make certain you keep a copy of the power of attorney.
Even if you intend to record the power of attorney, it’s a good idea to keep a physical copy of the document just in case. After all, documents have been known to get lost at the recorder’s office, and it’s always better to be safe than sorry.
Avoiding Fraud and Forgery Claims
As any title agent knows, fraud and forgery can be difficult to identify before it’s too late. While some perpetrators may accidentally incriminate themselves before the closing is complete, most fraudulent activity requires a keen eye and healthy instinct to catch in time.
Always be vigilant and trust your gut.
Your instincts are more trustworthy than you might think. If any part of your transaction looks, sounds or feels wrong, follow your gut and take a step back.
Verify that the mortgage is paid and the release is valid if within 12 months of the last transaction.
Keep in mind that for loan or mortgage policies more than $100,000, Stewart’s company policy requires you to contact the last lienholder executing a release within one year of the current transaction to verify that the mortgage is paid and the release is valid. Be sure your personnel know about this policy as well.
Use a Stewart agent to assist with mail away closings.
When a mail away closing arises, find out why it’s being done that way and whether you can accommodate the parties with a live closing. If not, contact a Stewart agent or approved attorney who can help assist you by witnessing signatures.
Utilize the Special Alert/USA PATRIOT Act database on vuwriter.com.
Stewart’s Virtual Underwriter® site (vuunderwriter.com) also features helpful bulletins, manuals and other materials to help you close your transactions more efficiently while protecting your agency against fraud.
Stay updated on known fraudsters and new schemes that are prevalent in your community.
Your local land title association is a great source of valuable information about the latest scams and schemes, so don’t hesitate to take advantage of all they have to offer.
Use a positive pay system whenever possible.
Be especially vigilant when it comes to online banking procedures. Escrow accounts are prime targets for Trojan horses, viruses and other malware, so it’s crucial to keep your online transactions safe and secure.
Check your Gap searches and record documents promptly after each closing.
The sooner you can check these documents, the sooner you can identify any fraudulent activity and take measures to resolve it.
Still have some questions about the best ways to avoid claims? Contact your Stewart Agency Services representative today for more information.