Dear ITLA Members,
One thing that we can all be assured of is that change is inevitable. The new closing disclosures, rules outlined by the CFPB, and ALTA best practices emphasize this fact. These new challenges can be overwhelming and create a great deal of frustration. The key to coping with change is fo-cusing on principles.
Recently I read a book titled, “Cowboy Ethics” by James P. Owen. Mr. Owen was a stock broker on Wall Street and was concerned with some of the behaviors that he witnessed in the finance industry. Utilizing his love of the Old West and his interest in the culture exhibited by the cow-boys who lived in the West he created what he thought would encompass the code the cowboys lived by. This code isn’t just meant for Cowboys; it can be applied to our daily lives as well. He broke down the Code of the West into the following principles:
- Live Each Day With Courage
- Take Pride In Your Work
- Always Finish What You Start
- Do What Has To Be Done
- Be Tough, But Fair
- When You Make A Promise, Keep It
- Ride For The Brand
- Talk Less And Say More
- Remember That some Things Aren’t For Sale
- Know Where To Draw the Line
Live Each Day with Courage
“There is an old saying that, ‘a cowboy’s a man with guts and a horse.’ No one lacking in bravery could last very long on the range.” James P. Owen. While we don’t have to face the same dangers as those who lived in the Old West we certainly have to have courage to do our jobs the right way. We are constantly asked by our closest clients to bend the rules for them or look the other way when proper and prudent procedures aren’t followed. We as an industry need to have the courage to stand up for what is right and make sure we are looking out for the welfare of the end consum-er of our products. “Real courage is being scared to death and saddling up anyway.” James P. Ow-en
Take Pride in Your Work
It’s hard to believe in the importance of what our industry does when we hear our customers be-little our contributions to the real estate process. At the end of the day we need to take pride in our work and the fact that without our skills and expertise the buying and selling of property could very well come to a screeching halt. The excerpt from the poem, “The Fence that Me and Shorty Built.”, written by Red Steagall describes what it means to take pride in ones work.
“If you’re not proud of what you do,
You won’t amount to much.
You’ll bounce around from job to job
Just slightly out of touch.
Come mornin’ let’s re-dig those holes
And get that fence in line.
And you and I will save two jobs,
Those bein’ yours and mine.
And someday you’ll come ridin’ through
And look across this land,
And see a fence that’s laid out straight
And know you had a hand,
In something that’s withstood the years.
Then proud and free from guilt,
You’ll smile and say, “Boys, that’s
The fence me and Shorty built.”
I know many of us can look at projects we worked on and see the end result of a purchase of a home, apartment/condo, land, or a commercial property, etc. We should take pride in those accomplishments and never be afraid to stand up for our contribution to the real estate process.
Always Finish What You Start
“No cowboy ever quit while his life was hardest and his duties were most exacting.” J. Frank Dobie.
Our industry is getting more and more difficult every day. Customers continue to make more demands of us, they expect us to take more risks, get our products out the door faster, charge less, and continue to have a smile on our face as we do these things. Regulators have taken a keen interest in the lending industry requiring more work for us so that regulations are met. Sometimes it would seem easier to throw our hands into the air and say, “I quit!”
We know we must finish what we start. People count on us to get the job done so they can finish their job. Without our commitment to the industry and getting the job done property isn’t bought or sold.
I hope these first three principles give you some inspiration in your daily life and help to deal with some of the continual demands of our industry. I know that these ideals have helped me to focus on what’s important. This has enabled me to continue to deal with change knowing that these principles will withstand the continual evolution of our industry. Over the next few newsletters I will continue to share the details of the remaining principles from Mr. Owen’s book with all of you.
ALTA CONVENTION RECAP
Takeaways from the ALTA convention in Seattle were plentiful on the information side as well as networking and vendor side. A major theme in the majority of the presentations was “communication and relationships” and “telling the story of not just our business but each transaction”. These themes were present in ALTA’s “consumer messaging project”. The project consisted of interviewing lenders, realtors and home buyers about title insurance. The conclusion was not unexpected that home buyers in general do not understand our business. Home buyers don’t seem to be particularly interested or care about the realities of a thorough search and exam of title. They don’t want to hear what we do and how we do it—they want to hear the benefits they receive. What they seem to be interested in is that title insurance is a one time fee; that it protects your financial investment for as long as you own your home; and, that the policy entails a search of the public records for debts, judgments and other home-ownership issues that give some peace of mind. Homeowners want to hear about the specifics and they want to know or have the chance to learn about title insurance earlier on in the transaction. ALTA concluded that the most effective message in promoting our business is to tell home buyers that title insurance is about “protecting your investment”.
Ken Schmidt of Harley Davidson lore spoke and had a different take on the ALTA message. Schmidt focused on what does the customer want to know/remember about the title business and their transaction. Schmidt found the ALTA message “protecting your investment” as largely hollow, worthless and boring. His reasoning was because what does that phrase really mean? What is memorable and exciting about that phrase? In his mind it doesn’t speak to what you want realtors, lenders, and home buyers to say about your office. If there is no exciting and memorable story to say there is no demand and you are just run of the mill. While not apples to apples Schmidt shared that Harley doesn’t necessarily have a better motorcycle then Honda and other competitors as they look and perform very similarly and Honda’s is priced significantly less. He insinuated that title policies and real estate closings were similar in analogy. If your focus is on quality, efficiency, protecting your investment, etc. this is boring and the same as your competitors. He said this was similar to Harley and motorcycles (just another product) but what Harley has done to separate itself is that it sells a lifestyle not a product. The Harley lifestyle is filled with passion and they have disciples versus customers. He encouraged the audience to establish meaningful differentiation from your competitors and create a story that makes you desirable. He challenged the industry to think outside the box and tell a different story that is passionate, fun, exciting versus the boring unmemorable “protecting your investment”. Schmidt summarized that when homeowners merely sign documents to protect their investment a memo-rable story is not created, you will not be remembered, and you are run of the mill.
Doug Duncan, chief economist for Fannie Mae presented. His belief is that the economy is still two years away from normalcy. Home ownership among younger groups is declining. Similar to what we heard from Ted Jones at the Pacific NW convention the younger age group is impacted by the CFPB and qualifying mortgage standards and large student loans. There is an increase in adult children living with their parents. Duncan cited that 55% of the public feels the country is on the wrong track to improving the economy. While he spoke at a separate meeting from Duncan, it was noteworthy that Rep. Denny Heck (D-WA) spoke highly of the real estate industry as a significant player in the economic recovery. Rep. Heck spoke passionately about home ownership and that housing is an under appreciated component of economic recovery. Duncan also contributed to a convention theme that was discussed with the ALTA consumer messaging project and Schmidt in that communication is a factor in under-standing and progressing forward— “simplicity is a key to effective communication.”
Other topics discussed were ALTA’s grassroots platform of TAN. TAN has reached 10,000 members. This is a very important grass roots networking tool and can be very effective when implemented. It increases the industry voice and carries a lot of weight. In contrast, the Mortgage Bankers Association has 7,000 in their TAN equivalent.. The CFPB was also a hot topic. Contacting your lenders and discussing best practices, requirements and implementation is key. Coordinating with your realtors so they are in the loop is also paramount. Regarding CFPB implementation issues—Leslie Wyatt of Soft Pro is scheduled to attend and present on this specific phase of the CFPB at our upcoming ed seminar in Boise on March 5. If you have specific implementation questions please let me know and I can coordinate with Leslie to incorporate into her presentation.
Jeanne Bliss closed with a talk about “improving the consumer experience”. Her theme focused on communication and shared some themes with Schmidt. Her focus was on becoming part of the story of our customer’s life. She coined it becoming a “beloved company”. A beloved company is one that believes; has clarity in purpose; is real; is there and accountable; and says they are sorry. It is one that believes in feedback and develops relationships and gets to know its customers versus a strict business relationship. Similar to Schmidt she advised you want to improve the life story and create hello and goodbye memories. You want to be proactive and solve problems and accept responsibility. People/customers are more than accounts.
One of the breakout sessions I attended was the “Top 10 Legal Issues Facing the Title Industry”. Some of the cases were of particular note given their geographic location and/or the topical trend. The presenters discussed Chase Plaza Condominium Assoc. v. JP Morgan Chase Bank, 2014 WL 4250949 (D.C. Court of Appeals, August 28, 2014). This case regarded a foreclosure by an HOA for delinquent condo assessments in the amount of $9,415.00. The HOA foreclosed and then sold the condo to a third party for $10,000.00. JP Morgan filed a complaint to void the foreclosure. Although the HOA lien was junior the court gave it a super priority lien status that wiped out the JP Morgan deed of trust. The super priority was based on a statute based on a Uniform Act that 13 states have adopted. Of significance is that of those 13 states members of the audience chimed in that Nevada and Washing-ton have adopted the Act and recent cases have had similar results. Another case that made their top 10 list was the Chicago Title v Washington Department of Insurance case that has been discussed previously at our Pacific NW conventions. The discussion centered on the holding finding the underwriter responsible for its independent agent’s improper marketing acts and the court’s interpretation of agency law. Another case was discussed also holding an underwriter liable—this time for an agent’s fraud in issuing a bogus title policy. FDIC v Untied General Title Insurance Co., 2014 WL 3611835 (E.D.N.Y.) determined that apparent authority cloaked the agent with appearance of authority to issue policies on behalf of the underwriter. The cases seem significant in holding the underwriter responsible for agent’s acts raising the possible ramifications that might come from those holdings. Lastly, there were a couple of Michigan cases that centered on the CPL. One case centered on the standing of the party to assert coverage under the CPL. In this case the loan was transferred but the prior lender was held to have standing to bring claims under the CPL. The court held the CPL does not follow the transfer of the loan and title policy but is a separate contractual obligation. The court allowed the prior lender to pursue claims under the CPL even though it no longer had any rights under the policy. The other CPL case regarded a fraudulent flipping scheme where the agent refused to answer questions pleading the Fifth Amendment. The court reversed a trial court decision in favor of the underwriter holding that enough facts were alleged of a fraudulent handling of escrow funds to trigger coverage under the CPL. The underwriter’s own bulletins warning of the fraud scam were used against it as supporting coverage under the CPL. Clearly, CPL litigation will be at the forefront for the coming years.
By Bob Rice
U.S. Bank v. CitiMortgage, Idaho Supreme Court Docket No. 41252 (October 29, 2014)
This case involves the competing priorities of two deeds of trust, one in favor of US Bank and the other in favor of CitiMortgage. It does not involve any impactful legal issues (for the title industry), but serves as a reminder that HELOCs must be dealt with very carefully.
Thomas took out a HELOC with U.S. Bank on September 9, 2005, in the amount of $2 million. Later that month on No-vember 23, 2005, in an effort to refinance the U.S. Bank loan, Thomas obtained a loan from CitiMortgage in the amount of $4,990,000.00. The Thomas’s signed a loan commitment indicating their understanding and intent that the HELOC would be closed and the U.S. Bank deed of trust reconveyed.
The closing agent for the CitiMortgage loan obtained a payoff from U.S. Bank and sent the appropriate amount to pay the HELOC in full. CitiMortgage also allegedly sent a “release and demand letter” to U.S. Bank requesting that the HELOC Deed of Trust be reconveyed. The release and demand letter was allegedly stapled to the payoff check.
U.S. Bank received the payoff of check but disputed receiving the release and demand letter. Needless to say the HELOC was not closed nor reconveyed. The Thomas’s subsequently maxed out the line of credit and then defaulted on both loans. The case hinged on whether one could see staple holes in the imaged copy of the negotiated check. The theory being that if there were staple holes in the check, the release and demand letter must have been attached. The case was decided upon the evidentiary burdens of the parties involved and remanded back to the trial court for additional findings.
The lesson to be learned from this case is that not only must the settlement agent request that the HELOC be closed and reconveyed, you must also retain evidence that the request was sent to the HELOC lender.
DAFCO LLC v. STEWART TITLE GUARANTY and AMERITITLE, Idaho Supreme Court Docket No. 40738 (July 31, 2014)
Facts. Insured lender filed action against Insurer and Escrow Agent based on failure of one spouse to sign first-position Deed of Trust as required by I.C. § 33-912. Separately, holder of second Deed of Trust brought judicial foreclosure action seeking priority over insured DT. Insurer defended insured lender in judicial foreclosure action and obtained rulings that: 1) under I.C. § 33-912, spouse’s failure to sign rendered first DT voidable, not void; and 2) holder of second DT could not in-voke I.C. § 33-912 for its benefit where non-signing spouse does not challenge validity of first DT.
Claims against Title Insurer: The Court upheld summary dismissal of Insured’s claims against Insurer. Sections 5(a), 5(c) and 9(a) of the lender’s policy permitted Insurer to establish title, as it did in defense of judicial foreclosure action, rather than pay face amount of policy. The Court upheld the District Court’s denial of Insured’s request to add a claim for breach of the implied covenant of good faith and fair dealing on the same ground.
Claims against Escrow Agent: The Court upheld dismissal of Lender’s claims against Escrow Agent. Plaintiff, as assignee of original lender, lacked privity with Escrow Agent and failed to timely present authority to the contrary. In dicta, the Court recited favorably the lower court’s determination that, reading policy and closing instructions together, Escrow Agent was mere scrivener and therefore not contractually obligated to obtain spouse’s signature.
CUMMINGS V. STEPHENS and NORTHERN TITLE COMPANY OF IDAHO, Idaho Supreme Court Docket No. 40793 (September 19, 2014)
Facts: Buyer (assignee of original contract buyer) of real property brought claims against Seller and Title Company after Title Company corrected its initial inaccurate legal description of the subject property. Original Deed mistakenly included 83 acres Seller never intended to sell. Seller discovered non-ownership of 83 acres through assessor and notified Title Company of problem. Title Company attempted to resolve the issue by adding language to Original Deed and re-recording it as a Correction Deed. Buyer then sued for negligence, breach of contract, and conversion of the 83 acres by recordation of the Correction Deed.
Claims against Seller: The Court upheld the dismissal of Buyer’s claims against Seller on the ground that the evidence showed that Seller merely informed Title Company of error in Original Deed, but did not participate in or direct the prepara-tion or recording of the Correction Deed. Therefore, only Title Company could be liable to Buyer.
Claims against Title Company: The Court declined to decide whether to extend the tort of bad faith to escrow companies on the ground that the plaintiff could not prevail on that claim even if it did so. The Title Company believed all along that the 83 acres were excluded and, therefore, contested the claim in good faith. Similarly, since Buyer (a) did not prove that the purchase agreement included the 83 acres and (b) did not present expert opinion as to the value of such acreage, Buyer could not recover value of that the acreage as damages from Title Company. Finally, the Court overturned the district court’s award of $50,000 to Buyer (the price Buyer paid for assignment of purchase contract) against Title Company for negligent performance of its duties as an abstractor of title under I.C. § 54-101. The Court found that Title Company could not be liable as an abstractor of title because it’s preparation of the legal description was “part of the work done to issue the com-mitment for title insurance.” The Court reiterated that, in Idaho, only abstractors, not title insurers, may be held liable for negligence in the search and examination of title. (See, I.C. § 41-2708(1), requiring “a search and examination” of title, but omitting any “reasonableness” requirement.)
Benton Associates Lobbyist’s Corner
Many of you have met Lyn Darrington, Larry’s new associate serving the Idaho Land Title Association.
If you have not, you’re in for a treat! Lyn brings a new perspective and wealth of experience to the Association that speaks clearly of her value to the ILTA. For those of you who have not yet met Lyn, the following information will serve as an intro until you have that chance. For nearly two decades Lyn has been one of Idaho’s leading government relations professionals. A fixture in the Idaho Capitol and state politics, Lyn combines deep knowledge of business issues, health care, insurance and tax policy with relationships built upon trust and years of public policy and political experience. A shareholder based in the Gallatin Group’s Boise office, Lyn cut her teeth as a health policy advisor to former Utah Governor Michael Leavitt’s Health Policy Commission. Prior to joining Gallatin Lyn was assistant vice president of legislative and regulatory affairs for Regence BlueShield of Idaho, where she oversaw all state and federal public policy and state regulatory
activity. A seasoned professional, Lyn has played an important role in Idaho’s health and insurance reform throughout the last decade.
Lyn also spent two years in service to the title industry as an employee of the American Land Title Association
in Washington, D.C.
Lyn lives in Boise and earned a Bachelor of Science degree from Utah State University and a Master of Arts degree from the University of Utah. She is active in the community and serves on the boards of Directors of the Idaho Governor’s Cup and the Idaho Chapter of the March of Dimes. Your lobbyists’ and your Legislative Committee have been working hard on your behalf to address the Idaho Association of Counties’ issue of the single recording of title-related multi-documents. Progress has been made, but more work is needed. A major announcement on this matter may be forthcoming once it has cleared the Committee and the ILTA board. We are also working with the Idaho Bankers Association on potential
legislative gas and oil lease issues that may be problematic. Finally, now that the election is over, we can get to work advocating Land Title issues. Legislation and legislative activity is in somewhat of a “slump” until the body convenes in early January, but I expect 2015 to be a busy legislative year. We will keep you apprised of events as they happen.
Newsletter November 2014_ – DOWNLOAD PDF