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The Rising Star
May 2005 - Volume 4, Number 3 |
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 News from
the Star
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Guest Columnist
Why You Need Title Insurance
By Connie Smith
The Law Offices of Brett M. Shanks, PC
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 Stacy made her annual trek to Washington D.C. to rub elbows with our elected representatives. This was an important year with all the troubles in the mortgage industry. She met with Rep. Neugebauer and Senator Cornyn's staff and was impressed with their desire to understand the issues. All seemed to appreciate the need for a cautious approach to new regulation and the need for better consumer education.
We are pleased to introduce to you the newest member of the Texas Lone Star Lending family, Barbara West. Barbara is our Loan Processor. She comes to us from the telecommunications industry where she excelled at managing IT resources, which makes her perfect for our push to add online resources for our customers.
Barbara is a quick study and is really enjoying the change. "I have been interested in real estate and mortgages for a long time. It is really exciting to be part of the process now," she says.
Barbara is a native Texan, but she has lived in CO and NM before moving back home. She and her husband have a blended family of 2 boys and 2 girls. They have 2 grandsons, but remain optimistic about the possibilities for more.
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I often hear people ask why they need to pay for title insurance when they purchase or refinance a property. In simple terms a title policy premium protects you and the lender against future claims for things that occurred in the past. Title Insurance companies research the full history of the property as completely as possible through court records, clear up any known issues, and then assume risk on behalf of the owners.
Here are some true stories about how title insurance protects you and your investment in your property:
A misspelled name meant that a second mortgage on a property wasn’t discovered during the title examination. The transaction closed and the first mortgage was paid off. When the second mortgage went into foreclosure due to non-payment by the sellers, the title insurance company paid for the missed mortgage and the buyers were able to keep their home.
A couple owned property and planned to build a home when the husband was transferred to another state for his job. He sold the property and forged his wife’s signature on the deed. The buyers were starting construction on their home when the wife turned up and asked what they were doing building on her property. The title insurance company paid the wife ½ of the proceeds from the sale, and the buyers were able to continue building their dream home.
Title examination uncovered a Federal Tax lien against a property. The sellers produced a “Release of Levy” from the IRS describing the property and signed by an IRS agent. The sale took place. The “Release of Levy” was the IRS’ promise to forgo collection efforts as long as installment payments were made. Shortly after closing the sellers stopped making payments. The title insurance company paid the IRS lien and received a “Certificate of Release of Federal Tax Lien” clearing the lien for the new owners.
Even if you had clear title when you purchased a property, tax liens, mechanics liens and other items may come up of which you may not even be aware that must be addressed before title can be conveyed to another party. From the examples above, it would seem to be a small price to pay to ensure that you have the right to dispose of your property as you wish.
You can reach Connie at:
(512) 658-2487
csmith@fidelitytitletx.com
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From the Residential Desk
Look Who’s Selling Your Personal Information
Your think your personal financial information is private, right? Think again! The major credit bureaus have found a new profit center, and it's selling your personal financial information. When you apply for a mortgage, within 24 hours you will start receiving phone calls from "competing" lenders. You just became a "trigger lead."
Maybe that sounds good to you. A little competition is healthy. That might be true if the competition were honest. The risks of trigger leads abound and in my opinion far outweigh the benefits of increased competition. (It's not like you can't find competing lenders yourself on the Internet.)
Bait & Switch - A number of consumer groups and government regulators have reported cases of "bait-and-switch." Trigger leads are quite expensive. A thousand leads costs a lender over $60,000. You think there might be an incentive to say anything to get consumers to change lenders? In the bait-and-switch callers misconstrue information to make their offers look better. One example is giving a "30-year rate" that actually is for a 2-year adjustable rate loan amortized for 30 years. The consumer finds out at the closing table that it isn't what he wanted, and then what can he do? (By the way, whom do you think picks up $60,000 tab?)
Identity Theft - Having your personal information sold to anyone willing to pay increases the chances that you will become a victim of identity theft. An example posted by a woman from WV illustrates the risk. She applied to refinance her home with HER mortgage company. In short order, she received a phone call from a man claiming to be "following up on your loan application." This woman knew he was lying, but would you be so lucky? What could have happened if she had given him her social security number?
Busted Closings - A realtor in WA reported about a client who he was helping purchase a $400,000 condo. After getting pre-approved with one lender, the client was barraged with solicitations from other lenders. The offers were very enticing, so the client decided to check them out, making multiple loan applications. Each application dropped the client's credit score, so when it came time to close, he no longer qualified for the loan. The client had to break the contract, lost the condo, and must restore his credit.
William Lund, director of the Maine Office of Consumer Credit Regulation, believes the bureaus and trigger lead buyers are violating the Fair Credit Reporting Act (FCRA) because excessive information is being provided on trigger leads and the credit offers are not firm. Instead, he says, they are "fishing expeditions" providing no benefit to the consumer.
However, the Federal Trade Commission (FTC), which administers the Act, ruled in March that it lacks the legal authority to stop the sale of trigger leads. Rebecca E. Kuehn, the FTC's assistant director for privacy and identity protection, said, the law allows for firm offers of credit using pre-screened lists and does not require that lenders know every detail about a consumer to make a firm offer.
The final word may come from Congress and state legislatures. House Financial Services Chairman Barney Frank reportedly plans to submit legislation to restrict the bureaus' ability to sell trigger leads. The states are not waiting. Massachusetts, Minnesota, Connecticut, Maine, Rhode Island and Alabama have bills that would "limit or prohibit the use of information about a specific loan by someone trying to compete with that loan or sell a product without acknowledging they are not affiliated with the bank that made the original loan."
In the meantime, what can you do to protect yourself?
Opt-Out - The same law that allows the credit bureaus to sell this data also requires they allow you to opt-out of this prescreening process. Visit www.optoutprescreen.com and complete the online form. Once you do this you will not receive any pre-screened offers for the next 5 years. Note that the opt-out request takes 5 days to become effective, so opt-out at least one week before your apply for a mortgage.
Do Not Call - You can block the telemarketing blitz by registering your phone number on the National Do Not Call Registry. You can register at www.donotcall.gov. Keep in mind that if you fill out an online form to shop your mortgage rate you may be giving permission for telemarketing lenders to avoid complying with this block.
Report - If you receive a trigger lead call, know what to do. Get the caller's name, company, and location, and ask for the offer in writing. If the caller is deceptive or evasive, report it to the FTC and your state's Attorney General. If your phone number is on the Do Not Call Registry, and you did not solicit the call, file a complaint on the registry's Web site (www.donotcall.gov).
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