Unit 4: Recordation, Title Insurance, and Settlement Flashcards
Title search
Done by attorney or title insurance company to trace ownership of a parcel of land to the beginning of it’s recorded history
Priority of recorded instrument
Determined by date of recording
Lis pendens (litigation pending)
Recorded notice stating that a pending lawsuit may affect title to a particular property
Document that summarizes all recorded interests affecting title to a given parcel of land
Abstract of title
Chain of title
All documents that comprise the history of the title
Title opinion
Given after attorney examines the abstract
Does NOT guarantee marketable title
Title insurance
Protection against incomplete or defective records of title found after closing
Does not protect against encroachments
Mortagee’s title insurance protects lender
Paid once, at the time of issuance
Covers errors in title examination, errors in the abstract, errors in the public record (misfiled docs) , forgery, incompetency , misrepresented marital status, improperly prepared deeds
Marketable title
Free from reasonable doubt as to its validity
Exception
A problem not coveted by standard or extended title insurance
Prorated item paid in advance
Debit it the buyer
RESPA
Requires lender to disclose all settlement costs in a void faith estimate no later then 3 days after a loan application
Prorated item paid in arrears
Credit to the buyer
New lien on settlement statement
Credit to the buyer
All loans (owner financing, loan assumption, new mortgage)
Credit to the buyer
Recording real estate documents
Provides constructive notice of their contents to the world
Policies and procedures that regulate records are established by state laws
Creates priority of the documents based on dare/time recorded
Most states require notarization
Real Estate Settlement Procedures Act (RESPA) requires lender supply
HUD-1
For only residential properties
Recording process
1) note date/time
2) assign recording number
3) copy document into public record
4) list document in grantor and grantee indexes
5) return original to indicated party
Actual notice
Inspect property for visible claims
Constructive notice
Inspect public records
Due diligence process
Buyer expected to inspect or gave someone inspect both the property (inspection) and public records (title search)
Subordination
Clause in mortgage / deed of trust which the lender permits a subsequent mortgage to take priority
Allows mortgages to maintain their original position
Title insurance: extended coverage
Protects against problems that are not a matter of public record but would be discovered by inspection of property
- adverse possession issues
- encroachments
Good faith estimate (GFE)
Used at beginning of loan process to provide buyers with an estimate of total settlement costs (including loan origination and discount points) that will be needed at settlement
Has to be provided within 3 business days after application
Lender fees cannot increase
Fees for services that lender requires but allows borrower to select cannot increase more then 10%
HUD-1
Reflects good faith estimate but represents final numbers used when closing the loan
Escrow
May not have more then 2 months of additions, fees plus west is owed
Escrow agent/holder is disinterested party who assists in carrying out the transaction according to terms in purchase contract
Lenders and title companies
Regulated, and real estate licenses are impacted
