Bring Your Spouse To the Refinance Closing!

Mortgage rates continue to hover near historic lows and virtually everyone is refinancing.  This is a friendly reminder to make sure everyone comes to closing.  This includes a spouse who does not own the property.

Wisconsin has an antiquated law that requires all spouses to sign any “conveyance” of  a married person’s “homestead.”  A mortgage is a conveyance because it conveys to the bank the right to take the property if the borrower ever defaults on their loan.

This law is not part of Wisconsin’s Marital Property Act.  Rather, it is in the statute that addresses the formal requirements to convey rights and title in real estate.  Some of those requirements are obvious:  identify the parties; identify the land, sign the document.   There is also a requirement that all spouses must sign if the property is the married person’s homestead.  This is true even if only one spouse owns the property.

This means that Jane Doe, the sole owner of her home, cannot mortgage her property without the signature of her husband.

There is an important exception for purchases where the entire mortgage is being used to fund the purchase (a “Purchase Money Mortgage”).  When buying and mortgaging, only the spouse who will be on the deed needs to sign.  When Jane Doe buys property without Jack, her spouse does not need to sign the purchase money mortgage.

We often here the complaint:  Why does my husband need to sign, he doesn’t own the property and didn’t sign the mortgage when I bought the property.  Wisconsin’s “homestead statute” is clear that non-titled spouses must sign any deed or mortgage on the homestead/residence except for the original mortgage when they purchased. If the non-titles spouse fails to sign, the Mortgage will not be valid.

If you are married and refinancing you personal residence, make sure your spouse comes to closing.

If you have questions about refinancing, the answer is very likely “do it!”  Rates are historically low.  You can also call us for referrals to a great lender.

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A Funny Thing Happened at My Drive-Up Closing

A pandemic can significantly impact the way we do business. Homestead has moved all of our closings to the parking lot, doing “Drive-in” or “Car-Hop” closings.  Customers love it for the health, safety, and social distancing.  Yet, there has been a surprising, unintended consequence. Healthy closings lead to dead batteries!

We have had SIX customers need to jump their cars in the last 3 weeks! 

When coming to closing, don’t forget your photo-ID, a checkbook, the keys, and jumper cables!

In all seriousness, we now advise customers to turn their car off, including the radio or anything that might drain their battery.

Homestead Title is always available to provide title insurance, closing solutions, or a jump for your dead battery.

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REMOTE DIGITAL CLOSINGS — Coming to your living room soon?

The self isolation and quarantines of the coronavirus/Covid-19 pandemic creates challenges and disruptions, including in real estate.  The title and mortgage industries are putting forth efforts to overcome these challenges.

Remote Digital Closings May be Available Soon!

A major effort is underway from title underwriters, legislatures, and administrative agencies to allow “Remote Online Notaries,” (RON) in Wisconsin.  This would allow for fully remote, digital closings without the need to leave home. While it would primarily be available to Sellers, some Buyers can also sign remotely.

Buyers with a loan will need their lender approval to conduct a fully digital closing.  Lenders have many considerations and challenges, including investors, underwriters, mortgage insurance, and legal issues. Some may not be able to offer this service right away and others may allow only certain documents to be signed digitally.

Homestead Title is already conducting digital, remote closings for “Cash” Buyers (where none of their documents are notarized and there is no lender).

Look for important updates on Digital Closings in the coming days.

 

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Time to Refinance?

Is it time to refinance your mortgage?  Probably!

The rate on a 30-Year Mortgage has steadily dropped from already low rates. Although rates can vary by region and lender, the national average has dropped from  nearly 4.5% to under 3.5% over the last 6 months.

The drop in mortgage rates corresponds with a recent drop in the 10-Year Treasury Bond.  The market for these bonds does not directly effect mortgage rates, but it is good indicator of their direction.  In fact, movement of the 10-Year Treasury Bonds almost exactly mirrors movement of 30-Year Mortgage rates over the past 5 years:

As of February 24, 2020, the yield on the 10-Year Treasury bonds were near record lows.

Does this suggest record low mortgage rates?

Yes!  The current mortgage rates are already near record lows.

Will mortgages rates drop further (don’t they drop when the bonds drop)?

Not Necessarily.  Mortgage rates are not directly effected by bond rates — there are many factors that determine mortgage rates.  And, a drop in bond rates may reflect market conditions that are already “baked in” to current mortgage rates.

The recent precipitous drop in bonds may be largely a reaction to the coronavirus, and fears of its effects on the global economy.  Yet, those fears and the current bond yields at least hint at a continuation of low rates, if not a drop in rates.

Disclaimer – if we could predict where mortgage rates will go, we would be on a tropical beach, not writing this blog.  Rates could go up or down. Mortgage rates are already CRAZY LOW and its probably time to refinance if you haven’t already!

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Digital Closings

Imagine signing all of your closing documents for the purchase or your house from the comfort of your couch.  Digital closings are coming and this could soon be a reality.

What is a Digital Closing?

A digital closing is a broad term that can include a number of different scenarios, ranging from the review and signing of a few documents on a computer or tablet to signing all documents remotely on a computer. A digital closing simply means a closing where at least some documents are signed electronically.  There are 3, broad categories of digital closings:

Hybrid Closing:  Some documents are signed electronically while others are signed on paper. This typically occurs in person, at the title company, and may include a traditional notarization or an electronic notarization.

Fully Electronic Closing:  All documents are signed electronically, including the use of in-person electronic notary.  The closing occurs in-person, usually at the title company.

Remote Electronic Closing:  The entire closing occurs remotely, via video, with a remote online notary (RON).

So, when can we do an electronic closing?  Some Hybrid closings are already happening. But, there are still challenges before the industry can implement more extensive use of electronic or remote electronic closings. These challenges include technology of lenders, title companies, and consumers; security and privacy concerns; and the interaction of state and federal laws.

Homestead Title recently participated in the American Land Title Association and Mortgage Banker’s Association’s Digital Closing Boot Camp.  Our take away: Digital closings are coming, but not tomorrow and not in a tidal wave.  Digital closings will soon become another tool in our tool box, giving consumers more options. Remote Electronic Closings are a more distant reality in Wisconsin.  Most importantly, we learned that Homestead Title is more prepared than most in the industry.

Look for more information about digital closings and options to make the closing experience easier, smoother, and more convenient.

 

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The Scoop on Scoops

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Title Commitments 101

Reading Title Commitments For Better Closings

Q: What is the most common mistake Realtors (and FSBO parties) make in reviewing a title insurance commitment?

A: They don’t review or read it at all!

Most Realtors are trained not to act as attorney’s or give any legal advice. The Title Commitment is a legal document and advising a client on it could constitute legal advice. In addition, many Realtors and FSBO parties simply don’t know what to look for and, therefore, don’t read the document.

Title Commitments Provide Critical Information

All Realtors should be reviewing the title commitment for certain, important information. A title commitment has three sections or schedules: Schedule A, Schedule B-I Requirements, and Schedule B-II Exceptions. At a minimum, Realtors should be reviewing the following:

Schedule A

The first part of the title commitment provides the names of the proposed insured. This should be your buyers. If it is not, call the title company right away – they might be missing an Amendment or their might be an error in your paperwork.

The Policy Amount should match your purchase price.

The name of the seller should be listed in paragraph 3 as the “fee simple” owner. If the name is different, there may be a title issue such as a deceased individual or spouse that still owns the property, a trust or LLC that has an interest in the property, or some other issue that requires attention.

The land referred to in the policy should match the land being sold. It will be a legal description, not a postal address. Review to make sure it looks right, especially if the property is a Condominium or includes multiple lots.

Schedule B-I Requirements

This portion of the title commitment provides a list of requirements that must be met in order to close. The requirements will call out any unusual issues that must be dealt with at closing. For instance, if the seller is deceased, the Requirements might require a valid Personal Representative to be appointed to sign on behalf of the estate.

In addition, most title companies will include any loan payoffs, taxes, or other liens that must be paid at closing. Some title companies, however, will show those liens in Schedule B-II.

Schedule B-II Exceptions

This section shows all of the title “issues” that are excepted from coverage – in other words, the title company will not insure for these issues. They are usually things like covenants, restrictions and easements. But, at some title companies, seller mortgages and liens will appear in this section. Therefore, it is important to review.

Reviewing is not Advising

Although Realtors should review the title commitment, they should not advise their clients about the legal meaning and effect of this document. That would constitute legal advice and is prohibited under Wisconsin Law. Nevertheless, if the Realtor spots a problem (the wrong seller or buyer or too many Mortgages), that should be brought to the client’s attention with the advice to seek legal counsel.

The title commitment is a critical document that provides all parties and their agents with notice of the current state of title. While Realtors should not make a “legal” review of this document, they should make a thorough review to avoid any closing problems.

 

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Closing Cost Credits

Closing Cost Credits – Buyer Beware!

A simple contract term can cause so much confusion:

“Seller shall provide buyer with a closing cost credit of $3,000 at closing.”

Closing cost credits are often used to help buyers cover their costs or to address contract issues prior to closing. When Buyer’s and Sellers agree on this credit, everyone should be happy. Unfortunately, it is not that simple.

The buyer’s lender must approve all closing credits and they must appear on the HUD-1 Settlement Statement. Problems arise when lenders reject these credits.

Contract Language and Communication

Realtors must draft good contract language and communicate with their Buyers. First, Realtors may provide for a “closing cost and prepaid” credit. Lenders will only allow credits up to the amount of the Buyer’s actual closing costs. Including “prepaids” allows many lenders to increase the allowable credits to include prepaid mortgage interest and tax escrows. Realtors should also avoid excessively large closing cost credits. In Dane County, for instance, it is unusual for closing costs to exceed $3,500. A closing cost credit of $8,000 is virtually certain to be denied. It is also important to communicate with your Buyers and warn them that the closing cost credit requires lender approval. Prepare them for the possibility that the credit may be limited or even rejected.

Avoiding Lender Rejection of Credits

Many Realtors or attorneys include provisions that reduce the purchase price by the amount of any rejected credits. Beware: this can cause delays and the need to re-underwrite a loan. The seller may also credit “prepaid” items to increase the allowable credits. Check with the lender prior to drafting the “closing cost and prepaid credit” provision to make sure it is acceptable. The best practice is to avoid closing cost credits that exceed actual closing costs.

Most importantly, if a lender rejects a credit, there are certain things that are not acceptable:

• Do NOT have the Seller write a personal check to the Buyer at closing
  
• Do NOT ask the title company to write a check to the buyer, and reduce the seller’s proceeds by that amount.
  
• Do NOT have the Realtors write a check to the Buyers.
  

Each of these “solutions” may constitute loan fraud. It is never worth risking a Realtor’s license or an attorney’s practice to assist or instruct their clients in the commission of loan fraud (no matter how unlikely it may seem that there would be any real consequences).

This information is provided by attorney Pete Zarov. This is not intended to constitute legal advice and should not be relied upon in place of individualized legal advice. For more real estate tips, check out Homestead Title’s blog.

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Title Rate Clarifications

New Rates In Response To OCI Bulletin

Wisconsin title companies recently revised rates in response to State regulatory pressures from the Office of the Commissioner of Insurance (the OCI). There has been a lot of confusion over the recent rate changes. Indeed, there have been suggestions that the new rates have nothing to do with the OCI’s recent Bulletin and that title agents can continue to offer any rates or discounts they wish.

In fact, an OCI Bulletin sent a clear warning about rates and when discounts are allowed. The OCI warned title companies that:

• Discounts must be made pursuant to a filed rate program.
  
• Discounts can only be offered for risk-based reasons.
  
• Discounts may not be made for purely competitive reasons.
  

This is a significant change in how the OCI regulates title rates. The result, however, has not been significantly higher rates. Title companies have filed new rates that are actually lower than previously filed rates. And they filed rate-discount programs that allow rates to remain competitive.

A Short History Leading Up To The New Rate Filings

The state has always required title companies to file their rates. The filed rates must be approved and cannot be “excessive or inadequate.” Over the last two decades, however, stiff competition led title agents to discount their charges from the filed rates on every single closing.  For instance, the filed rates on the sale of an average home ranged between $900 – $1,300. Yet, local title companies in Dane County and Milwaukee discounted from these filed rates, charging anywhere from $400-575. Title companies offered these substantial downward deviations from filed rates for strictly competitive reasons.  Arguably, the discounts were excessive and the rates inadequate.

The OCI Bulletin Set Limits on Discounts

The OCI signaled a significant change in enforcement of the law. The Bulletin reminded title companies that they must charge filed rates and these must be neither excessive nor inadequate. The OCI outlined when and how companies could offer discounts from filed rates, emphasizing that discounts could only be made based upon a “rate deviation program” that is based upon risk factors.

The OCI has made clear that it will no longer allow downward deviations (discounts) from any company’s filed rate based upon “market competition.”  Now, any discount must be (1) documented, (2) based on a filed “deviation program,” and (3) made for risk or actuarial reasons. This is a significant change in policy and enforcement.

New Rates – Lower than Previously Filed Rates

Most underwriters responded to the OCI’s actions by filing new rates that are lower than previously filed rates. They generally allow discounts if the title agency is provided with an older (prior) title insurance policy for the property. The filed discounts range from 10% to 20% of the rate and reflect the lower risk in insuring a property where there is already a policy in place.

The result will be a modest increase in prices in the Dane County market and a drop in rates in many areas of the state. In 2011, for example, a typical $200,000 title policy might have cost about $575. Today, that same policy will cost $665 – $750 (assuming the property had been insured previously). This represents an overall increase of less than 1% of the typical seller’s closing costs. Buyer title costs remain unchanged and refinance rates remain fairly static with lower prices on high end properties.

Overall, rates in Wisconsin are still very low compared to regional and national averages. Homestead Title writes for three underwriters and continues to have competitive rates and incredible service. For a rate sheet, contact us at Home@HomesteadTitle.net.

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Deed Copy Scam Alert

DEED PROCESSING NOTICE – Don’t Fall For it!

Home owners are being targeted for a simple, yet effective scam. At least two companies are offering to send copies of “grant deeds” for a charge of $86. They recommend that homeowners obtain this deed in order to confirm their ownership in the property. Yet, these public records are readily available for almost no cost.

Why Do Many Officials Call This A “Scam?”

These companies send official looking notices that often include warnings of late fees, compliance response deadlines, or the phrase FINAL NOTICE. While these sales pitches are not illegal, they are deceptive. As the Lake County Recorder of Deeds in the Chicago area noted: “It is not against the law, but it breaks the spirit of the law . . . It is very, very deceptive.” Officials Warn Homeowners of Deed Scams, Chicago Tribune.

The companies often charge $86 for the deed but also include a $35 late free for not meeting a fictional deadline. It is only in the fine print that they disclose that this is not a bill and that you could receive the same information from the County Recorder (or register of deeds).

Deeds Can be Obtained Inexpensively or Free

In fact, copies of deeds, mortgages, or any recorded document may be obtained from your local Wisconsin Register of Deeds office, for a very nominal fee. Generally the fees are $2.00 for the first page, and $1 for each page thereafter. Deeds are usually one or two pages.

In addition, homeowners should have received a copy of their deed from their title company when they purchased. Homestead Title and many other title companies will provide a duplicate to their customers at no charge.

Homestead Title Company is always happy to assist Dane County homeowners with such requests.

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