HB 4050 News
 ....I've been waiting so long........

The obscure musical reference notwithstanding, we all have been waiting for something, anything, to happen. Since the last time we spoke, the only thing that is a "known" fact is that the start date is September 1, 2006. The credit counselors got the relief that they were looking for, they have been absolved of any liability stemming from their actions in this train wreck-to-be. After that, it is all still vague, as only the State of Illinois can be. No information as to the implementation of the database, or how much and how long you and I are going to get the short end of the stick in this mess.

 

 TitleFacts - Common questions, uncommon answers!
 

Taxes. The most confusing and irritating part of your closing. This installment of TitleFacts will hopefully help you to understand the hows and whys of what the Title Company does to insure these annoying buggers. Let us begin with the basics. In the State of Illinois, Real Estate Property Taxes are billed in arrears, meaning that the 2005 taxes are due in 2006, the 2006 taxes won't be due until 2007, etc. etc. In the vast majority of Counties, the full year bill is determined and then divided into two equal installments, generally due in June and September. Cook County (along with a few Downstate) are the odd stepchildren. In Cook, for reasons to numerous to go into here (and generally understood only by someone the County calls "The Oracle"), they do things different. The full year taxes are not established in time for the bills to be issued for the March due date of the first installment. Therefore, any increase in the tax bill will not appear until the second installment, due generally anytime from September to December, determined by when the County actually finishes figuring out what the bills should be.

Now that the basics are clear, (pause while you shake your head and go "Huh?") let us actually put things into practice. The first item that I would like to explain is the dreaded tax TI. TI is short for Title Indemnity. At its core, a TI is a general purpose device whose sole purpose is to set aside some money at the closing to allow the Title Company to indemnify, or insure over, a particular matter of title. A TI can be used for a Mortgage, some other lien or issue, but most commonly used for taxes.

By a large margin, the number one thing that no one understands why the title company wants to hold THAT much money. Taxes are the number one loss for any title company. It is not just ATS or in the Chicago area, it is national. The vast majority of these losses are not the fault of the Title Company, they are due to an error at the County level that is discovered after the closing, when the taxes are paid. It usually goes like this, The Title Company will go to the County to pay the taxes and at that time Gladys behind the counter says something like "Well, that isn't enough money, we forgot to add the 1st installment from 1856!", or something just as crazy. More than likely though, it is something simpler, like an additional months interest is due, or they have added an installment to the prior tax sale or even, especially in Cook County, is what is know as the Tri- Annual Reassessment (which will be covered in a future issue of TitleFacts).

The Title Company has no choice but to pay the County what the County wants, but it is not the Title Companies bill, now is it? History has taught the Title Companies the following truths: 1) The County always wins, and 2) Borrowers seem to disappear when we come looking for reimbursement. The amount that we hold for a TI, while appearing wildly out of balance for the taxes that are showing, is necessary to insure your client and your lender, that all taxes are paid.

Next time, we will cover the other odd tax notes that appear on your commitment and what they really mean. Have an idea or a question that you would like to see addressed in an upcoming issue of News and Views?

Drop me an email!

Ideas? Questions? Need more Information?.... 

 Our View......
 Life from this side of the table

In the last issue of News and Views, we spoke of title issues that “pop-up” at the closing table. If you remember, we learned that in 99.9% of the time, the issues were already in the title commitment, but were overlooked until closing. This issue, I will try to explain a question that we hear many, many times a day: “Can’t you just waive that?” The short answer to that question is yes. We have the ability to waive any title exception that is on your commitment. Want all your Mortgages gone? Sure, we can do that. Tax problems affecting your Loan to Value? No problem!

But we won’t do that. Neither will any other title company. Here is why.

At our core, as well as every other title company, is one solid truth. We are an insurance company. We assess risk for a living. That is what insurance companies do, just like your personal car and homeowners insurance. The only difference being, title companies are operating on a fixed rate (or premium), rather than a rate (premium) based upon how much risk they are taking.

Therein lies the problem, at least as it relates to waiving title exceptions. For the insurance rate that we offer you, we agree to accept a certain amount of risk, based upon the coverage that the Buyer (that they own it) and Lender (that they can Foreclose) wish to be insured for. But what happens to those odd exceptions on your commitment? The answer begins rather simply. What did I refer to them as in the previous sentence? Exceptions, more formally known as Exceptions to Coverage.

As a general rule, there isn’t a title company around that is going to waive, or to put it more directly, accept the risk, of mortgages, or any other Exception to Coverage for that matter, that still appear on title without some sort of verifiable proof that it is not going to cause a claim later on. Now of course, there will be exceptions to this, on a case by case basis, based on the risk that is involved. There might be cases that will require the payment of an Additional Risk Premium to induce the title company to insure over the exception. There might be times where we can waive things for without the Additional Risk Premium. It all depends on the risk.

 

 BREAKING NEWS
 Foreclosure "Rescue" Law Signed

The Governor recently signed into law Senate Bill 2349 which spells out specific guidelines and rules for this practice. The complete description is available here. The Governor also signed SB 2569, which will require County Recorders to send postcards to the owner of a parcel of land when a quit claim deed is recorded against it. The complete description is available here.