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3 Things You Need to Know About Escrow

When you have found the house you"re completely smitten with, you"ll be sure to get in touch with the seller and agree to a great deal. However, before you can finally have to house, you need to complete one more step. The last step is what we call the escrow process, or most commonly called as closing.

You may have a real estate agent or an escrow title company to guide you through the whole process, but that doesn"t stop you from finding out what happens during the closing. Here are things that you need to know about escrow:

escrow title company

What Do Title Companies Do

Title companies must make sure that the title of the property you"re going for is clear of any legal issues. They need to check if there are any forgeries, liens, fraud and anything else that could go wrong. You don"t want to be paying for the previous owner"s unpaid debts or discovering an entitled heir to claim the property. These must all be cleared before you close the deal.

If it"s all clear, the title company then issues a title insurance Mandarin FL has to protect both you (the buyer) and lender from any disputes against the property. A lender"s policy remains effective until the mortgage is fully paid. On the other hand, an owner"s policy lasts as long as you and your heirs own the property. That means that the property would still be protected even if you passed it on your son or daughter.

What are Escrow Services?

Escrow agents can act as a neutral party who is in charge of title and escrow responsibilities, transaction details, financing and other paperwork that may be related to the purchase of your home, refinancing of mortgage or title transfer. They must protect all critical documents and make sure that everything is filed correctly on time. They follow the written instructions and comply with every required form to complete the process. They don"t necessarily give out any advice to buyers, but they could help you find ways to speed up the closing process.

As a buyer, you would want to be sure that all the conditions of your purchase are met before you set the deal. A more simple definition of the escrow is a transaction where one engages in the sale, transfer or lease of a property to another person who delivers the documents and finances to an escrow agent.

Choosing Your Escrow Company

Your real estate agent or broker may recommend an escrow officer who, they have successfully worked with in the past. But, you have the right to choose whomever you deem to be fit for the job. There are specific factors that should be considered to select the right one for the task. The level of experience is critical for a smooth transaction as well as the financial ability of the company and the rates of their services. You may also consider choosing an office which you can quickly reach for you to save time.

Rates can vary, so you can take your time in comparing prices that would do good for your budget. Here are additional tips on escrow fees:

You can ask for a list of expected title and escrow costs
You should also determine whether you or the seller will pay the fees. Customs differ in diverse states. In some states, the buyer and seller split up the costs of escrow services.
Watch out for relatively low estimates as you would be charged more for other incidental fees.

So, before you sign the deal, make sure you understand the things that happen during the closing process.

Foreclosure: The Bank Must Prove They Own The Note

The Court System is finally standing up for the little guy! Recently, the Southern District of New York ruled in favor of a borrower who was being foreclosed upon by their mortgage bank because the bank could not prove they owned the mortgage.


Years ago, lenders conspired to bypass the mortgage recording systems put in place by local municipalities, as well as avoid the fees associated with the recording of assignments of mortgages. In order to accomplish this task, lenders formed a company known as the Mortgage Electronic Recording System or MERS. Many mortgages state that the owner of the mortgage is MERS as nominee for the lender. The issue here is that MERS is not the actual lender or the note holder and one can only foreclose if they are in fact the party that has been defaulted. In the case of MERS, the investor is the owner of the note but MERS is the owner of the record of the mortgage.

What Does This Mean?

In short, this means that the note and mortgage are owned by separate entities and a foreclosing party must own both in order to foreclose. If a borrower fails to make payments, then the borrower has defaulted on the note and the owner of the note, therefore, has a cause of action for default on the note only and is not able to foreclose. The note holder may have the right to a judgment on the note and may be able to attempt collections on the note but cannot actually institute a foreclosure proceeding. The mortgage document, which allows for foreclosure, has not been violated since the borrower has only defaulted on the note and has not offended the owner of the mortgage. A mortgage holder may still be able to institute a foreclosure proceeding against the borrower for other violations of the mortgage such as transferring the property without consent, condemnation of the premises, etc.. but the mortgage holder may not institute foreclosure proceedings based on nonpayment of the note. This means that under the new rulings by a Kansas Court, MERS does not have the ability to foreclosure the mortgage and the investor may only recover under the terms of the note.

Proof Of Ownership

A foreclosing lender must prove that it is the owner of the defaulted mortgage and note, and not the owner of only one of those two documents. In keeping with the Kansas Court, the Bankruptcy Court for the Southern District of New York threw out the first mortgage of more than $400,000.00 in its ruling. The foreclosing servicer and underlying investor could not prove that they were the actual owners of the mortgage. The underlying investor, U.S. Bank, could not prove that it owned the mortgage that was being foreclosed upon by it servicer, PHH Mortgage. The lenders here used MERS which allowed them to assign the loan without filing actual assignments in the Municipality’s recording office. Since there was no assignment of record, U.S. Bank was unable to prove that they were the aggrieved party and therefore, had no standing to foreclose.


Although these rulings are being or will be appealed by the lenders, these rulings show a change in the way the Court System is looking at foreclosures. After years and years of deferment to creditors and a bending of the rules when it comes to proof of claims in foreclosure and collections matters, the Courts are now requiring lenders to prove that they are in fact the aggrieved party and to provide proof. If the lender is unable to prove that they are the aggrieved party, Courts seem much less likely to simply defer to the creditors. It seemed that the burden of proving the debt has finally been shifted back to where it belongs. Now the lender must prove that the debt is valid and owned by them before the Court will allow them to proceed.

What Does This Means For You?

About 60% of all mortgages that were given out during the lending and refinance boom are held by MERS as the nominee. There is a good chance that your mortgage is held in this fashion. If you can find your copy of the mortgage papers you signed all those years ago, look on the first page of the mortgage documents and see who is named as the lender or mortgagee. If it is MERS as a nominee, you may have a viable defense to foreclosure or may be able to have the debt completely relieved in bankruptcy.


The rulings cited in this blog post are cases of the first impression and the full ramifications of the rulings are not yet known. The ruling of the Kansas Court is not binding upon any other State and until the appeals process has been completed there is no way of knowing what the actual outcome may be. This article was written to show the trend of the Courts in moving away from a creditor bias and toward a more fairly viewed interpretation of the law and rules surrounding mortgages and foreclosure. This is not legal advice but rather a recitation of facts and an analysis of what appears to be happening around the Country with the hopes that some of our colleagues may be inspired to pursue these types of defenses to foreclosure proceedings and establish the rule of law more thoroughly and to give hope to those who are facing similar circumstances.

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How To Choose A Realtor

Recently there was an article on titled “What To Look For In A Realtor“. This article gives some excellent advice about to how to choose a realtor and what you should look for. For most people, buying a home will be the most expensive purchase they ever make. Further, most people will only buy or sell a house a few times in their life so you want to make sure that you have seasoned professionals in your corner. That includes your Realtor. You will spend more time with your Realtor than any other person involved in the purchase or sale of a home, so you want to make sure that they are the best.

Some points to remember when choosing your Realtor:

1. Make sure you like them

Like I said above, you are going to spend a lot of time with them. If you are buying a home, you are going to go with them to open houses and showings. You are most likely going to be in a car with them driving between homes and then with them at the homes. You have to like them and trust them. If you are not happy with your Realtor, find another one. There are plenty to choose from.

2. Ask Questions

You should feel comfortable enough with them to ask any and all questions you have. If you are selling your home, you should ask them questions such as “Will my home be listed on the Multiple Listing Service?” and “How long will my house be listed with you?” If you are buying a home, you should always ask whether the Realtor is working for you or the seller. Many times the Realtor is the Listing Agent and is working on behalf of the seller to help them sell the house. Any questions you have you should get an answer that is clear and concise. You should not be left wondering what is going on.

3. Referrals

If you ask your Realtor for a referral, remember that it is just a referral. You are in no way obligated to use the attorney, appraiser, or mortgage broker that they recommend. You are always free to choose whomever you wish to represent your interests. However, Realtor’s can usually give you a referral to someone in the area and most likely, they have a relationship with them.

Remember that buying or selling a home is a lengthy, complicated process that requires you to be involved in every step. Make sure that you are choosing someone that you are comfortable with to have a relationship with for a few months.

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Banks Halting Foreclosures

Over the past 5 days, Bank of America, GMAC and JP Morgan Chase, have announced that they are halting all of their foreclosures. These banks have stated that they are going to stop all pending foreclosures and are going to go back and start looking at the foreclosures that have already taken place for discrepancies, fraud and other inconsistencies in their foreclosure process.

There has been a significant amount of articles written on this topic recently. You can view some of them here:

1. Flawed Paperwork Aggravates a Foreclosure Crisis

2. Bank of America and Chase implicated in foreclosure ‘robo-signing’ scandal

3. Bank of America to Freeze Foreclosure Cases

4. JP Morgan Chase halts foreclosures: second large bank to do so

5. GMAC Mortgage Stops Foreclosures in 23 States

What does this mean for me?

Here is my thinking…this is NOT a good thing for a lot of people involved. The people who bought foreclosed homes from the banks (known as REO’s – Real Estate Owned) will have to defend their purchases. The banks that lent money to these borrowers will have to defend themselves. The title companies that insured these properties will have to defend themselves. All of this is expensive and will clog the courts.

For the people whose homes were foreclosed upon, if it is determined that they were foreclosed upon “wrongly”, now what? Lawsuit. Suing the bank can be an expensive proposition. In most states, there is no right to give them back their home. (For good reason, the people who bought the foreclosed home had the right to buy it. They cannot get thrown out of a home that they rightfully purchased). Each of these banks is going to have more lawsuits against them than they can handle.

However, for the people who are in pending foreclosure may have a silver lining to this situation. While the banks may not proceed with the foreclosure at this time, they will eventually. So the banks may be much more willing to grant loan modifications. Really grant loan modifications. Not just putting people on trial modifications indefinitely.

This is not a free pass to borrowers who are struggling. Once the banks get through this, they will begin the foreclosure process again and probably more efficiently. Applying for a loan modification now may be the best plan. If borrowers take advantage of this situation, there may be a lot of people who get to keep their homes and have a much more affordable payment.

My paralegal and I were just talking about this situation and what we think is going to happen. She and I realized that last week, our law firm had over 6 permanent modifications come through for clients from 2 of these 3 banks and 5 more trial modifications. That made me wonder…are the banks going to process the modifications and approve modifications more readily?

Only time will tell. What I can tell you is that now is the time to apply for a loan modification.

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