HAZARDS OF RUNNING AN ESCROW DESK
Setting the scene: Refinance transaction, loan funded yesterday and ready to close today.
Title Company: “I am sorry, we did a final review check of the ownership chain last night and we can’t record tomorrow.
We found a UCC Financing Statement recorded on the property two weeks ago. It looks like the Borrower took out a loan for solar panels.”
Us (!?!? What? Oh, no! Immediately calling the loan broker): “John, we have a problem! Mr. XXXX’s loan recording got pulled!
Did you know he just signed a contract for solar panels after he has been in escrow doing his refinance with you these last few months?
We can’t record your new loan tomorrow because it will be downgraded from first to second position.
That solar panel contract will take priority over any loan, old or new.”
Loan Broker: “What? He didn’t tell me! Let me call the Borrower and call you back.”
Loan Broker (Calling us back): “*Sigh* Do me a favor and call the solar panel leasing company and see if this lease can be subordinated to the new mortgage loan.
Let’s get the paperwork started, will you?
That contract is for 20 years and a substantial amount of money. Mr. XXXX can’t pay it off.
I don’t know why he did this while in the middle of a refi and DID NOT LET US KNOW!
I may need to requalify him for his refinance because now he has more debt and his debt ratio may be all screwed up. What was he thinking?”
Us: “*Sigh* Okay. We’ll get it started. You know this subordination might take a couple of weeks, especially with the Thanksgiving holiday in between and that we have to return all the loan funds that your lender sent to us yesterday, right?
We have to explain to them why we can’t record, right? ”
To my dear readers:
This is an ongoing case and there is no good ending yet.
If you are interested in how Escrow Officers feel about these solar panel contracts/leases / HERO/ PACE financing, read on and let me unburden myself on you. Forewarned is forearmed!
WHAT HAPPENS NOW?
As the nation gasps through the shock and surprise of a Trump win, as protestors stream the streets in repudiation of the win, calmer minds sit down and utter these two words: “Now What?”
All eyes are on what will happen to the Dodd Frank Act and the future of the Consumer Financial Protection Bureau (CFPB). Will TRID continue?
Will the CFPB continue to be the “single most powerful agency”? Will it stay? Will it change? Or will it be totally eliminated?
It may be a crap shoot at this time but it will be one of the major crap shoots that the new government will be aiming at (the other being Obamacare).
Privately, there is considerable uncertainty and trepidation in the financial industry.
But publicly it is “business as usual”.
But my take on this is:
FREE CORDRAY! … to do other things…
Life is short, Mr. Cordray, you have done enough as the totally independent Director of the CFPB in the last 4 years to earn a world of hate.
You need to get a life other than the CFPB. As our President Elect so readily proclaimed , “You’re fired!” I know, I am so ashamed of myself for even forwarding that Forbes opinion article.
AND WHILE TRUMP FIGURES OUT HIS MOVING LOGISTICS
Have we got an idea for him! Although this article came out in the middle of the year, now is a good time for us to think about it, perhaps even Tweet it to the PEOTUS to catch his attention.
Here is one man’s opinion on what other “moves” this brand new government should think about – “It’s time to move the federal government out of Washington.”
Awesome idea. Diffuse the concentration of power!
Diffuse the lobby groups from D.C.! Relieve traffic congestion around the Beltway!
In this totally interconnected world that we have today, is it necessary to have physical face-to-face meetings? With GoToMeetings, Skype, FaceTime, there are plenty of ways to meet and greet.
Why, if worse comes to worse, they could even use e-mails (uh oh, is that a bad word?)!
Why concentrate all the power within one tiny 65 square miles of the nation thereby forcing the power brokers to buy high priced real estate in the neighboring counties in VA and MD?
Return those lands to the Indians! Connect with the masses!
Go West! Or North, or South. Joking aside, the author of this article makes many valid points.
Since change is what We the Masses wanted, what better way to move (pun intended) it along.
ARE YOU MY HERO?
The HERO program is a financing program for PACE, the Property Assessed Clean Energy program and is used to finance energy efficient home improvements, of which solar panel installations are the most popular.
These HERO/PACE loans are gaining in popularity to the dismay of Escrow Officers (see my Hazards of the Escrow Desk piece) who look at it as another headache/stomachache that gets dropped onto our laps.
As this article states, it’s hard to fully gauge how much the consumer understands when they are talked into the loan.
Like any sales pitch, the sales people want to make the deal, but if they do not disclose carefully, in a manner in which the consumer would understand, there could be consequences of how the loan would affect the ownership of the property in the future.
California may have passed a law this year that demands better disclosure of these loans, (AB2693) but here are the major issues from an Escrow Officer’s standpoint:
- It is easy to miss on a title report. Unlike a standard mortgage loan, the recorded disclosure document is easily missed if the title and escrow officer is inexperienced as to what these loans are. We do not know what we are looking at when reviewing the report in escrow.
- This is a “Super Lien”. Because payments are incorporated into the property taxes this special assessment gets paid first, before a foreclosing mortgage Lender gets any money out of the foreclosure. This means the mortgage loses its first-in-line standing. This is a problem for mortgage Lenders when they try to sell the loan papers on the secondary market and so many lenders don’t want to lend on properties that have an existing HERO/PACE loan on it. No one likes to lend a huge chunk of money and end up in second position.
- The homeowner forgot! When the payments are collected through the property taxes and there is no need to write a monthly check, the homeowner forgets that the loan exists and may forget to disclose it to a Buyer. It’s a shock when the Escrow Officer says, “Hey! Here is a HERO/PACE loan! Is the Buyer assuming it or is the Seller paying it off?” O_O It then becomes a mad scramble back to the negotiation table. Have escrows cancelled because of this? Yes. Have Buyers reluctantly ended up incorporating this loan into the purchase? Yes. Have Sellers ended up getting less than they thought they would because they had to pay this loan off? Yes. It can be very painful for all involved.
- The Debt Ratio is thrown off. In a refinance transaction HERO/PACE assessments can influence the debt ratio of the property as well as the credit ratio of the Borrower. When the Borrower forgets to disclose it until the Escrow Officer brings it to the loan officer’s attention, the whole refinance transaction teeters at the edge of the abyss. The new loan may have to be underwritten again to determine if the property and Borrower can qualify with these new parameters.
Your friendly Escrow Officer has a few tips and some questions that need to be asked:
- Check out all the types of programs there are out there.
- Fully understand what you are getting into before you sign on that dotted line.
- What are the future consequences to ownership?
- What happens if I sell the property?
- What happens if I refinance?
- For the Real Estate Agent, those solar panels on the roof are a dead giveaway! Ask the Seller, “Are the panels paid in full? Are they leased? What will you do with them?” We need to disclose and negotiate!
- And one more article (continue to article after ad) to emphasize my pain points.
SAN FRANCISCO MUNI HELD UP FOR RANSOM!
Black Friday and Cyber Monday may have overshadowed this newsworthy item over the Thanksgiving holiday, but it should be a major concern for all of us.
Riders on the San Francisco’s Municipal Transportation system got to ride for free the long holiday because the system was hit by a Ransomware attack.
Another daily evidence that we are all totally helpless in the face of sophisticated hackers.
This what we are facing today and tomorrow into the indefinite future as hackers see an easy way to make lots of underserved money.
Today it is the train system.
What will tomorrow be? Our electricity grid? Our water system? When you are held for ransom, do you pay?
In the end, San Francisco determined there was no critical data stolen and restored their systems without paying any ransom.
But where does it end?
FACT OR FICTION?
Now that all the sensationalism of our presidential election is done, all the avid trolling of the news regarding one candidate versus the other is over (Melina Trump is an extraterrestrial alien!
Bill Clinton lost 500 lbs!) it is time to ask ourselves, how much of the news that we consume from the Internet is fact? How much is fiction?
As a newsblogger I must constantly remind myself that just because it appeared on the Internet does not make it real or true.
So, guess what I found on the Internet!
This article, on how to distinguish fact from fiction! Here is the cautionary advice. Don’t get swept into the sensationalism of a headline.
Check it out, question it, don’t just share it or propagate it just because it happens to be something that you think should be true, or that it fits in with what you think.
Well, except articles on extraterrestrials.
Those are so far out that they have to be true.
SANTA’S COMING TO TOWN:
Just in case Santa wants to sell his pad and exchange it for another one in Tahiti, here is his listing on Zillow for you to make an offer on.
Isn’t it cozy and gorgeous?
I could get used to living there, snow and all. But then I need the Elves to be included. Or then again, maybe not.
The Dept. of Labor has this thing about slave labor.
A new year marks a new beginning:
There are new people to meet,
New adventures to go on,
New memories to create.
From our business and personal family to yours, a happy, prosperous, exciting and fun filled 2017!
The world is out there for us to conquer. Let’s do it!