Connecticut Attorney : Penner Law Firm

If you are anything like me this weekend, you did two things you don’t normally do: watch commercials and actually pay attention to them. As much as I record everything on TV and watch it later on (DVR), sports are the only programs on television where you have to watch commercials. Sports fans cannot watch a game on delay; the information is readily available by numerous mediums as it happens. Suffice to say, sports forces you to watch the commercials. Don’t believe me? Think Super Bowl.

Again, if you are like me you know, for certainty, that: (1) If I buy a Chevy, I get to live in “Our Country”; (2) Peyton Manning has now appeared in 2,000 commercials; (3) It’s the mirrors; (4) “Dude” can be used as a verb, noun, adjective, pronoun, and even as a conjunction; and (5) Reverse Mortgages are the new happening in real estate. And so, after the fifth Reverse Mortgage commercial seen during the Giants game, I decided it was blog time.

About six months ago, I gave a presentation about Reverse Mortgages to one of the mortgage brokers I work with. Here is an excerpt:

“Reverse Mortgages enable eligible homeowners to access the money they have built up as equity in their homes. Designed for seniors, a reverse mortgage is a loan that allows the homeowner to convert some of the equity in their home into cash or monthly income, while retaining home ownership. Rather than making a payment to the lender each month, the lender pays the borrower. The amount of cash available from a reverse mortgage depends on age, the home’s value and location, and current interest rates.  Borrowers can select to receive their money through monthly payments, a line of credit, a lump sum, or some combination. The money can be used for any legal purpose. Most people use the proceeds from reverse mortgages for home improvements, for in-home health care, to pay taxes and insurance, or to generally improve their standard of living over Social Security. The total amount owed at the end of the loan equals all of the cash advances you’ve received, plus the accrued interest. The interest rate at the time of closing is the initial rate for the loan, and the rate will remain adjustable during the life of the loan.”
 
“The loan is not paid during the lifetimes of the borrowers; rather when the house is sold or no longer used as a primary residence, the borrower’s estate will repay the cash received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in the home, if any, belongs to the borrowers’ heirs. None of a borrower’s other assets will be affected by HUD’s reverse mortgage loan and the new debt will never be passed along to the estate or heirs.”

Some things have changed since I wrote that piece. A recent Chicago Sun-Times article focused on the changing and developing reverse mortgage market (Navigating the Reverse Mortgage Market, Chicago Sun-Times, December 24, 2007). In it, the authors discuss how large banks are entering the market: some lenders have lowered the age to qualify to 60 and some lenders are using reverse mortgages for second homes or investment properties. Moreover, some lenders are offering fixed rate reverse mortgages. One current negative issue with reverse mortgages are fees: upfront costs can be two to three times higher than a conventional mortgage, and origination fees tripled from 2000 to 2006, says the AARP.
 
Despite the positive and negative changes, the reverse mortgage market appears to be booming. Although they represent less than 1% of the overall refinance market, the number of federally-backed reverse mortgages has risen 41% for 2007. I see no reason why this shouldn’t continue: senior citizens, fearing a changing climate both economically and politically, can use earned equity for themselves and the debt will die with the house.

My advice: If the banks are making these mortgages more accessible to seniors, then seniors must prepare to not only shop for the right lender, but also prepare to be more selective in the reverse mortgage programs. What’s worrisome is that the mortgage industry’s marketing machine is gearing up as if this is the next big thing. It’s running financial seminars on reverse mortgages, lining up celebrity endorsements, recruiting salespeople, and running commercials during football games! The advertisement costs alone for NFL games are astronomical; so mush so that the boom is here. If a lender advertises during the Super Bowl, then it is all but certain that the “hot and new” thing in real estate has arrived.

Is this the best way to utilize equity? As a settlement agent and attorney, it’s a case-by-case basis. A home-equity loan is cheaper. A cash-out refinancing will free up more money. Some older citizens would be better off to sell the house and move to a smaller residence. But they may not qualify for other loans. However, after careful selection, the reverse mortgage may be the right way to go. Besides, in most cases with the rise in the value of the property over the years, the reverse mortgage, if it’s paid off by heirs, will eat up only a small portion of the equity.

For additional information, contact Penner Law Firm, LLC today and speak to a real estate attorney. Additional information can be found at this website: http://www.newretirement.com/Services/Reverse_Mortgage.aspx.

Strange week. Some people took this week off as well as last week; even mortgage brokers I work with decided to shut down for two weeks. I never could understand this: If the market and banks are open, there is business around and money to be made. In this industry, making yourself available to your clients is of the utmost importance.

 I came across a title question this week and wanted to share it with my readers. For a South Carolina condominium purchase, the broker informed us that the property was known as 123 A Street, Unit 7. We performed a proper title search, and all relevant documents regarding the property had it as 7 Beach Condominium. We informed the broker and the client, and discovered that the original street address changed because the condominium association created a new road. The old mailing address was for A Street, and mail could still be delivered to that address. However, legally the property is located on Beach Condominium, the newly created road. The purpose of the new road was to make it easier for tenants: simply use the unit number as the address on Beach Condominium.

Sounds simple, right? No, because old deeds and land records indicate the property being on A Street. As a title insurance policy producer, I need to be exact on the title insurance policy. Our client thought there was no way to protect her in this situation (see below). One call to our title insurance underwriter and I am satisfied; the homeowner’s policy, an expanded version of the standard owner’s title insurance policy, covers this discrepancy. If the property address is in some way referred to as A Street after closing, the policy will protect the client by insuring that the property address is the same as the address insured. Problem solved. Our client will purchase the expanded policy and have proper coverage.

People often have misconceptions about title insurance and what it can do: the so-called myths of the industry. The most common myth is that a lender’s policy will cover an owner. That is false: in order to protect the homeowner, an owner’s policy is required. The lender’s policy is written in the amount of the loan. If there were a total failure of the title, the lender would be covered for the full amount of the investment - while the buyer would have no coverage at all. Owner’s title insurance will protect the purchaser if a claim is made against the title and will pay any legal fees incurred in defending the claim. If only a lender’s title insurance policy has been issued, the homeowner would not be covered for legal fees and might lose the property should a problem arise.
Another myth claims that few properties have title problems. That is false: A large percentage of real estate properties have defects. Whether these defects are unreleased prior mortgages or judgments, questionable property descriptions, or something else that can adversely affect title, they can all affect a potential sale. The coverage of an owner’s policy is ongoing and never lapses. A one-time fee to cover all possible title defects in the future is a smart idea for all homebuyers.

 TANGENT: This is now my third blog and I am enjoying every one. I accept questions and topic ideas. Please email me at jfeigelson@pennerlawfirm.com for ideas, suggestions, and questions.
Jamie D. Feigelson’s Real Estate Blog

Last week I had a real estate closing where the client refused to allow me to even talk during the closing. She examined each document herself, and when I tried to advise her of the legal ramifications of each document, she asked me, politely, to quiet down so she could read. I asked her, at the end of the closing, why she though so little of attorneys/closing agents. Her answer: I don’t do anything. If true, then I get paid to do nothing. And the legal fee collected at closing at closing by my firm is for doing nothing. If it were only that easy!
 
Perhaps she did not want to admit our role, but closing agents are essential to the closing process. As a lender representative, our job is to adhere to the lender’s instructions regarding the signing and recording of the documents. Our HUD-1 statement must be approved by the lender and is used to direct the settlement agent on how to disburse funds. These roles are essential to both the client and the lender.
 Other roles that a settlement agent performs are: creation and preparing of a title abstract; making mathematical calculations involving proration of taxes, insurance, rent, and interest; completing form documents in accordance with lender instructions; obtaining payoffs and waivers of all liens and mortgages; preparing the settlement statement (HUD-1); receiving and disbursing funds; and completing other forms, affidavits, tax reports, and documents as required by the lender.

As an attorney and settlement agent, I can also give legal advice on each document in the closing package and its legal effect, if any, on the borrower. For purchases, my role begins at the drafting of the Contract of Sale. I will advise a client of all relevant contingency clauses, commitment dates, inspections reports, and other important sections from the Contract. Upon closing, my client and I review all of the seller’s documents, including the Deed, affidavits, and tax forms. After closing, when all monies have been transferred and my client has the key to the new home, my work is still not finished. I produce and issue the final title insurance policies, and disburse all other monies accordingly.

To the client who thinks real estate Settlement Agents do nothing: think again. Although not as glamorous as a trial attorney on “Law & Order”, a settlement agent’s role is crucial to the purchase or refinance of a home. They act as your guide throughout the process, and act as a liaison between the client, the bank, the broker, and the seller. They are the glue that holds the entire transaction together.

If you are seeking real estate closing services, contact us at Penner Law Firm: 203-878-1254.

I should begin with a brief introduction of myself and the purpose of this blog. My name is Jamie Daniel Feigelson and I am an associate attorney for Penner Law Firm, and I focus most of my time on real estate. My firm performs numerous real estate closings throughout Connecticut, Massachusetts, Delaware, South Carolina, and Georgia. I am also an advisory attorney for Hartford National Title, a nationwide title closing company prepared to close loans in over 40 states. The blog is designed for me to give my weekly ramblings about the industry to the readers. I will pay close attention to the federal interest rates, the changing real estate market, the ongoing tribulations of the banks and brokers, the title insurance system, and some other tidbits of information I want to throw in. Consider this a weekly source of new information which may be available elsewhere, but put together and broken down by someone who knows the industry.
 
The first blog entry is entitled “The Importance of Title Insurance.” I am not going to preach the benefits and hazards of title insurance to my readers; rather, I will give specific examples of why title insurance can be so important. Then, fully informed, you can understand why this matter is very important and proceed from there.
 
Example #1: Mr. and Mrs. Ramon decide to purchase, after 25 years of saving, a 100-year old house. The couple closes on the home and purchases an owner’s title insurance policy (in addition to the lender-required lender’s title insurance policy). They had been residing at the property for six months, performing some renovations, when they received a summons. Someone else had claimed to have legal title to the property. Turns out, Mr. and Mrs. Ramon had a fraudulent deed, and someone else had a proper deed. Rather than being put out on the street, the couple calls their settlement agent, who contacts the title insurance company. The owner’s title insurance policy they purchased at closing will protect them! And it will continue to protect them for the entire time they own the house. After two years of legal battling, the couple keeps their home. (Insurance Untangles Ownership, Washington Post, February 25, 2006)
 
Example #2: Mr. Norton owns a house. Three years after purchasing the house, his neighbor takes Mr. Norton to court over a disputed 10-foot strip of land. Mr. Norton’s title insurance company not only defends him in court, but will pay all monetary losses if the neighbor wins. The difference is usually calculated as the difference in the value of the home. Had Mr. Norton not have had the owner’s policy, he would have had to defend himself and incurred the losses. (The Scope of Title Insurance, New York Times, December 29, 1996)

Other examples are out there for you to find as well. Cemetery plots, old roadways and highways, abandoned railroad lines, and other matter can all be relieved with an owner’s title insurance policy. What if the new house did not have a previous owner, but someone owned the land a long time ago? What if that owner had a loan? Imagine how devastating it would be to discover that you don’t actually own the home you are ready to purchase. Protect yourself. Ask your settlement agent about an owner’s title insurance policy.

At Penner Law Firm, educating our clients is paramount to not only your success, but ours.  Our expert staff of attorneys has what it takes to guide you through many aspects of the legal system.  We will be providing useful articles and insight into legal topics such as real estate, probate, escrow, commercial real estate, planning and zoning and much more.

Check back often and as always, if we can help, call us at 203.878.1254.

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