Since the housing crash of 2008, the mortgage market has made a slow but steady rebound. With the bombardment of new regulations, a myriad of rules and document changes, and aggressive competition, worrying about title issues seems to fit at the bottom of the totem pole. However, title problems can and do arise, and when they happen, the delay can slow your funding or even kill your deal.
Serious title issues can result from typical “clouds” on a title such as old service liens, encumbrances, easements, or missing conveyances that grind your file to a halt. These potential problems should be identified early by the title agent or by your escrow officer, but it is good policy to familiarize yourself with the issues that can affect your closing. Some items can get missed in the hustle and bustle of juggling multiple originations.
During the peak of the foreclosure crisis, homeowners were scrambling to save houses in default by any means possible. Some of the techniques employed included filing UCC liens, deeding over the property to a relative or third party, or filing bankruptcy against the property. While the techniques may or may not have helped, some of those title clouds still exist in the marketplace and must be dealt with before the title insurance policy can be issued.
Other issues may be more innocuous but can be just as disruptive to the process. Missing signatures on previous title transfers, deceased title holders, mechanic’s liens, HOA dues, tax liens, or judgments all can be resolved but must be identified early and worked through before the file gets too far along in the process.
Many title problems will be caught and resolved by the title agent, but some will require the originator to work with the seller or borrower to fix them before they cause a delay. If there are problems that could slow funding, bringing them out into the open with the client will allow you to quickly resolve them and ensure they do not get blindsided with an unexpected delay. If there are more serious issues that cannot be solved by the title company, then the owner may require legal help to ensure the title coverage is intact and complete. Certain liens or encumbrances may expose the owner to future litigation, and an owner should consult a competent real estate attorney to help resolve those issues immediately.
Clearing title is a process that is sometimes taken for granted, but there may be instances when an owner will be unable to obtain title insurance based on a title cloud. When that situation arises, a quiet title action may need to be initiated so a court can clear up the title issue. A quiet title allows an owner to submit a disputed title claim to the court, present evidence, and allow the court to clear any encumbrances or blots on a title. The action can be costly and time-consuming, but an owner should be aware that until serious title issues are corrected, they will not be able to close a sale or refinance the property.
