Glen Oaks Escrow

Understanding the Private Mortgage Insurance Premium Cost in Escrow

When purchasing a home, lenders will require home buyers to purchase Private Mortgage Insurance on FHA loans because their down payment is less than 20% of the value of their new home.  This insurance allows borrowers with less cash to purchase a home with smaller down payments, and it also protects lenders if a borrower were to default on a loan.  Borrowers will pay a monthly fee for their Private Mortgage Insurance in addition to each month’s mortgage payment.

There are two ways to pay for the Private Mortgage Insurance Premium (MIP): (1) out of pocket, or (2) financed by the lender.  When the borrower is presented with the estimated settlement statement at the close of escrow, the MIP premium is always reflected in a line item as a debit (“charge”) to the buyer, regardless if it has been financed by the lender or not.  This is to ensure that the proper amounts of the financed funds are allocated correctly toward the purchase price and the MIP premium.   See examples below:

1. Estimate Closing Cost with MIP paid out-of pocket:

2. Estimated Closing Costs with MIP financed by lender:

It is important to remember that the MIP premium will always be reflected as a line item “debit” even if it is being financed by the lender.  The “Funds required” line item will reflect the actual amount needed from the buyer prior to the close of escrow.

No Comments »

•  Print This Post

An Explanation of Property Deeds

In every purchase/sale of Real Estate, the buyer is granted title to the property from the seller through the delivery of a Deed.  The escrow company/title company or an attorney prepares this Deed, and the Deed shows the seller, currently vested on title, is granting the title to the buyer, as the buyer has chosen to take title of the property.  Because there is more than one type of property Deed, some buyers may have questions about why a certain Deed was issued in the transfer of their property.

There are four types of deeds: Grant Deeds, Warranty Deeds, Special Warranty Deeds, and Quitclaim Deeds.  A Grant Deed or general Warranty Deed is normally used in the transfer of residential real estate, while a Special Warranty Deed is typically used in Commercial property.  Special Warranty Deeds are also now more commonly being used in the transfer of REO, or Real Estate Owned, properties.

In all Grant Deeds the grantor gives a “general warranty” of title against any claims.  With a Grant Deed and a Warranty Deed, the grantor’s warranty applies to any period of time, while the grantor held title or before they held title.  In a Special Warranty Deed, the grantor gives the warranty for only the time period in which they held title to the property.   Quitclaim Deeds are most often used to transfer title to family members, divorcing spouses, or to people who know each other.

All warranty given through a Deed pertains only to the condition of the title of the property.  It has nothing to do with the condition of the physical property.  The Deed must also include the legal description of the property as well as the APN Number that is displayed on the tax rolls for the property.  The Deed is prepared in accordance with the type of property that is being transferred, or per specific instructions provided by the seller, and is usually recorded within one business day after escrow has received receipt of loan funds.

The state of California views Grant Deeds, Warranty Deeds, and Quitclaim Deeds as the same thing.  The Deed conveys ownership, and the title insurance company will insure that the buyer receives clear title to the property they are purchasing and guarantees against encumbrances.  As long as buyers go through an escrow and receive title insurance at the close of their escrow, they do not need to be concerned with the type of Deed that is used to transfer the property into their names.

No Comments »

•  Print This Post

The Short Sell Process: Escrow Explains What You Need to Know

In a prior post we explain the terminology associated with Short Sales. In order to further clarify the short sale process, this post explains the process a seller must go through if they find themselves facing a short sale.

A Short Sale comes in to play when a seller must sell their home and the value of the property is just not sufficient to cover the balance owed to the existing lender. In order to accomplish this the seller must work with their existing lender(s), and any other existing lien holders, to request approval of the sales price, the sale terms, and payoff of their loan to be at a reduced amount.

The Short Sale process is as follows:

• The owner or their agent/negotiator must contact the existing lender.
• The lender will direct them to their website, or will advise how, to obtain specific forms, instructions and lender requirements.
• This group of documents, along with the lender’s financial forms (Short Sale Package*) is then sent to the lender as per the lender’s instructions.
• After the lender receives the package it is then assigned to a contact person in the lender’s Loss Mitigation Department. This process can take anywhere from two weeks to two months and sometimes even longer.
• At this point the Loss Mitigation Dept then reviews the package and will contact the homeowner to request any additional items that may be required by the lender. This request is usually made verbally to the homeowner or negotiator but can sometimes be found via the lender’s website.
• The lender will then request a Broker’s Price Opinion (BPO) from an agent chosen by the lender.
• Once the lender has received the BPO as well as the Short Sale Package they submit it for final review. Once the lender has completed their final review they may give approval as is or their approval may be subject to changes such as sales price changes. Or the lender, at this time may decide that the seller did not have ample reason for the short sale and therefore deny the request for the short sale.

*Short Sale Package can consist of 100 to 200 pages including, but not limited to, the following items:

1. Listing Agreement

2. Short Sale Addendum

3. Offer to Purchase

4. Proof of Buyer’s funds

5. Owner’s Tax returns

6. Paystubs

7. Owner’s Bank Statements

8. Hardship letter from owner (explaining why the short sale is needed)

Remember that every lender and every situation is a different story so it will help to keep a handle on each request by staying in touch with the lender constantly through the process.

Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (Glen Oaks Escrow) in the box titled “Subscribe via Email”.

Become a fan of Glen Oaks Escrow on Facebook and follow us on Twitter.

No Comments »

•  Print This Post

What is the Foreclosure Process? Escrow Explains.

With the increased amount of foreclosures on the market today, escrow officers are often asked about the foreclosure process. The first thing to know is the foreclosure terminology, which we discussed in a prior post. What is important for homebuyers and sellers to understand is that foreclosures happen to loans not properties therefore it is a process that is handled between the lender and the lender’s trustee company. In an effort to answer the many foreclosure questions that we get following is a simplified breakdown of the steps that lead to and complete the foreclosure process.

• The borrower fails to make more than one monthly mortgage payment
• The lender would have their trustee company prepare, record and send the borrower a Notice of Default (NOD)
• The borrower now has 90 days to bring the loan current (reinstatement period)
• If the borrower is still unable to bring the loan current the trustee company will set a sale date approx. 4 weeks out
• The trustee will prepare, record and send to the lender and borrower a Notice of Trustee Sale (NTS)
• The NTS will also be posted at the property in a conspicuous place and published in a local newspaper (publication period)
• This Notice will contain the date, time and place where the Trustee Sale will take place
• During the publication period the borrower can still bring the loan current up to 5 days prior to the sale date
• The sale is held at the courthouse in the county where the property is located
• The lender sets an opening bid that would cover the loan balance, interest, attorney fees and any other accrued fees and costs
• The property is then sold to the person with the highest bid over the opening bid set by the lender
• If no one bids over the opening bid then the lender retains the property as a banked owned property (REO)- Real Estate Owned

During the foreclosure process there are several stages in which the homeowner has the opportunity to bring the loan current and avoid foreclosure.  Foreclosures contain many nuances and affect each party involved differently. Don’t hesitate to ask your agent for information about foreclosures and your situation or for further information see the links below.

• http://www.biggerpockets.com/foreclosure-process.html
• http://www.realtytrac.com/foreclosure-laws/california-foreclosure-laws.asp

Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (Glen Oaks Escrow) in the box titled “Subscribe via Email”.

No Comments »

•  Print This Post

Pros and Pitfalls of the Buyer's Choice Act

The Buyer’s Choice Act (AB 957) was established to protect the buyer’s right in an REO transaction in having a choice as to which Escrow Company and Title Company is used. This sounds great, although in many cases it can be a benefit to the buyer to choose the companies that the REO Bank use on a regular basis for the following reasons:

• The REO Banks require the settlement companies to use their online systems (only the companies selected by the REO Banks are given authorization to log onto the online systems) in order to obtain necessary documentation for your transaction. Without access to the online systems there may be delays in the closing process.
• The REO Banks have special internal requirements that must be completed before they can move forward to closing. The Escrow Companies and Title Companies used by the REO Banks know the requirements and are able to provide the seller with the necessary items in advance therefore getting the job done quicker and more efficiently.
• The Title Companies that work with the REO Banks have documentation already in place that is necessary to clear the title on the properties. Using Title Companies that work with the REO Banks creates a much smoother transaction process for you.
• The REO Banks must approve an estimated HUD settlement statement prior to authorizing the close of escrow. In order to accomplish this each REO Bank has special requirements for certain items they need prior to approving said settlement statement. All these items again must be sent to the seller via their online systems. Using the companies that know the REO Bank’s requirements helps to get your transaction completed much quicker and smoother.
• Each REO Bank is different and has different requirements. Using an Escrow Company and Title Company that has experience with that particular Bank’s requirements will inevitably make your transaction smoother.

For further information on the Buyer’s Choice Act you can read the following article: AB 957 “The Buyers Choice Act” Passes

When making your choice or accepting the seller’s choice of escrow or title companies, consider asking the following questions to the prospective companies:

1. Do they retain an Errors & Omissions Insurance Policy and a Fidelity Bond each with a minimum of $2,000,000 which protects your transaction to the fullest value?
2. Do they conduct background checks on all new hires through the Department of Justice including stockholders, officers, directors and managers?
3. Are Potential employees barred if they have drug convictions, moral turpitude or theft of any type on their record?
4. Do they have set minimum financial requirements by their licensing entity?
5. Are their trust funds and processing of files audited by their licensing entity, or in-house auditors and CPA?
6. Are their trust funds balanced every day?
7. Is their computer systems capable of handling the paperless file required for processing an REO transaction?
8. Are they proficient in a variety of REO software platforms?
9. Do they have an extensive back up computer systems, which includes a disaster preparedness plan?
10. Can they handle all transactions in a professional, honest and diligent manner?

Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (Glen Oaks Escrow) in the box titled “Subscribe via Email”.

Become a fan of Glen Oaks Escrow on Facebook and follow us on Twitter.

No Comments »

•  Print This Post

Understanding the Duties and Responsibilities of Escrow Can Lead To An Easier Transaction

The escrow process can be a complicated and often technical necessity of buying and selling real estate.  The escrow company and its officer have many duties to juggle on behalf of the Realtor, Seller, and Buyer during the real estate transaction.  Understanding the various duties and functions of the escrow can assist all parties in ensuring a successful and timely transaction, as everyone involved has a part to play.

The escrow officer’s main duty is to remain as a neutral third party between buyer and seller in a real estate purchase transaction at all times.  The escrow officer is not to be involved in negotiations between buyer, seller and/or lender.

Additional escrow officer duties and responsibilities are as follows:

1. Receive and hold buyer’s funds in a non interest paying trust account during escrow.
2. Read and comply with all agreements as detailed in the Purchase Contract and Joint Escrow Instructions as it pertains to the escrow process.
3. Follow mutually signed, written instructions agreed upon by buyer and seller during escrow.
4. Prepare Escrow Instructions/General Provisions, Amendments, Grant Deed (for seller’s signature), Estimated Closing Statement and any additional documents required to clear title or as required by the new lender.
5. Although in many cases reports are ordered by the buyer, seller or agents outside of escrow in some cases the escrow officer will obtain reports as required by the purchase contract and provide same to the buyer during escrow for their review.
6. Make sure escrow is in receipt of buyer and seller signatures on Purchase Agreement and Joint Escrow Instructions, Escrow Instructions/General Provisions, Grant Deed, any Amendments, Estimated Closing Statements and any other documents required during escrow.
7. Receive loan documents from the buyer’s new lender (IF APPLICABLE) and prepare amendments and estimated closing statements as required by the lender on their lender’s instructions.
8. Order the evidence of insurance from the buyer insurance agent as per the requirement of the new lender.
9. Send the signed loan documents and all lender required items to the new lender for funding.
10. Send original recordable documents along with any releases required to clear title to the title company for recording at the close of escrow.
11. Make sure that escrow is in receipt of all funds necessary to pay the seller their proceeds as well as all invoices agreed upon by buyer and seller during escrow.
12. Make sure the seller has sufficient equity in the property to cover all costs, payoff of liens and any invoices agreed upon by buyer and seller during the escrow.
13. Make sure that all the proper paperwork is in escrow to provide the buyer with clear title to the property.
14. Make sure that all the conditions agreed upon by the buyer and seller on the purchase agreement and in writing through escrow have been satisfied prior to closing the escrow and transferring the property into the buyer’s name.

The Buyer and Seller should also be aware that they will be receiving many additional items that may require their signatures from their agents and lenders directly.

In addition to the above responsibilities, Glen Oaks Escrow views our most valuable function as acting as a personal liaison and resource for Realtors, Buyers and Sellers to accomplish a successful transaction.

Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (Glen Oaks Escrow) in the box titled “Subscribe via Email”.

Become a fan of Glen Oaks Escrow on Facebook and follow us on Twitter.

2 Comments »

•  Print This Post