1. rCRMS Essential Skill for a Successful Closing

2. Unit 1: Choosing a Lender

3. Risks – Failing to Understand
Buyers’ failure to obtain financing
Failure to provide adequate guidance for a buyer with low to moderate income
or less than perfect credit history
Others…

4. Banker vs. Broker
A mortgage banker originates, underwrites and funds the loan.
A mortgage broker originates the loan and handles the application but doesn’t underwrite or fund the loan.

5. Predatory Lending Red Flags
Offers of cash back after closing
Loan terms much less favorable than advertised
Loans offered for more than the property is worth
Large prepayment penalties
Interest rates much higher than the market average
Exorbitant fees or points due at closing
Lenders failing to fully explain loan terms
Pressure to close quickly
Pressure to inflate income or asset value
Pressure to sign over the deed to a home
Loan documents that differ from what the client was told

6. Scenario – Altering the Purchase Price
Question: What are the risks associated with this situation

7. Scenario – Altering the Purchase Price
The risks:
Any cash to the buyer at closing must be specified in the loan documents and the HUD statement (only allowed in rare cases)
If the actual lender (NOT the mortgage broker but the entity providing the funds) is not aware of this or does not agree, this would constitute mortgage fraud against the lender

8. Privacy Act The risks: Failing to understand the allowed disclosures
Failing to make required disclosures regarding the buyer’s ability to obtain
financing

9. Unit 2: The Loan Process

10. Pre-Qualification Form
Purpose
Explain to Seller-clients
Advantages for the buyer

11. Loan Status Update Risks – failing to use Benefit to buyer-clients
Significance

12. Roundtable Discussion
Take 5 minutes to discuss the questions on page 11 of your manual

13. Risks – Alternative Financing
Failure to adhere to the seller financing restrictions contained in the Dodd-Frank Act
Failure to adhere to an existing due-on-sale clause
Liability related to the failure to include all material terms and conditions related
Failure to adequately explain buyers’ and sellers’ concerns related to wraparound financing
Any other risks?

14. Wraparound Financing Risks for Sellers
Buyers failing to make required payments
Failure to verify appropriate financial information
Failure to seek appropriate legal and tax advice
Inadequate record keeping
Liability with failing to honor due-on-sale clause

15. Wraparound Financing Risks for Buyers
Sellers failing to timely pay the first loan
Foreclosure due to sellers’ failure to pay
Failure to review sellers’ loan documents
Failure to recognize due-on sale clause
Failure to seek legal and tax advice

16. Lease Option Risks: Ambiguous terms
Failure to include all terms agreed upon by the parties
Failure of parties to understand obligations and time constraints
Disputes over purchase price
Disputes over occupancy if option not exercised
Others…

17. Lease Purchase Risks: Buyer’s inability to obtain financing
Failure to properly execute both the lease agreement and the purchase contract
Failure to include cross default clauses
Failure of buyer and seller to understand their rights under the agreement
Others…

18. Unit 3: Escrow Instructions

19. Higgins v. Kittleson Decision
The Escrow Company was dismissed prior to the appeal, however the decision included some discussion of the Escrow Company
The court cited existing case law in clarifying that the escrow instructions and purchase contract are not interchangeable; a binding contract must exist for the escrow instructions to be enforceable.
The court stated that because the Escrow Agent fraudulently recorded the deed (all conditions were not met), the deed conveyed no title.

20. Young v. Bishop Decision In summary. . . .
“A contract of sale of real estate and an escrow agreement are not interchangeable entities.”
The court summarized escrow as “a conveyancing device designed to carry out the terms of a binding contract of sale previously entered into by the parties.”
The court did not find that the contract of sale “was expressly conditioned upon the completion of escrow instructions.”
In summary

21. The court stated that while the escrow agreement itself had not been completed due to the failure of the parties to agree upon and submit the necessary supplemental instructions, the contract itself did not set forth the requirement of these supplemental instructions as a condition of the binding agreement between the parties.

22. Allan v. Martin Decision
The court, citing Young v. Bishop, noted that the sales contract and the escrow arrangement are two separate agreements, the escrow agreement being subject to an enforceable contract.
Although terms within the contract may alter the escrow agreement, the escrow agreement may not alter the underlying contract unless it is explicitly spelled out and agreed upon within the language of the contract.

23. The court noted the presence of a “time is of the essence” clause within the contract as well as Martin’s statement that the closing date was important. Because of Allan’s failure to perform by the latest date agreed upon by the parties (August 15th) the Martin’s had the right to treat the contract as canceled. The court held that when the contract was canceled “the escrow instructions became enforceable.” The court stated that “nothing in the escrow instructions can revive an already dead underlying contract.”

24. Tucson Title Insurance Co. v. D’Ascoli
Decision
The court found the escrow company clearly violated the escrow instructions.
By failing to adhere to the escrow instructions, the escrow company breached its fiduciary duty to D’Ascoli.
The court also stated that any deed secured without complying with the escrow instructions is of no effect.

25. Burkons v. Ticor Title Ins. Co.
Decision
The court held that Ticor violated the escrow instructions by recording the lien holder of the construction loan in first position.
The court cited Tucson v. D’Ascoli, in that “an escrow agent which fails to follow the escrow instructions breaches its contract, and the parties to the escrow may recover ‘all damages resulting from any deviation’ from the escrow instructions.:
The court further stated that an escrow agent should be aware of all provisions contained in the escrow documents and, in the case of any ambiguity, should seek clarification from the parties.

26. Unit 4: Title Commitment

27. Take 5 minutes to complete as a group
Quiz
Take 5 minutes to complete as a group

28. Title Commitment Sections
Schedule A
Schedule B
Requirements
Exclusions

29. Title Commitment Issues
Easements
CC&Rs and Other Deed Restrictions
Access
Judgments, Liens, and Bankruptcy

30. 5 minute Roundtable Discussion

31. Forms of Holding Title Any others? Risks
Failure to advise buyers to seek appropriate advice (legal, tax, estate planning)
Seller’s inability to convey title
Delayed closing
Enforceability issues
Any others?

32. Deeds Any others? Risks Mistakes and omissions Improper form
Failure to meet legal requirements
Going unrecorded
Any others?

33. Take 3 minutes to complete as a group
Quiz
Take 3 minutes to complete as a group

34. Unit 5: Post-Closing

35. Title Insurance Policies
Standard
Plain Language
ALTA
Extended Endorsements

36. Title Insurance Policies Protect Against
Defects that occurred prior to the policy date
Defects in liens and encumbrances
Unmarketability of title
Lack of a right of legal access

37. What is the significance of the different types of title policies?
Under what circumstances would you recommend a buyer obtain additional coverage through endorsements?

38. Trustee’s Sales
Under what conditions can a property be sold in a trustee’s sale?
Owner has defaulted on payments
Notice of the sale has been recorded
90 days have passed since the recording of the notice

39. Risks associated with a Trustee’s Sale
Property Condition
Condition of Title
Inability to inspect the property beforehand

40. Baker v. Gardner Decision
The court held that at the core of the anti-deficiency statutes was the desire to protect homeowners from losing everything.
Because the property was subject to the anti-deficiency statutes, Gardner’s other personal property was exempt.
The court stated that the only remedy creditors could pursue was the property itself and any proceeds of the forced sale.

41. Bank One v. Beauvais Decision
The court held that the refinanced loan was still considered purchase money and was subject to the anti-deficiency statutes.

42. THANK YOU!!!!!!