New ALTA Closing Protection Letter With Florida Modifications Corrects Unfortunate Case Law

BY MARTY SOLOMON
CLE Presented to FLTA Roundtable, April, 2018

The new American Land Title Association (ALTA) Closing Protection Letter (CPL) form recently took effect in Florida.

The new form both streamlines the previous CPL’s language and addresses and corrects many of the problems created by recent bad case law. It brings the CPL into line with longstanding understandings of CPL’s purpose and scope within the title insurance industry.

The clear and laudable aim of this new form is to create a better relationship among the contracting parties with clearer language and more sensible limitations on liability. This article summarizes revisions, with particular focus on those areas that address case law that led us astray.

Hot Topics in Claims Avoidance: Avoiding POA Claims in Florida

BY GARY ROSNER & PAULA LEVY,
RITTER CHUSID, LLP

In the title industry, a power of attorney (“POA”) is used when one of the parties to the transaction cannot be physically present at the closing. Transactions involving a power of attorney are ripe for fraud and errors.

The following checklist can be used to determine whether or not to proceed with insuring a real property transaction involving a POA:

  • The POA must be signed by the principal.
  • The name and signature of the principal should match other documents in the public records.
  • The POA should be free from alterations or obvious corrections (no white-outs or strike-throughs; all provisions have the same font and size; no missing pages or paragraphs).
  • If the POA is transaction specific, it should identify the real property by legal description or address, and enumerate specific powers for the insured transaction (e.g., sell, convey, mortgage, encumber, lease, execute deeds and bills of sale, etc.). Note, however, that a general durable POA does NOT need to describe the real property, as long as it contains the requisite powers.
  • The POA must have two subscribing witnesses.
  • The POA must contain a proper notary acknowledgment (i.e., venue, date, name of principal, personally known or ID provided, notary signature and seal affixed).
  • The agent must not be a party to (or benefitted by) the proposed insured transaction.
  • The agent should be in possession of an original POA, capable of being recorded (pursuant to §695.01 and §695.03, Florida Statutes, the original POA must be recorded in the public records of the county where the subject property is located). If the original is not available contact underwriting.
  • Pursuant to §709.2106(3), Florida Statutes, a POA to convey or mortgage real property executed in another state, which does not comply with the execution requirements set forth for POAs executed in Florida, will be valid in Florida if, when it was executed, the POA and its execution complied with the laws of the state where it was executed. Agents must satisfy the requirements set forth in Florida’s Uniform Power of Attorney Act, when dealing with out-of-state POAs, and must be sure to adhere to company guidelines from its underwriter. However, if the property is the homestead of the principal, the power of attorney must meet the execution requirements set forth for POAs executed in Florida.

Of course, this article does not replace your underwriter’s requirements. Any questions or issues concerning the use or validity of a power of attorney should be discussed with underwriting counsel, prior to closing and the issuance of a title policy.

Hot Topics in Claims Avoidance: Avoiding HELOC Claims in Florida

BY GARY ROSNER & PAULA LEVY,
RITTER CHUSID, LLP

Often, sale and refinance transactions necessitate the payoff and satisfaction of revolving lines of credit, also known as home equity lines of credit (“HELOC”).

These mortgages are loans secured by the debtor’s real property which generally allow the borrower to access the equity in their property utilizing credit devices including checks, ATM cards and credit cards.

The ease by which these accounts may be accessed, drawing up the outstanding principal balance right before, or after, the closing, may leave the agent and underwriter vulnerable to claims.

The recommended practice concerning satisfying HELOCs, and insuring without exception, are as follows:

-Prior to closing, the agent should provide lenders with adequate notice of the intended conveyance or refinance, review the mortgage for, and comply with, any specific requirements pertaining to payoff information and satisfactions which may differ from traditional mortgages.

-The agent must request an estoppel letter from the lender for all outstanding amounts due, with language in the estoppel request:

  • (a) instructing the lender to immediately freeze the account upon issuance of the estoppel;
  • (b) advising the lender that any amounts advanced subsequent to the payoff made pursuant to the estoppel will not be secured by the property; and,
  • (c) that upon payment the lender must execute and record a satisfaction of the mortgage and written authorization by the borrower for (a) through (c) must be provided to the lender.

-The agent should verify with the lender, on the day of closing, the amount outstanding and document the same; and if the amount outstanding is different from the lender’s original estoppel letter, a new, revised estoppel letter must be obtained prior to closing and disbursing.

-The agent should obtain an affidavit referencing the loan number, address of the property, borrower’s name, and the current amount due under the loan (as evidenced by the attached estoppel letter). The affidavit should include affirmations by the borrower that:

  • (a) the account is closed;
  • (b) no advances or withdrawals of funds have been made within the 30 days prior to the closing which would change the current amount due;
  • (c) all lender’s documents pertaining to paying off and closing the account have been executed; and,
  • (d) all credit and/or ATM cards, checks, or other credit devices attached to the account have been destroyed or surrendered to the agent.

-All checks, credit and/or ATM cards or other credit devices for obtaining additional equity advances or withdrawals from this credit line that have not been previously destroyed should be surrendered to the agent, and if the payoff is not being wired to the lender, the agent should forward the payoff via overnight mail together with the aforementioned affidavit, and a letter, executed by the borrower:

  • (a) instructing the lender to immediately close the account and provide confirmation thereof;
  • (b) advising the lender that any amounts advanced subsequent to the payoff made pursuant to the estoppel will not be secured by the property; and,
  • (c) advising the lender that, upon payment, the lender must execute and record a satisfaction of the mortgage.

Any other requirements that the lender imposes should also be attached.

If an agent is unable to comply with all of the guidelines set forth herein, he or she should not insure without exception for the HELOC and should contact underwriting counsel. Naturally, should a superior mortgage lien be refinanced and the borrowers do not wish to close the HELOC, it will be necessary to obtain a subordination of the HELOC to the superior mortgage lien.

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