Friday, February 10, 2012

HARP REDUX?

By Daniel E. Cullick, CEO at Global American Title Agency, Inc

President Obama recently presented a proposal to revise the Home Affordable Refinance Program (HARP) … again.  This would be the third version of HARP and it is being proposed to help even more homeowners who have not been able to refinance because of the sharp drop in property values over the past several years.  While many borrowers have been able to take advantage of the previous versions, it has not been nearly as many as had been hoped.  The new version would have all the advantages of the previous versions, but would also:

            -   Eliminate the need for the borrower to have a Fannie Mae or Freddie Mac backed mortgage.  Under the new version, loans owned by banks and also loans with private investors would also be included.  (The program for these loans would be operated through FHA)

-  Make a credit score above 580 the qualifying mark.  About nine out of ten
borrowers would have the ability to meet this criteria.

            -  Set the maximum loan amounts at conforming FHA limits.  Depending on the area, FHA limits range from $271,050 to $729,750.

            -  Ensure the loan is for a single family owner-occupied principal residence.  The program is designed to help families stay in their homes.

            The proposal also includes caveats for eliminating the appraisal cost, streamlining the refinance process and increasing competition among lenders to insure the borrower is getting the best deal possible.

            A decision should be made in the near future.  Hopefully this will enable even more homeowners to take advantage of the record low interest rates.

Friday, January 6, 2012

DOES TODI HAVE WARTS?

By Daniel E. Cullick, CEO at Global American Title Agency, Inc.

A new estate-planning tool became effective in Illinois on January 1, 2012 and it is known simply as the Transfer on Death Instrument (TODI).  Some are viewing it as similar to a will that doesn’t require prove-up and does not have to go through probate proceedings.  It should be noted that a TODI is NOT a deed!

The TODI transfers title to residential real estate only and do not take effect until the death of the owner who executed the TODI.  The TODI must contain the essential elements and formalities of a recordable deed; be executed, witnessed and acknowledged; state the transfer is to occur at the owner’s death and be recorded before the owner’s death in the office of the Recorder of Deeds in which the property is located.  The Act also states the TODI shall be prepared only by a licensed Illinois attorney.

The TODI does not affect the right of the owner to convey or mortgage the property during his lifetime.  If the subject property were mortgaged after the TODI is executed, the beneficiary would take the property subject to the mortgage. If the owner transfers the property to a third party after the execution of the TODI, the beneficiary will have no right to the property.  The beneficiary has no interest in the property during the life of the owner.

In order to make a TODI effective, the beneficiary must record a Notice of Death Affidavit and Acceptance in the office of the Recorder of Deeds in the county in which the property is located.  If the Notice is not recorded within 30 days after the death of the owner, the personal representative of the owner’s estate may take possession of the property.  If the Notice is not filed within 2 years of the owner’s death, the TODI is void.

The TODI presents a great many potential problems and pitfalls for title insurers.  What does the title company do if the owner has been dead for a year and the Notice of Acceptance has not been recorded?  What if only one party executed the TODI when title is held as joint tenants or tenants by the entirety?  What if the owner transfers title to a living trust after a TODI is executed?  What if the TODI transfers title to someone who is a minor at the time of the owner’s death?  Does a parking unit in a condominium development that has its own PIN count as residential real estate?  Is a municipality required to attach an exempt stamp to a TODI even though it is not a deed?  Many more issues were raised at a recent seminar presented by Illinois Land Title Association.

Because this is a brand new instrument and untested in the court system, title insurers will undoubtedly be very conservative in underwriting properties that involve a TODI.  There will undoubtedly be many requests for probate proceedings, suits to quiet title and deeds from heirs and legatees.

The new instrument leaves many questions unanswered at this time.  As is always recommended, please contact a qualified attorney to determine which estate-planning course of action best suits your needs.