Attorney Opinion Letter instead of ALTA Title Policy
Attorney Opinion Letter hereafter referred to as AOL
(not America Online)
Lists on a yellow pad
helps to see and predict from
data the best future course of action.
How much does a loaf of bread cost?
PRO:
- AOL is cheaper on transactions from $750000- $999000.
- Saves consumer money on luxury transaction
- In the future may create price improvement from competition
- Change is good
CON:
- Pricing under $400000 loan amount is higher for AOL
- Under $400000 ALTA title insurance cheaper and more coverage
- Time to provide the AOL vs digital title is much slower, an additional four days
- Cost for Lender to convert and plug in option to Loan Operating System expenses on back of lender
- Cost to train Point of Sale on which type order upfront day one and which product matches is high
- AOL does not allow free cancellation if Lender needs to convert to ALTA.
- Relies upon Attorney staying in business for thirty years and not dying or retiring.
- Attorney can be sanctioned, lose license, lose insurance thus no coverage.
- Claims process to be invented by attorney is new with no back-end process worked out.
- Point of sale must know if subject is PUD, odd, or manufactured before they order and if is a sale listing agent has no idea, sometimes consumer doesn’t even understand what they own.
- Lender and servicer take on more risk that: GSE forces buy back on incorrectly coded or incorrect property type.
Unknown future
― I Vicdansaadet
Speaking: No Rest Till The World is Lifted
- Title companies can reduce ALTA costs on luxury to compete
- AOL cost can change as they have claims, need to ramp up customer service staff, and accommodate lender questions and problems
- Other Law firms come to market with Nationwide book of attorneys and forms that accommodate and compete. The software is easy to imitate.
- How could AOL cover for the endorsements that lenders want: 100, 104.1 110.9 116
- Can AOL’s build nationwide better insurance for errors and omission at what cost?
- HELOC product development HELOC doesn't use either
- Two unit condo conversions, PUD’s with unrecorded CCR’s and many non stand alone single family houses exist in America. These are not covered.
The medium sized
lender doesn’t want to take the leap:
- Refinance is gone for the next three years. Only refinances for probate, death, divorce, and disaster will be requested.
- Cost to train and link into operating systems. Sales, processing, Underwriting, Quality Control and Servicing have to learn to read the AOL. Build new labeling systems and look for red flags.
- It is easy to record fraudulent deeds. Liability and manpower to deal with fraud weighs on Servicer and Lender to wade through.
- Can lender verify attorney competence? Not yet. No vetting system.
- AOL malpractice insurance policy variety and not transparent
- A Attorney issuing the title opinion letter is required to be state licensed to practice law in the jurisdiction where the subject property is located. Lender needs to lookup license on Bar Association manually. Necessary to set up National rating and vetting system. What is "normal" for a county?
- When there is an error theLender has to check letter against a checklist and develop standards to be able to send back the AOL for revision. What is the cost to cure? Will attorney charge $400 and hour? Title companies do this for free
- Gap coverage between the loan closing and recording of the mortgage gap coverage is the time period between lender sends a wire through the Federal Reserve and when the title company or attorney send the e-filing to the county recorder and the time the recorder takes to review and post the fact that it changed.
- Attorneys are only responsible for their negligence, not hidden defects and mistakes in the public records. They are not responsible for lot line errors, survey errors, construction that
- fraud is not covered
- Lender bears the burden that the AOL is worded according to what GSE requires as to indemnification
AOL EXCLUDES:
§ Condominium Project
§ Cooperative
Share Loan
§ Leasehold estate
§ Manufactured
Home
§ Property
subject to restrictive agreements or restrictive covenants
§ Executed using a
power of attorney
§ A Texas Equity
Section 50(a)(6) Mortgage
§ A Community Land
Trust Mortgage
§ No PACE loans no HERO
loans
§ No Adjustable Rate
Loans
§ No environmental
Protection Liens (no tanks, no prior gas station, not in proximity to
Disaster Area
§ Planned Unit
Developments (PUDs) for which an attorney's opinion of title was obtained in
lieu of a title insurance policy shall be eligible for purchase, provided that:
§ There is no violation
of any restrictive covenants that are in the PUD constituent documents and
restrict the use of the land
§ All dues applicable
to the Mortgages Premises are current and not delinquent (never happens someone
is always on payment plan)
§ No recorded right of
first refusal to purchase the land was exercised or could have been exercised
on or before the closing date of the Mortgage and the undersigned is unaware of
the existence or the exercise of any right of first refusal on or before the
closing date of the Mortga
Colin
Fisher gave example that the cost of AOL is $700 verses a title policy costing
$10000 which is incorrect numbers. He uses the maximum limit as the cost comparison.
This is not a new product it has been in market for fifteen years. Freddie adopted
the use three years ago with no increase in switch from ALTA title policy to
AOL.
Also
there are many law firms who offer today AOL
I AM A NUMBERS GIRL:
On
a PA or TX $900000 refinance Voxtur charges $1000 plus $150 for CPL vs three title
company quotes of $4543 and $100 but he misses some marks.
Title
companies do not have a regulatory floor that discourages them from lower pricing.
Costs are regulated ceilings.
AOL rolled out in four states with limited products.
The GSE’s are also only
seventy five percent of the whole market. No cash out refinances. Only cookie
cutter houses in a tract.
Lower end pricing example a $300000 loan here are the actual numbers:
|
| ||||
| __________________________ California $400000 refinance loan SFR no PUD Akerman AOL $1200 CPL $200 Katten AOL $1100 CPL $200 Voxtur AOL not published but estimated $1000 FATCO ALTA $642 CPL $25 DOMO ALTA $604 CPL $25 ATLAS ALTA $612 CPL $100 California refinance rates for $900000 loan on SFR FATCO ALTA $835 CPL $25 DOMO ALTA $804 CPL $100 Voxtur AOL $1000 CPL $150 TEXAS however is a tricky and expensive title state $400000 no cash out refinance SFR noPUD Voxtur AOL $700 CPL $100 FATCO ALTA $1823 CPL $25 Pricing for ALTA policy is based on county/city/loan amount/loan type |
| |||
The many endorsements lenders ask for depending on location, loan type, and who the loan is sold/securitized on secondary market:
https://www.republictitle.com/wp-content/uploads/2018/11/2017-Endorsement-Guide.pdf
https://www.youtube.com/watch?v=4sfAXEwIYT8
States using an attorney for closing have exorbitant and varied fees. Also in luxury markets that use escrow officers the delta of cost can vary 300%. A two million dollar sale in Washington State with a boutique escrow can cost $5000 while bundling it with matching title company costs $700.
Other large cost in a residential real estate transaction is points which borrowers use to buy down rate which is generally not a long term financial good bet.
