Entries in jonathan yasko (3)
As the pendulum swings…
This week I spoke with a title agent in Florida who informed me of this new phenomenon where lenders are now adding a 10% reduction from the appraisal price due to a declining market.
Here’s how the situation works…an elderly lady in Miami purchased a house for $800K at the peak of the real estate boom and put down $100K as a down payment. She is now looking to refinance as her monthly payment is too high and understands that the value of her house may have depreciated since she bought it. Her appraisal comes in at $700K, which is not an issue since she owes $700K on the current mortgage. Due to the market that we are in, the lender is taking an additional 10% reduction off the appraisal for the new loan. This means the lender is only going to lend $630K for a house that appraised at $700K.
Upon hearing this I was in disbelief, that was until I spoke with another agency who said the exact same thing, however, it was for a buy/sell transaction. From what I understand, these types of reductions are only in South Florida, but the question is for how long?
Is this the beginning of a new era in home loans?
Jonathan Yasko
in related industries, foreclosure crises, jonathan yasko
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The problem with escrow accounts
There is no reason to tell you that our industry has changed, since we hear about it everyday through all types of media. The constant steady stream of negative news about the real estate industry has now pressed the Federal Government into action to stop this out of control train heading the US into a recession. On top of that, I am sure you have heard locally of a title agency closing their doors or rumors of a title insurance underwriter shutting an agency down.
The underwriters are fighting an uphill battle due to the overwhelming amount of claims, lack of remittance, fraud, and defalcations. Since the underwriters are now stating significant losses, they have turned their focus to your escrow / trust account in efforts to stop the bleeding.
The fact is that the majority of problems resulting in a loss to the underwriters are generated from the title agencies and law firms escrow / trust accounts.
Almost all of the agency / underwriter contracts require the agent to reconcile their escrow or trust account monthly, in a “3-way” manner. Additionally, most state bars and some state statutes require the same. Therefore, many underwriters are now taking the position of zero tolerance and suspending or canceling a title agent or law firm if their reconciliations do not tie -or- are invalid.
As an auditor for several title insurance underwriters, I can tell you I have seen many good agents suspended and canceled due to their lack of, or, invalid escrow / trust account reconciliations. To make matters worse, these types of situations, for the most part, could have been avoided if the agent knew or contracted with somebody who knew how to properly reconcile their escrow / trust account in a “3-way” manner.
A 3-way reconciliation brings the book balance, adjusted bank balance and trial balance into agreement. This is how we know each penny is accounted for in the escrow / trust account.
Conducting proper monthly 3-way reconciliations is the only way to ensure against possible defalcation, internal fraud, external fraud, negligence, mis-appropriations and bank errors.
Jonathan Yasko
in title company defalcation, jonathan yasko, audit standards, escrow reconciliation
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Title-opoly has a new contributor
Jonathan Yasko has extensive auditing experience having worked for title insurers and as an independent consultant. His consulting firm, Entrust Solutions, can ensure that your title company, or law firm, is statutorily compliant and utilizing proper 3-way reconciliation methods.
Entrust clients, regardless of the software package used, suffer zero downtime while their accounts are reconciled due to cutting edge technology.
With that being said, I’m pleased to introduce Jonathan as a Title-opoly contributor.
Ed Rybczynski
in jonathan yasko
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