[Mary Frances]

We have a new situation due to the Pandemic…. On Friday the Fayette County Clerk’s Office. Our attorneys are telling us that we need to get owner’s title insurance on purchase transactions. How would other banks handle requiring owner’s title insurance? Can we even require owners title insurance if so does it need to be included in the finance charge.

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[rcooper]

Owner’s title saved me when I sold my first home – an owner two transactions back in her 90’s hadn’t sign over the deed to the next owner. It was a laborious process as she had to be tracked across the country and fortunately, for many reasons, she was still living. So I certainly understand wanting to protect the consumer, especially right now if title searches aren’t able to be done expediently or at all. Of course, you’ll require the lender’s title policy, however, I’m not sure the bank has the right to require the consumer to purchase an owner’s title policy since it will protect only the owner and it is up to them if they want to take that risk. I’m thinking you get your attorney’s opinion on using a special disclosure stating the facts of the situation (Pandemic, clerks office closed and impact on title work, risk to consumer, lender is covered by lender’s title, recommendation and reason, etc.) provide to consumer as soon as possible and have them sign it.

I’ll send this over to Jack to get his thoughts too.

[jholzknecht]

To the extent of my knowledge only seven of 120 counties in the Commonwealth of Kentucky have implemented electronic filing for mortgages; unfortunately Fayette is not one of the counties.

Obtaining an owner’s title policy, if available, may help protect your borrower. In the previous response Robin brought the very valid issue of can you require the owner to buy a policy. The Lender’s policy protects the lender. Strongly encouraging the lender to buy an Owner’s policy is wise, but does not appear to improve the bank’s position. If your counsel opines that you can require the Owner’s policy there are questions:
1. One question is how long will title companies continue to write title policies (owner’s or lender’s) when they are unable to verity liens while the clerk’s office is closed. Apparently some of the closed offices are holding title work received in the mail and are tracking when received, so the mortgages and deeds can be recorded in order received once their office opens again.
2. If you are developing TRID disclosures for a new transaction then the Owner’s Title Insurance, which is usually listed as optional in Section H of Other costs is listed in both the LE and the CD as required in either Section B or C, depending on whether or not the borrower is allowed to shop for the service.
3. If you have already provided a LE and are now requiring, based on the guidance of legal counsel, the borrower to purchase Owner’s Title Insurance, you have a changed circumstance and may provide a revised LE disclosing the Owner’s policy as described above.
4. According to § 1026.4(c)(7)(i) the fees for title examination, abstract of title, title insurance, property survey, and similar purposes may be excluded from the finance charge in a transaction secured by real property or in a residential mortgage transaction, if the fees are bona fide and reasonable in amount.

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