A lesson about Title Insurance

Lafayette-based Jaguar Group is accused in a $3.4 million Ponzi scam

Excerpts:

When Rose bought his home, his lender JPMorgan Chase Bank paid an entity related to Jaguar, which failed to forward the money to Citywide. A promissory note was not presented, meaning there was no evidence the bank had paid the proper party.

"People are at risk if they don't have the note brought to the table," Sweetbaum said. "People don't realize that the law says they have to get the promissory note. That doesn't happen anymore. People don't know where the notes are."

Citywide president Marty Schmitz declined to comment because of pending litigation, saying only, "We don't anticipate any losses."

There have been a number of similar cases nationwide, including at least 20 in Colorado, where insolvent mortgage companies have received payoffs from borrowers but have failed to pass the money along to the investor to whom they assigned their interest in the property.

The common practice for closing a home sale is for the title company to request a current loan payment coupon from the seller or ask to whom the monthly payments are made, a method that generally leads to the holder of the loan or the loan servicers who would have the authority to provide payoff information.

Comment: So the buyer goes to the closing and expects that the check from his lender will pay off the previous mortgage holder. In this case the money was fraudulently misdirected. Title insurance saved the day for him. More on Title Insurance here.

Not commonly know is that there is buyers title insurance and lenders title insurance. The first protects the buyer, the later the lender. Let's say you buy a home for $ 300,000 and put $ 100,000 down. The lender's title insurance protects the Mortgager for $ 200,000. Most people only buy lender's title insurance (which is required by the lender. In the case of a cash sale, eg. a retired person who has fully paid off his previous home, sells it and has cash proceeds to buy another; no lender's title insurance is required (because there is no lender!). Buyers beware ... have buyer's title insurance to avoid financial risk!