Streamline your sales process with airSlate SignNow's solution for closing sales in Affidavits

How to create outlook signature

hello everyone uh welcome to today's title topics webinar uh this is alt's uh free 30 minute presentation we are offering monthly to um uh provide alternative ways of communicating important industry information with our members I'm Jeremy yoi alt's director of communications and joining uh joining me today uh for the webinar is Bill birding he is Executive Vice President and general counsel for Orange Coast title family of companies and he will be discussing Freddy Mack's short sale affidavit and uh he's he's also a member of ala's Board of Governors uh so Bill thanks for joining us today and uh taking a little bit of uh time out of your busy schedule to uh discuss the short so affidavit my pleasure thank you and welcome everybody um last year we started running into problems I'm sure most everybody on this call started running into problems regarding the short sales and the short sale affidavits uh Freddy Mack came out with a short sale affidavit that they were requiring on every transaction every short sale transaction because the majority of our companies business is in states where short sales are um the norm not the exception in California and Arizona Nevada especially um we started getting involved in the short sale affidavits uh immediately as soon as they came out the first round of the short sale affidavits uh were very very difficult in nature in that they uh were put in place to reduce fraud but the way that they were written it put additional liability on the settlement agent and it also put additional liability upon the realators and they had to be signed by everyone in the transaction from the all the realators to the closing entity and if title and were were different than it had to be signed by both companies as well so anybody who was part and parcel of the transaction had to execute the short sale affidavit and that affidavit required them to certify information that quite frankly uh the realators nor the title company or escro company would could or would have known or they would not have been in a normal investigation namely they wanted to make sure that the parties it was true arms length transaction there was no side agreements and that the um parties to the transaction uh were not related or connected whatsoever and that's something that the title company would not normally know because you could have different names and have the person still be brother and sister for example so people were just simply signing these affidavits uh without paying much attention to them and it also created extra liability to the buyer and seller and that a party to the transaction may not know um whether or not they are uh signing this and violating the the rule and the letter of the law at the same time people were just randomly signing these these documents so we went to um ala and ala in turn went to uh n and other companies and other or not companies but other uh trade organizations and were're able to get the short sale affidavit modified and that's what I want to discuss today is not so much focusing on the old affidavit but really focusing on the new affidavit because in the old affidavit uh it did require us to go and find out information that we would not normally have to find out and the new affidavit uh we do have to uh still turn over information that we know or should have known to the short sale lender or the short sale uh the company that's selling the property on the short sale and we we have to do this under a negligence standard versus before we had an absolute liability standard so the old affidavits required all parties signing to the trans trans action to uh sign under penalty of perjury also they would be liable uh for fraud so your closers for example were signing these documents signing these affidavits that said that this is this was indeed an arms length transaction that there was no conspiring amongst the parties and they would have no idea and yet they would be personally liable for any and all losses that would go along with that and the actual Freddy ma document itself said they would only be liable for uh for their own loss in that it would be the amount of the short sale that they would be taking however uh other documents and other lenders modified that particular uh section and they put all sorts of consequential Damages in there as well so you had an almost open-ended measure of Damages that your closers were signing to and they were signing for themselves in an individual capacity and they were signing in a corporate capacity so your your your your um employees were basically taking on huge amounts of liability that they didn't know that they were taking on personally and really they were unable to protect themselves so the the title companies had two choices at that point sign the documents and get deals closed or not sign the documents and have it go to other companies and there was a wide variance of what companies would do some companies would uh insist upon uh modification of those documents or modification of the affidavit and other companies simply signed them uh wholesale that didn't work out and that really slowed down the short sale process and the whole part of the short sale process is that you want to make sure that the um that the transaction moves along as quickly and as timely as possible and this was really slowing the transaction down so all time's members were able to convince Freddy to clarify the affidavit and they did so uh effective January one of this year a lot of the affidavit still is there namely it has to be an arms length transaction uh the parties can't be uh in cahoot so to speak but they're only negligent or they're only liable if they have negligent or intentional misrepresentation and they are signing in a a corporate capacity not an individual capacity so by making the change on the affidavit the the the U it really allowed the the affidavit to be clarifi that to clarify the transaction it allowed the transaction to move along more quickly so that the that the closer and the realators only had to disclose what they actually knew or should have known uh about the transaction so if they didn't know that the parties were brother and sister for example or they didn't know that the parties had business uh dealings with each other then uh then you can go ahead and sign the affidavit before it was strict liability and absolute liability so if the parties were uh related or had previous business dealings together they were absolutely and strictly liable now they're not absolutely strictly liable anymore so under the new aavid um which again went into effect January 1 2012 the affidavit no longer is incorporated as an addendum to the sales contract it is simply a a closing document like any other document in closing still needs to be signed by all of the parties to the transaction namely it needs to be signed by the buyer by the seller um by the realators by the title company and if we have a separate escro company by the escro company as well it also required the serer to update their forms to comply with the revised policy but I will tell you that that simply is not the case right now we have the majority of the affidavits that are coming back are not coming back with the modified language so as a practice here the thing you really want to make sure is is that you have a copy of the new Freddy Max short sale affidavit in all of your closers hands then have them match up that particular form with the form that is being used by the lender if it does not match then they need to be taking that upstairs to uh the your legal department or your underwriter or whatever the case may may be but we are seeing about 50% of all of the short sale affidavits not match the current short sale affidavit that Freddy Mack put out there and that's a problem so we're actually having to go work with each and every lender to get them to modify their form in order to meet the new requirement and again the new requirement just says that the person certifying is certifying to the best of their signatory knowledge and belief so basically what they knew or should have known uh about the transaction is it indeed an arms length transaction and if they will not modify the document you need to really go to the legal department of the lender because they uh seem to be more aware of the modification of the law uh than the people who are processing these on a day-to-day basis and again that varies by lender but again we're seeing about 50% of all of the short sales simply uh not use the current form and when the current form is not used again it brings in all sorts of old liabilities that were uh specifically taken back by Freddy Mack and it still puts them out there so you still have even though Freddy Mac still Freddy Mac has modified the form if the old form is used you still have all the contraction liability that the old form had and that is obviously a huge problem in the new form uh all it says is there is an arms link transaction the parties are unrelated unaffiliated by business marriage or commercial Enterprise that does mean that if you had a former business partner and it was sold from business partner to business partner then they have to set set forth that business relationship that is something that would be almost impossible for realtor or the title company to know and it also says that you can't sell the property for X period of time now that becomes a bit of a problem because if we're if we're part and parcel of the transaction what we're seeing is is that some of these properties are being flipped and if the property is being flipped you have to be careful that you're not signing the short sale affidavit saying that this property won't be sold for a period of 90 days sometimes we're seeing 6 months sometimes we're seeing a year um but it should be no no longer than 90 days and that's where you need to make sure that um you contact the lender and make sure they modify the affidavit if possible to state that the uh transaction may not be flipped for a period of 90 days as a maximum uh if that is it that if that is there then you need to create a datab base to reflect when transactions close and how long the waiting period is so that you don't do not inadvertently close a transaction uh before that 90-day period what we've done is we actually have created a data base uh of all of the transactions where we have signed these types of affidavits and if a transaction Falls within 90 days or whatever that period of time and sometimes it's 30 days sometimes it's 60 it all varies upon lender um then we are notifi it is notified through title out to the closer that they can't close the transaction or the parties need to uh simply wait to close the transaction so uh it is important that you maintain some type of database so you can verify that uh the transaction has the transaction is closed um it also the new FID also says the borrower or purchaser will not receive any funds or commissions from the sale of the mortgage Pro uh premises so it is important that nobody is getting any money out of this transaction now in a short sale it really shouldn't make that much of a difference because there's obviously not much much money going out one thing that we're finding is in the event that they are not willing to sign the affidavit it is just very very important that the affidavit goes to the legal department again of the lender and we are we have taken some of the uh affidavits and simply modified them and had all parties initial initial them and then sent them to the uh lender and see if the lender will approve it we have done that a hand full of times and it does work um so what do you do what if you're presented with an old form if they will not change it I don't think you can close the transaction and you certainly cannot let your your closer close the transaction uh signing under the old form because it does provide for personal liability of uh of the of the settlement agent and you can't allow your employees to have that type of personal ability so in my mind you either have to use a new form modify the old form to provide for the best of knowledge or you simply cannot close the transaction so to me that is Simply the Best practice that you have going forward and the only way to do that is to make sure that your escore officer has at their desk the old form and new form and make sure that they're able to sign the document without any problems and again it needs to go to the legal department if it's not and it does make a lot of sense in that this is preventing fraud there was a lot of fraud going on and this has done a good job of eliminating a lot of the schemes that were out there but again what it was doing was creating liability for people who were signing the documents that didn't know they were getting the liability and really weren't signing on for the liability so with a new short sale affidavit form it does fix that problem it's not perfect in a perfect world I think we would have preferred not to have any type of affidavit that we were signing but we have to have something that says that the parties are unrelated and this is not fraud and that this is the best we could do we could get at the time so we have it now you have to use the new form and again if you don't have the new form uh you need to get a copy of it absolutely as soon as possible and then use it on a with every single escore officer you have on every single transaction you have that's a short sale and make sure that the new form is being used and with that Jeremy that was quick but there's that's about all there is to it okay well well thanks Bill we had um two questions and they were uh both pretty much the same theme and they were curious as to where can the new for short sale affidavits be found is this going to be generated from their serer yes the serer should have the affidavits and should have the new forms however what I'm the problem that we're running across is that half of the servicers either don't have the forms or not using the forms right now and that's really been the overriding problem that we've had so you've had to go back and work with the servicers to go back to the lender and then tell them that hey this is the form that is going to be used uh so yes they have the forms that's where you should be getting them however they're just simply not being used on a wholesale basis and they need to be used on a whole sale basis and so that your advice would be just you know if you do get one make sure you're as you said comparing the new compare it the best thing you can do is have your escort officers compare the new form and really if it varies at all you should have have the legal department take a look at it because if there's any variance whatsoever uh from the old form or really from the new form there's a reason for that variance and it probably is to add additional liability to the to the uh settlement service provider and so you need to be very careful about uh executing those documents even in a corporate capacity you need to be careful about executing those documents because it is going to be creating additional liability um um for the company and in many cases for the individual as well and even though that Freddy has made the change if you don't if you sign the old affidavit it does provide for personal liability and you that's the thing you have to be the most careful about another question came in and and a lot of these are are centered around you know the old form new form how the question is how do you know if it's a new form there is no like Watermark or anything like that I wish there was um what you need to do is get a copy of the new form and what we've done is simply hand it to all of the escrow officers if it varies at all from the old form or if it varies at all from the new form then they need to call because the new form is pretty easy to see because it does not have uh does not have signature blocks in personal liability for example it have signature blocks in and corporate liability and it also provides for the uh new or should have known language in there so you you'll know it if you see it um but it's important that you get the new affidavits to your escar officers and really in for real estate companies that they get those to uh their agents uh as soon as possible so they aren't aren't signing the old document with old liability any other questions um it doesn't look like any more came in someone asked of if sample language could be Pro provided um maybe Bill offer a little advice on how you worked with some of your servicers on on how to maybe modify the language sure actually the the modification that we did is very similar to what the new form a new affidavit is um the change that needs to be made or the two major changes that need to be made are one to put it into corporate capacity so that the person who is signing the indemnity and this really is just an Indemnity for in the grand scheme of things but who signing the affidavit is signing it only in their capacity as either a real estate agent um or signing it in their capacity as um as a settlement service provider and not signing it in their personal capacity so you have to change the signature blocks and that's what we did we modified the signature blocks in order to create corporate capacity not not individual capacity and then also modified the document so that as opposed to saying I we changed it to the name of the company so that everything ran to the company and did not run to the individual themselves the other thing that we did is that we changed the absolute liability language and stated that it's not a violation of the contract if the parties are related for example if they do have a business relationship uh that is not going to be a violation but only if the escrow officer who was signing the document knew or should have known of the prior business relationship do they have liability so those are the changes that need to be made and if you can make those changes what it does it really transforms the old document into the new document and does modify the um does modify the old document to make it compliant with the with the new form the other thing that you need to be careful of is that we're having a handful of lenders put certain things into these short sale affidavits that are a little bit troubling in that they also serve as escro instructions namely we're seeing and this is rare but we're seeing it on occasion we're seeing that that we're agreeing to issue particular endorsements or we're agreeing to do specific things on title that's rare but it does happen on occasion if you see something like that it needs to be addressed with the legal department of your company as soon as possible because that's not part of the affidavit and some lenders are using the affidavit to bootstrap other issues that they're not getting elsewhere they're bootstrapping it into the the closing by virtue of the short sale affidavit so again you should have just the short sale affidavit the new one and it should be at the desk of every escro officer that you have and then um if there's any variance whatsoever then then it needs to go to the legal department because there's probably a reason why they're either using the old document which is a problem or they're trying to do something to create additional liability to the settlement service provider which again is a problem so it is important that this document really is at the desk of every person that is closing short sales great advice Bill uh one more question um question is if you've ever encountered or or heard of a lender pursuing a title agent based on on this short sell affid David being signed that's a great question the answer is yes um I have heard I have seen issues instances where uh A lender has gone after um somebody but in most of the instances that I have seen it it was parties that truly were related and that the escra officer knew or should have known um so yes we have seen it but it is in a rare set of circumstances that it is that has occurred um and most of the times we have seen it are are instances where uh it was either fraud or um certainly had the appearance of fraud but these have not been wholesale uh implemented or wholesale litigated not even close because again don't for for get these things only have been in place for a little over a year so um we haven't seen really The Fallout of any potential liability yet that may be coming down the future down the path in the future hey all right thanks Bill I don't see any other questions coming into the queue so uh thanks for the Practical advice on this as an added benefit to those on the call um the presentation will be available for download later this week on ala's website and you'll be able to find it at ala.org tile toopics again that's alta.org tile topics and just a quick note before we wrap up i' just like to everyone know that bill will address this topic at next month's business strategies conference in Louisville uh he'll be partner partnering with David Townsen president of Agents National Title Insurance Company on the panel lender instructions what am I agreeing to so you can go to alt's website for more information on that and to register so that brings us to the conclusion of today's webinar Bill thanks again for joining us and I hope all all the listeners found the presentation useful