Title Company Hasn't Cleared Liens for My Refi. What do I do?

Question

Hey BP,

Here is the background before I get to the main problems and why I am now feeling "uncomfortable."

I closed on a property in January of this year. It was a cash deal and everything went smoothly. I am now in the process of doing delayed financing on the property. The appraisal is done and the bank has everything done that they need to do. My mortgage broker called me yesterday and said that the title company (same one that I used for closing) sent back the title information with liens still on the property. The previous owner had done a "quiet title" and the title company saved around 45k at closing to clear the title since they were insuring it.

So today I hear that the title company will send back new title information saying that the title is all clear now so that we can proceed with the closing of the mortgage. This has already delayed my target closing date about a week, which was locked in with the interest rate.

My main concerns are as follows:

1. This seems really sketchy. Why are they going to say there were still liens then the next day say that there are none?

2. Why didn't the title company do the work to clear all the liens on the title already since it has been about 2 months since closing.

3. Should I still move forward with closing on my own "lien" knowing that the title might not be free and clear yet?

4. I'm calling the title company tomorrow to try and see what is going on. Is there anything specific I should be asking/saying to them (maybe to put some pressure on them, but also to ensure that everything will be alright)?

5. Is the title company liable for any "damages" considering that pushing out the closing on the loan will require either the mortgage company or myself to incur some cost in extending the interest rate lock. Its probably only 1-200 bucks but still.

6. Is it odd that the seller isn't bugging the title company to get the title all clear so that they can release the remainder/leftover money that they held to them since they are still waiting on that money from the sale?

Tom Gimer · Answer

If the title insurer is willing to say everything is OK then it doesn't matter.

Here's an example...

Let's say the issue is an unreleased deed of trust taken out in 1990 by the guy who sold you the property. It was a 30 year loan that would have matured in 2020 so it's still a potential problem. After the 1990 loan there were a few refinances and loans were paid off with new loans originated. What to do about the URT from 1990? It seems the lender named in that trust went out of business in 2008 so there is nobody to get a release from; the trust was never assigned; and either there is no successor bank handling the lender's loans now or the successor bank has no record of this loan.

Does this prevent the property from being sold, refinanced, etc? No. What happens in these situations is you minimize the risk that someone claiming the right to collect on the 1990 loan resurfaces, demands payment, and the title insurer has to pay. There are several ways to do this, which I won't bore you with.

Tom Gimer · Answer

I guess we have some of the same keywords on our notification list... I was typing my response while you were typing yours.

The problems were already insured over in connection with OP's cash buy. If the title insurer via its agent will insure over them again, all that does it help OP get to the table for his refi.

Jack Barkow · Answer

to update on this..

I talked to the lawyer at the title company and the reason for the delay was because the seller got the property through foreclosure. The prior owner had died. Because the old owner had died it took longer than usual to clear up all of the liens.

All good now and closing next Friday

Roman M. · Answer

First Time around - Owner's policy

Second Time around - Lender's policy.

That is two times around with the same title co.

From my experience and when lender is involved, the title co won't clear to close until all liens are cleared and if there is any doubt of any open items out there they will put it on hold until that have cleaned all issues.

Tom Gimer · Answer

Title companies are not afraid of lenders. And in this transaction there would be a lenders policy issued, so it's not a 2nd time around.

Roman M. · Answer

Don't overthink it. Title co are afraid of lenders. If it's clear to close for refi, you good to go. They will have to defend the title especially that it is 2nd time around.

Jack Barkow · Answer

@Dana Whicker I thought so as well.. over half of the purchase price. I’ll let y’all know what happens. Probably end up closing next week

Jack Barkow · Answer

@Tom Gimer so if the title company sends out documentation saying that the title is free and clear when it isn’t and myself and the mortgage company are skeptical that the title hasn’t become clear in 2 days time is there any concern etc? Or since they insured the title I shouldn’t really care if they haven’t finished up on their end and just move along and close on the refi?

Title Company Hasn't Cleared Liens for My Refi. What do I do?

Title Company Hasn't Cleared Liens for My Refi. What do I do?

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