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Game changing “Real Estate Commissions and Title Insurance Services for a Flat Fee” in Illinois

William B. Blanchard, real estate lawyer in illinois and general counsel for Gaia Title, Inc. spoke about a game-changing development of great significance to Realtors® and title agents in Illinois. READ MORE. 


William B. Blanchard real estate attorney and general counsel for Gaia Title, Inc. spoke about a game-changing development of great significance to Realtors® and title agents in Illinois.


Home Bay, a California real estate technology company is expanding its operation to seven additional states including Illinois. Home Bay has been successful in the California real estate market by offering discounted flat fee brokerage commissions in the range of $2,500 to $3,000.  


Home Bay announced this week that its getting into the title insurance and settlement services business by acquiring OnTitle, a full-service title insurance and settlement company. Mr. Blanchard stated, “this is a game changer for Illinois residents, real estate agents and title agencies because Home Bay’s fees are significantly below prevailing rates in our market. OnTitle is registered to provide title and closing services in 31 states including Illinois.” Home Bay’s spokesman says, “the flat fee platform will allow the company to become a one-stop-technology-shop for brokerage, title and escrow.” He went on to add, “the recent addition to our portfolio permits us to streamline the sales and settlement process.” 


The question becomes, will Home Bay with the recent acquisition of OnTitle bring real savings to consumers, and Mr. Blanchard believes it will. “There is no doubt that consumers working with Home Bay in its current markets have realized lower commissions and settlement fees.” added Mr. Blanchard.


William B. Blanchard is General Counsel for Gaia Title, Inc. and a real estate attorney representing clients in the Western suburbs of Chicago in all types of real estate transactions including real estate closings, short sales, and real estate tax appeals. As General Counsel, Mr. Blanchard provides title insurance examinations, commitment and policy reviews, supervises closing activities and regulatory compliance issues.


Mr. Blanchard received his Juris Doctor Degree from DePaul University College of Law in 1972, and was admitted to the practice of law in Illinois in 1973.


Three Different Courts Find CFPB and Agency Regulation of Title Insurance Companies are Intrusive

St. Charles, Illinois (July 2018) William Blanchard, a St. Charles, Illinois real estate attorney and General Counsel of Gaia Title, Inc., spoke about three recent court cases each ending with a decision to limit or abolish regulatory efforts by the Consumer Financial Protection Bureau (CFPB) or proceedings under the Real Estate Settlement Procedures Act (RESPA). The significance of these decisions is that together they demonstrate that the pendulum is swinging away from broad agency regulatory authority toward less intrusive business oversight.


On May 18, 2017, the Illinois Supreme Court deadlocked in the matter of Chultem vs. Ticor Title Insurance Co. (2017 IL 120448). Plaintiffs in that case alleged that the title company defendants paid excessive commissions to attorney agents who referred title business to defendants. The complaint recognized that RESPA permitted payment to attorneys who provide core services during the title production process but argued that the quantity and quality of services provided did not justify agent commissions of up to 80% of policy premiums. The trial court rejected plaintiffs' assertion that the attorney agents must perform all of the core title services to avoid violating section 2607 of RESPA, and that under Freeman v. Quicken Loans, Inc., 132 S. Ct. 2034 (2012), it was irrelevant whether an attorney agent was overpaid for their services when performing less than all core title services.


The Illinois Supreme Court justices deadlocked decision resulted in the decision by Appellate Court Judge Mary Mikva to stand, which favored title companies (Appeal from the Circuit Court of Cook County, Nos. 06-CH-09488, 06-CH-09489).


In particular, Judge Mikva noted that “legal precedent holds attorneys need only perform some title services to allow them to be legally paid by the title companies as a “title agent.” In the Appellate Opinion Chultem v. Ticor Title Insurance Co., 2015 IL App (1st) 140808, the majority held that the federal law at issue, known as RESPA, doesn’t spell out how much work attorneys must perform to receive payment, or control the amounts attorneys can collect in return for their work on a title.


“…RESPA is not concerned with whether the attorney agents were paid too much for their actual services, but asks only whether actual services were rendered,” the majority wrote. “Thus, the title companies' payments were not unlawful.”


The next example of a recent court decision that limits regulatory oversight is the decision of Judge Eileen Rakower of the Manhattan Supreme Court of July 6, 2018. In the case of the New York Land Title Association v. the New York Department of Finance, Judge Rakower found that regulations adopted by the DFS were overly broad and therefore invalid. This case dealt with title insurance company’s practice of giving gifts of meals, event tickets, hotel rooms, and other perks to real estate brokers, bankers, attorneys and others who provided title insurance orders to title companies. The Department took the position that these gifts were things of value that increased premiums to consumers and amounted to unpermitted referral fees or kickbacks. The rules preventing such gifts had gone into effect earlier this year and were an attempt to lower real estate closing costs for New York consumers. The Court thus struck down a state regulation that prevented title insurers from passing along marketing and client-relation expenses to customers. See https://www.law.com/newyorklawjournal/2018/07/06/supreme-court-strikes-down-ny-title-insurance-regulation/ 


“To construe [the law] in this manner is to hold that the Legislature intended to prohibit title insurance corporations from marketing themselves for business is an absurd proposition," Judge Rakower wrote, validating many of the arguments made by title insurers and lawmakers who attempted to defang the regulations through legislation. 

In the third case, a federal district judge ruled on June 21, 2018 that the structure of the Consumer Financial Protection Bureau (CFPB) violates the Constitution, countering a January ruling from a federal appeals court. Judge Loretta Preska of the Southern District of New York (a Republican judge), in the case of Consumer Financial Protection Bureau et al v. RD Legal Funding LLC et al (No. 1:2017cv00890 - Document 80, S.D.N.Y. 2018) ruled that the CFPB’s creation as an independent agency with a director that could only be dismissed for wrongdoing was unconstitutional. In her written opinion, Judge Preska noted that the Bureau was virtually free from Congressional or Executive oversight and was in fact created as another branch of government not permitted by the Constitution. However, this decision conflicts with an earlier decision by the Court of Appeals of the District of Columbia which found that the President’s ability to fire the CFPB Director at will was sufficient oversight to make its structure constitutional. Judge Preska failed to mention the United States Supreme Court’s reasoning in May of this year in Murphy vs. NCAA which discussed the issue and inferred most judges feel that it would be more logical to rule on specific CFPB actions or powers than to find the entire Act unconstitutional.


These three post-election decisions highlight the differences in attitude concerning business regulation between the previous and current administrations. The CFPB was originally staffed by Senator Elizabeth Warren of Massachusetts while President Trump recently appointed his choice to lead the Bureau. 


Mr. Blanchard pointed out that, “Future court decisions including a determination by the United States Supreme Court will determine if this trend continues. An appeal of the conflicting findings by Judge Preska and the DC Court could determine that the Dodd Frank Wall Street Reform and Consumer Financial Protection Act is unconstitutional as currently structured. Presumably the political make-up of the Supreme Court will be more conservative with a second appointment by President Trump. All factors point to another point of contention between Republicans and Democrats after the mid-term elections.”

Mr. Blanchard received his Juris Doctor from DePaul University College of Law in 1972 and was admitted to the practice of law in Illinois in 1973. He graduated with his B.S. in Business Administration from Southern Illinois University. More news from William Blanchard are at https://attorneygazette.com/william-blanchard%2C-esq#40b43d7b-94b2-48d3-b055-1979a636f1e7

Illinois Appellate Decision finding Title Insurance Company not responsible for damages

Though it took 18 months to clear liens, Title Insurance Company not liable; this will affect real estate transactions where lien is discovered after closing.


Real Estate Attorney William B. Blanchard, general counsel for Gaia Title, Inc., spoke about a recent case where the Illinois Appellate Court held that the standard ALTA Owner’s Policy gives a title insurance company wide latitude in how to remove liens from the title, and protects it from liability for damages. This court opinion may affect any real estate purchaser who seeks to have liens or other encumbrances removed from a title insurance policy after closing.


The case of Wade v. Stewart Title Guaranty Company arose from a breach of contract regarding a title insurance policy for a multi-unit residential building in Chicago, Illinois. Plaintiff Josephine Wade, the purchaser of the property, filed suit against Stewart Title Guaranty Company (“Stewart Title”), alleging that it had failed to timely remove defects on the property’s title. As a consequence of the delays, according to Ms. Wade, the building was demolished because she could not comply with the City of Chicago’s building code. The trial court ruled in favor of Stewart Title, finding that the title company did not breach any duties under the policy. The Illinois Appellate Court affirmed, noting that the Plaintiff did not meet the burden of proof needed to establish that the 18 months Stewart Title took to clear the defects was not “reasonably diligent.”


Apparently, the title insurance company pursued lengthy litigation during which time the building’s value quickly deteriorated. The litigation was designed to settle the liens for less money, rather than immediately paying the liens in full. Section 9. of the title insurance policy, “Limitation of Liability,” provided: “If the (Title) Company establishes the title, or removes the alleged defect, lien or encumbrance *** in a reasonably diligent manner by any method, including litigation and the completion of any appeals therefrom, it shall have fully performed its obligations with respect to that matter and shall not be liable for any loss or damage caused hereby.”


Section 4 of the policy gave the title insurance company the right to determine how to defend or settle the claims. On ambiguity of provisions in insurance contract, the Court stated, “…an insurance contract will be liberally construed in favor of the insured. First Chicago Insurance Co. v. Molda, 2015 IL App (1st) 140548, ¶ 33.” Then, ironically, the Court held that Plaintiff had the burden of proof to show the defense was not “reasonably diligent.” Note that the trial court heard evidence that the defense provided by Stewart Title was for its own benefit, and to the detriment of their policy holder. 


Mr. Blanchard stated, “this decision is important for anybody in a real estate transaction where a lien or other encumbrance is first discovered after closing. Basically, the standard title insurance policy provides that you must let the insurer do the job in any manner it chooses.  The appellate court concluded that if the policy owner suffers damages while the title company engages in its defense, a policy holder cannot prevail in a claim damages absent clear and convincing evidence that the defense did not act in a “reasonably diligent” manner.”


“This is an important case also for what the Court didn’t consider in reaching its opinion,” adds Mr. Blanchard. “The Appellate Court affirmed because the reasonableness and diligence of the title insurance company’s defense was a matter for the trial court to determine based upon the evidence presented. Before this case, a plaintiff was required to present evidence that it suffered damages during the time it took the title company to remove title defects, and it was then up to the title company to present evidence that its efforts were reasonably diligent.”


“Title insurance companies defending similar actions in the future will cite this case as precedent for a broad interpretation of both Section 4’s grant of discretion and Section 9’s protection from liability. The ruling is contrary to Illinois precedent establishing that unclear terms in insurance policies should be interpreted in favor of Plaintiffs, and shifts the burden of proof on the question of “reasonable diligence” from Defendants to Plaintiffs,” opines Mr. Blanchard. 


The case is Wade v. Stewart Title Guaranty 2017 ILAP (1st) 161765. The full opinion is on the court website http://www.illinoiscourts.gov/Opinions/AppellateCourt/2017/1stDistrict/1161765.pdf


William B. Blanchard is General Counsel for Gaia Title, Inc. and a real estate law attorney representing clients in the Western suburbs of Chicago in all types of real estate transactions including real estate closings, short sales, and real estate tax appeals. See http://www.gaiatitle.com/


As General Counsel, Mr. Blanchard provides title insurance examinations, commitment and policy reviews, supervises closing activities and regulatory compliance issues. Mr. Blanchard received his Juris Doctor Degree from DePaul University College of Law in 1972, and was admitted to the practice of law in Illinois in 1973. His LinkedIn Profile is at https://www.linkedin.com/in/william-bill-blanchard-080a48b/

Will County Attorney Wins Reversal Before The Illinois Property Tax Appeal Board

Home owner appealed real estate tax assessment for his home with help of attorney; successful appeal resulted in 13% tax bill reduction for 2015 alone


St. Charles real estate attorney William “Bill” Blanchard successfully appealed a determination by the Will County Board of Review (“BOR”) regarding the real estate tax assessment for a Homer Township homeowner (“Appellant”). On May 15, 2018 the Illinois Property Tax Appeal Board (“PTAB”) unanimously adopted the request by the Appellant for a reduction of his 2015 tax assessment. The BOR decided not to appeal the decision which now becomes final. 


The Homer Township Assessor originally determined the fair market value of value of the 3,455 square foot, 2-story home in Hidden Valley Estates as $436,207, while the homeowner, represented by Mr. Blanchard at the BOR hearing, requested an assessment based upon a value of $380,800. The BOA issued a “No Change” opinion which Mr. Blanchard appealed to PTAB. 


PTAB’s decision in favor of the homeowner to reduce the fair market value by $55,407 resulted in a 13% tax bill reduction for the homeowner on his 2015 real estate tax bill. The over payment will be refunded by the Will County Treasurer. Mr. Blanchard said, “the homeowner was extremely happy with the outcome especially when told that the decision would entitle him to similar refunds for tax years 2016 and 2017 as well.” Blanchard continued, “I’ve now received reductions for 24 Will County homeowners who appealed decisions by the Will County Board of Review.”


William Blanchard represents residential, commercial and industrial property owners who feel they are entitled to assessment reductions in Will, Kane and DuPage Counties in Illinois.


Further information about the Illinois Property Tax System is available at http://tax.illinois.gov/publications/localgovernment/ptax1004.pdf. Specifically about Will County, Illinois, additional real property tax information is at http://www.willcountysoa.com/search_address.aspx.


Related Video:

https://www.youtube.com/watch?v=i6hmui3gRd4

CNBC News Report with Billionaire Real Estate Investor Sam Zell On The Economy and Tax Reform.

Illinois’ Closing Protection Letters (CPLs) Help Protect against Wire Fraud Losses

Illinois Act shows that legislature is holding the major title companies and underwriters responsible for creating a situation which makes it easier for unscrupulous parties to steal funds


St. Charles, Illinois (August 2018) - Real Estate Attorney William B. Blanchard commented that the loss of funds due to wire transfer scams is now the Number 1 insurance claim category for title companies, escrow closing services and their attorney/agents. Cunning hackers can intercept and replace wire transfer instructions sent via email between the various parties to a real estate transaction and have now diverted over a billion dollars in the U.S. alone. Cyber thieves and unscrupulous closing agents make off with closing funds or proceeds belonging to buyers, sellers and lenders involved in real estate transaction at a rapidly increasing rate. Once gone, the money is virtually impossible to recover as it moves quickly through a maze of domestic and foreign accounts. Criminals are having greater success now than ever before, with a large percentage of thefts taking place in Northern Illinois.


Mr. Blanchard explains that a “Closing Protection Letter” (CPL) which must now be used is a form of insurance issued by title insurance companies, insuring the actions of a particular attorney, agent, and/or closer in conducting a closing. 


The business of issuing title insurance commitments, owner’s and lender’s policies and administering closings in Illinois, underwent a dramatic change during the 1980s and ‘90s.  Residential real estate contracts, following established practice in Northern Illinois, provide that seller’s attorney is responsible for selecting the title company to provide title and escrow settlement services for the transaction. Title companies, attempting to increase title orders, took steps to build a base of loyal attorneys in a competitive market by entering into independent agent agreements. These agreements provided financial rewards to attorney/agents through generous premium splits in exchange for placement of title orders.


By the turn of the Century major title companies engaged in fierce competition to attract new agents until now virtually all real estate attorneys have affiliated business arrangements with at least one title underwriter. As a result, attorney policy premium splits quickly reached 80-20%. Attorney revenue continued to grow rapidly as title companies had to increase premiums in order to remain a competitive attorney recruitment program.  


Title companies dealt with lost revenue from lower premium margins by increasing the cost of other services such as escrow settlement and closings fees. After profits from providing ancillary services and products grew, attorneys and investors opened full service title agencies allowing them to enter the lucrative escrow and settlement business. Most new agencies were and continue to be undercapitalized and are staffed by real estate attorneys and administrative staff having little hands-on title experience. Mistakes before, during and after closings increased as did the volume of claims. Dissatisfied lenders complained as they had to look to undercapitalized independent agencies to recover losses resulting from title errors and mishandling or theft of escrow funds. The result was a reluctance amongst mortgage lenders to recognize these new agencies as approved vendors for their closings. 


Facing a need to bolster lender’s confidence in agency closings, major title companies and underwriters issued CPLs indemnifying lenders and buyers from losses occurring during the closing process.  Underwriters paid or settled claims quickly in order encourage lenders to accept the newer agencies as approved vendors. 


At first, CPLs were issued by underwriters to lenders and later to buyers upon request. Later Illinois enacted statutory coverage for CPLs and provided that title company underwriters must issue letters to buyers and lenders in all residential real estate transactions. Then on September 1, 2011 the Illinois legislature added CPLs for sellers under the Act and provided for payment of fees to title companies that issued CPLs (Illinois Public Act 96-1454) (“Act”).


Attorney William Blanchard notes that “theft of closing funds or sale proceeds is not just an Illinois problem as losses are prevalent throughout the country. Courts in many states without CPL legislation are struggling to justify decisions finding title companies and individual agency or agent’s errors and omission insurers responsible to the parties to real estate transactions that fail due to loss of funds or to sellers whose proceeds end up somewhere other than intended. Other state courts have moved in the opposite directions finding underwriters and insurers free from legal responsibility for losses.”

Even though millions of dollars are being hijacked by unscrupulous closing agents, attorneys and hackers, there are no appellate or supreme court cases on the issue of title insurance company responsibility for loss due to fake wire transfer instructions involving CPLs. Statutory defenses are provided in the Act, but for now it appears that underwriters are accepting claims under CPLs with a reservation of right to deny the claims. Therefore, if buyer, lender or seller closing funds are misappropriated and the closing does not occur, insurers are still settling claims very early in the process to prevent courts from interpreting issuer’s liability under the Act. The obvious desire not to litigate may be realization that it would be rare for a claim of diversion of funds to result from settlement actions by closing agents or attorney/agents who were completely free from negligence, error, fraud, or intentional taking.


Mr. Blanchard concludes that “the language of the Illinois Act makes it clear that the legislature is holding the major title companies and underwriters responsible for creating a situation which makes it easier for unscrupulous parties to steal funds and will now hold insurers strictly responsible for the damages.”


About William B. Blanchard, Real Estate Attorney


Bill Blanchard is a solo practice attorney with offices in St. Charles and Oakbrook Terrace, Illinois. He specializes in representing real estate clients for purchases and sales as well as home owner real estate tax assessment appeals. He is also General Counsel for Gaia Title, Inc. a title insurance agency and settlement services provider. The Company is owned by real estate attorneys who demand exemplary title insurance services and accurate and efficient settlement services. As General Counsel he is responsible for title examination, commitment and policy review, escrow settlement supervision and regulatory review.


More information:


There are numerous news reports about this type of scam elsewhere in the U.S., for example:

http://www.chicagotribune.com/classified/realestate/ct-re-1105-kenneth-harney-20171030-story.html

http://time.com/money/5062964/this-sneaky-home-buying-scam-is-on-the-rise-heres-how-to-spot-it/

https://abc7chicago.com/realestate/wired-away-couple-loses-life-savings-during-home-purchase/2630496/


The Illinois Statutory CPL now reads as follows: 


Illinois Agent Issued Seller Closing Protection Letter

7/19/2018

[…] Transaction File Number (hereafter, “the Real Estate Transaction”): Buyer/Borrower: 

Property Address: 

Loan Number: 

Name of Issuing Agent or Approved Attorney ("title insurance agent"): 

Re: Seller Closing Protection Letter

Dear Sir or Madam:

___________________ Title Insurance Company (the “Company”) agrees, subject to the Conditions and Exclusions set forth below, to reimburse you for actual loss not to exceed the amount of the settlement funds deposited with the title insurance agent and incurred by you, the Seller/Lessor in connection with the closing of the Real Estate Transaction conducted by the title insurance agent of the Company provided:

(A) A title insurance policy of the Company is issued in connection with the closing of the Real Estate Transaction;

(B) You are to be the (i) Seller of an interest in land, or (ii) Lessor of an interest in land; and

(C) The aggregate of all funds you transmit to, or are to receive from the title insurance agent for the Real Estate Transaction does not exceed $2,000,000.00 on a nonresidential transaction; and provided the loss arises out of:

1. Failure of the title insurance agent to comply with your written closing instructions to the extent that they relate to (a) the status of the title to that interest in land or including the obtaining of documents and the disbursement of funds necessary to establish the status of title, or (b) the obtaining of any other documents, specifically required by you, but only to the extent the failure to obtain the other documents affects the status of the title to that interest in land and not to the extent that your instructions require a determination of the validity, enforceability or the effectiveness of the other documents, or

2. Fraud, dishonesty, or negligence of the title insurance agent in handling funds or documents in connection with closings to the extent that the fraud, dishonesty, or negligence relates to the status of the title to the interest in land or, in the case of a Seller/Lessor, to the extent that the fraud, dishonesty, or negligence relates to funds paid to the Seller/Lessor or on behalf of the Seller/Lessor.

Conditions and Exclusions:

1. The Company will not be liable for loss arising out of:

A. Failure of the title insurance agent to comply with your written closing instructions which require title insurance protection inconsistent with that set forth in the title insurance binder or commitment issued by the Company. Instructions which require the removal of specific exceptions to title or compliance with the requirements contained in the binder or commitment shall not be deemed to be inconsistent.

B. Loss or impairment of your funds in the course of collection or while on deposit with a bank due to bank failure, insolvency or suspension, except as shall result from failure of the title insurance agent to comply with your written closing instructions to deposit the funds in a bank which you designated by name.

C. Defects, liens, encumbrances, mechanics' and materialmen's liens, or other matters in connection with the Real Estate Transaction if it is a sale, lease or loan transaction except to the extent that protection against those defects, liens, encumbrances or other matters is afforded by a policy of title insurance not inconsistent with your closing instructions.

D. Fraud, dishonesty or negligence of your employee, agent, attorney, broker, buyer/borrower/lessee, borrower’s lender or warehouse lender.

E. Your settlement or release of any claim without the written consent of the Company.

F. Any matters created, suffered, assumed or agreed to by you or known to you.

G. The title insurance agent of the Company acting as a Qualified Intermediary/Accommodator pursuant to IRC 1031, Like Kind Exchanges. However, the Company is liable for the acts or omissions of the title insurance agent pursuant to the coverage’s afforded by this Closing Protection Letter if the title insurance agent fails to follow written instructions directing the disbursement of exchange funds to a third party Qualified Intermediary/Accommodator. The terms and conditions of this Closing Protection Letter extend only to the disbursement of exchange funds to a designated Qualified Intermediary/Accommodator disclosed in written instructions and not to the subsequent acquisition of the replacement property as defined in IRC 1031, Like Kind Exchanges.

2. When the Company shall have reimbursed you pursuant to this Closing Protection Letter it shall be subrogated to all rights and remedies which you would have had against any person or property had you not been so reimbursed. Liability of the Company for such reimbursement shall be reduced to the extent that you have knowingly and voluntarily impaired the value of this right of subrogation.

3. The title insurance agent is the Company’s agent only for the limited purpose of issuing title insurance policies. The title insurance agent is not the Company’s agent for the purpose of providing other closing or settlement services. The Company’s liability for your losses arising from closing or settlement services is strictly limited to the protection expressly provided in this Closing Protection Letter. Any liability of the Company for loss does not include liability for loss resulting from the negligence, fraud or bad faith of any party to the Real Estate Transaction other than the tile insurance agent pursuant to this Closing Protection Letter; the lack of creditworthiness of any borrower connected with the Real Estate Transaction, or the failure of any collateral to adequately secure a loan connected with the Real Estate Transaction. However, this letter does not affect the Company’s liability with respect to its title insurance binders, commitments or policies issued by the title insurance agent in connection with the Real Estate Transaction

4. You must promptly send written notice of a claim under this letter to the Company at its principal office, First American Title Insurance Company, Attn: Claims National Intake Center, 1 First American Way, Santa Ana, CA 92707. The company is not liable for a loss if the written notice is not received within one year from the date of the closing. from the date of the closing.

Any previous Closing Protection Letter or similar agreement is hereby cancelled with respect to the Real Estate Transaction.