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On February 3, 2010 the board of the American Land Title Association (ALTA) voted to officially decommission or withdraw the creditors’ rights endorsement (ALTA Form 21/21/06) from use.  This action is a response to the concerns of title insurers and their re-insurers due to the downturn of the economy and several recent bankruptcy court decisions. Also many state regulators are questioning whether creditors’ rights coverage is even within the scope of concern of title insurance. 

Prior to the last 18 months creditors’ rights coverage was fairly common and easy to obtain on commercial property.  The endorsement to the lender or owner’s title policy provides coverage against challenges to a transfer of title as a result of a fraudulent conveyance, fraudulent transfer or preferential transfer or certain other federal and state bankruptcy and insolvency laws.  However, recently title insurers have been very reluctant to provide the coverage, and when they did provide it, it has come at a substantial cost of additional title premium.

Shortly after ALTA withdrew the endorsement national title insurance companies issued instructions to their agents that they would no longer provide a creditors’ rights endorsement or any form of creditors’ rights coverage.   

by Sherry Ryals, Escrow Closer for Kings River Title

There is a lot more work involved in getting a transaction to the closing table today than at any other time in history. This is even more true now that the words “short sale” have become part of our daily vocabulary.  It is a time consuming ordeal for the seller and their real estate professional to convince the seller’s lender to accept a payoff that is substantially less than what is owed.  However, considering that a vast number of homeowners owe more than what their homes are currently worth, mortgage lenders often would rather accept a lesser payoff from a short sale and write off the shortage rather than risk a potentially greater loss after foreclosure. Thus, the lender gives ”short sale” approval to their borrower, who can now sell the property for less than the amount the lender is owed.  This process can also be very frustrating for a buyer because they often have to wait several months just to find out if the seller’s lender will approve the short sale offer. 

Once the lender has approved the short sale and has accepted the terms of the sale in the executed real estate contract, the lender will send very detailed closing instructions to the closing agent at the title company.  It is imperative that the closing agent and title company you choose to handle the closing be experience in closing short sale transactions.  Failure to follow and meet the conditions set out in the closing instructions can result in the seller’s lender failing to release its mortgage, the buyer’s lender not being appropriately secured and the seller liable to both the lender and the buyer.

An example of a closing condition that many short sale lenders include in their closing instructions are deed restrictions.  These restrictions can potentially prohibit a subsequent sale of the property for up to 6 months and/or the profit that the seller can realize during that period.  Another condition that is almost universal is that the seller in a short sale must not receive any proceeds from the sale.

Given the challenges associated with short sale closings, it is important to have a closer that is experienced closing these transactions.  In order to meet the needs of my customers in this economic environment, I have made it a point of emphasis to be knowledgeable in the details of these short sale transactions so that I can make sure the property closes quickly, and most importantly, correctly. Even though these closings can be very challenging, I personally find it rewarding to save a seller from foreclosure and help the buyer obtain the property, usually at a good price.  I look forward to assisting you and your customers with your next closing, even short sales, so give me a call or email me today at 479-442-6400 or sherry@kingsrivertitle.com

by: Robert A. Ballinger, Attorney at Law, Director of Operations, Kings River Title and Abstract

We have all been asked this question more times than we can count. Why would the spouse of a seller who took title as “a married person in their own right,” need to come to the closing and execute the deed? The reason for this is because Arkansas, as well as a few other states, recognizes a peculiar type of marital rights to property called dower and curtesy. Dower is a wife’s interest in her husband’s property, and curtesy is a husband’s interest in his wife’s property. Today, these rights are essentially the same; just different terms to define the gender involved. These rights are designed to protect the spouse in the event of intestacy (the condition of the estate of a person who dies owning property without having made a valid will or other binding declaration). Interests based on dower and curtesy are inchoate (a right contingent on an event) until the death of a spouse.

Dower or curtesy exists in all real and personal property that is seized (owned with the right to possess) during the marriage. This is taken literally. If the property is brought into the marriage, it is owned during marriage and these rights are in effect. If the property is transferred during the marriage, it was still owned during marriage and these rights are in effect.

The extent of dower and curtesy right depends on whether there are descendants or not. In the situation with real property, if there are descendants, the amount of the dower is a 1/3 life estate. This would mean that the surviving spouse will receive one-third of the income generated from the land during his or her life. At the death of the surviving spouse, he or she owns nothing to pass on to someone else. If there are no descendants, the dower is 1/2 fee simple. Fee simple is the most common way real estate is owned in Arkansas, and is ordinarily the most complete ownership interest that can be had in real property, but the decedent’s creditors may reduce this share if the remainder of the estate is not sufficient to pay all debts.

Therefore, when buying real estate in Arkansas, one of the most important questions to ask the seller is “are you married?” If the seller’s spouse does not sign the conveyance, buyer could rescind for failure to provide marketable title. Dower and curtesy interest can be terminated through time, but only after seven years pass from date the interest becomes choate, which is most often the death of spouse. The best way to take care of this is to get the spouse’s signature on the deed.

See, Arkansas Code:

28-11-305. Personalty.

If a person dies leaving a surviving spouse and a child or children, the surviving spouse shall be entitled, as part of dower or curtesy in his or her own right, to one-third (1/3) part of the personal estate whereof the deceased spouse died seized or possessed.

28-11-307. Dower or curtesy when no children.

(a)(1) If a person dies leaving a surviving spouse and no children, the surviving spouse shall be endowed in fee simple of one-half (1/2) of the real estate of which the deceased person died seized when the estate is a new acquisition and not an ancestral estate and of one-half (1/2) of the personal estate, absolutely, and in his or her own right, as against collateral heirs.

(2) However, as against creditors, the surviving spouse shall be invested with one-third (1/3) of the real estate in fee simple if a new acquisition, and not ancestral, and of one-third (1/3) of the personal property absolutely.

(b) If the real estate of the deceased person is an ancestral estate, the surviving spouse shall be endowed in a life estate of one-half (1/2) of the estate as against collateral heirs and one-third (1/3) as against creditors.

18-12-402. Dower or curtesy; relinquishment

A married person may relinquish dower or curtesy in any of the real estate of a spouse by joining with the spouse in the deed of conveyance thereof, or by a separate instrument executed to spouse’s grantee or anyone claiming title under the spouse, and acknowledging it in the manner prescribed by law.