real estate lawyer

Marketing tips for dirt lawyers

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bookLast week, this blog discussed technology and marketing issues, and I warned readers to expect more on those topics. I read another great book! This one, The Power of a System, by John H. Fisher, a medical malpractice lawyer, is basically about how to build a successful plaintiff’s practice. Why, you ask, should a real estate lawyer care?

A real estate lawyer should care because Mr. Fisher included some great marketing tips for real estate lawyers. He believes, for example, in identifying the “ideal client” and marketing relentlessly to that person. Here is his quote about the “ideal client” of a real estate lawyer:

“If you are a real estate lawyer, are your ideal clients the homeowners buying a new house? No! The homeowners will use your services one time for a fee of $750, and you will likely never hear from them again…You will be broke by the time the homeowners need you again. The ideal clients for a real estate lawyer are real estate agents who refer a steady stream of new homeowners. The goal is not to make money on a single transaction. Rather, your goal should be to develop relationships with your ideal client that will generate new clients and a steady stream of income for the rest of your career. The lifetime value of your ideal client is far greater than the value of a single transaction.”

This makes perfect sense, doesn’t it? Real estate lawyers in South Carolina should devote their marketing dollars and time to courting the individuals who are in a position to send them business. In addition to real estate agents, local lenders and builders are prime targets. Analyze your market, your community, and determine who will be in a position to direct business to your practice. Call those individuals your “ideal clients” and go after them!

Mr. Fisher has developed three simple marketing tools that he says will make all the difference in a law practice:

  1. Create an information-powerhouse website that provides killer content on a daily basis;
  2. Publish a monthly newsletter targeted to your ideal client;
  3. Host regular seminars and workshops that provide valuable content to your ideal client.

As to the information-powerhouse website, you will need assistance.  There are experts who can assist you with setting up the website as well as providing content. You will, of course, have to comply with the Rules of Professional Responsibility, so you cannot let your website expert work alone. Stay tuned for later blogs about websites.

As to the monthly newsletter, Mr. Fisher was very specific. He believes newsletters are “marketing gold”, but they must be written by the attorney to show personality as well as expertise, and they must be mailed consistently on a monthly basis. He believes that mass-mailing pieces will not do the job.

He said he is always thinking and taking notes about possible articles. (I get this idea because I am always thinking about blog ideas.) He said, with collecting ideas all month, he is able to devote only two hours per month to actually writing. He writes a main article or two on law related topics. Then he answers a legal question or two. After that, he throws in a brief article about his marketing events (“What’s John up to?”). And he adds a goofy picture or two of him and his kids to humanize himself.

He hires a graphic designer to make the newsletter “pretty” and uses a “fulfillment provider” for printing and mailing.

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He wants his newsletter to be so good that his ideal clients (the lawyers who refer medical malpractice plaintiffs to him) will save them and post them on their bulletin boards. Can you write a newsletter that good to promote your practice? I believe you can!

As to event marketing, Mr. Fisher says events should be educational, informational and fun and they should give away secrets! He has seminars for lawyers (his referral partners) to explain his systems, how he treats his clients, etc. He says to promote the heck out of these events to your ideal clients. Mail invitations. Follow with postcards, emails and handwritten notes. He recommends using testimonials from others who have attended successful events. Keep building momentum. Obtain sponsors and vendors to assist. Make sure the events are fun! And then follow them with handwritten notes.

Our office is in the business of consulting with real estate lawyers on marketing and other issues. We can help!  And here’s a further warning about more of these topics in future blogs.

Happy marketing!

Into the mystic: Fannie and Freddie predict what is in store for housing in 2017.

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In a sign that the average cost of houses is increasing across the country, the conforming loan limit for loans to be purchased by Fannie Mae and Freddie Mac will increase in 2017 for the first time in ten years.

The Federal Housing Finance Agency has announced the maximum conforming loan in most parts of the country (including South Carolina) will increase from $417,000 to $424,100. Stated another way, a borrower will not have to qualify for a “jumbo loan” unless the amount to be borrowed exceeds $424,100.

This change should help qualified buyers, particularly in our coastal areas where home prices are higher, obtain mortgages backed by Fannie Mae and Freddie Mac, even though credit remains tight and interest rates are likely to increase.

This is the time of the year when all of us involved in the housing industry are charged with looking into the proverbial crystal ball and projecting how we think the real estate market for the new year will compare with the current year.  For what it’s worth (and this and $5 will buy you a cup of coffee at Starbucks), I’m projecting around a 3 percent increase for next year in South Carolina. Let me know what your crystal ball is disclosing!

Court of Appeals Revises Opinion, but not Result, in Arbitration Case

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It seems the arbitration cases are all over the place in 2016. We’ve discussed three cases so far this year*, and the opinion in one of these cases has been withdrawn, substituted and refiled**, but the result did not change.

The South Carolina Court of Appeals decided to make a few changes in its opinion in One Belle Hall. The earlier opinion, filed June 1, held that an arbitration clause in a roofing supplier’s warranty provision was not unconscionable. The trial court had ruled that the supplier’s sale of shingles was based on a contract of adhesion and that the injured property owners lacked any meaningful choice in negotiating the warranty and arbitration terms, which were contained in the packaging for the shingles.

The Court of Appeals indicated that the underlying sale was a typical modern transaction for goods in which the buyer never has direct contact with the manufacturer to negotiate terms. The Court found it significant that the packaging contained the notation: “Important: Read Carefully before Opening” providing that if the purchaser is not satisfied with the terms of the warranty, then all unopened boxes should be returned. The Court pointed to the standard warranty in the marketplace that gives buyers the choice of keeping the goods or rejecting them by returning them for a refund, and blessed the arbitration provision.

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In the later opinion, filed September 28, the Court of Appeals addressed the South Carolina Supreme Court’s July 6, 2016 opinion in Smith v. D.R. Horton (cited in the footnote, below). In D.R. Horton, which this blog discussed on July, 14 the Supreme Court held that a national residential company’s contract contained a number of “oppressive and one-sided provisions”, including an attempted waiver of the implied warranty of habitability and a prohibition of awarding money damages of any kind. The Supreme Court held that the home purchasers lacked a meaningful ability to negotiate their contract, the only remedy through which appeared to be repair and replacement.

The difference in the two cases appears to be the location of the offending provisions. The United States Supreme Court has ruled that an arbitration agreement is separable from the contract in which it is embedded, and the issue of its validity is distinct from the substantive validity of the contract as a whole.*** The arbitration provision in D.R. Horton was construed in its entirety because various subparagraphs addressed warranty information and contained cross-references to each other. In addition, the contract did not contain a severability clause.

In the second opinion in One Belle Hall, the Court of Appeals admitted, as the supplier had conceded, that the agreement at issue was a contract of adhesion, but noted that our Supreme Court has stated that adhesion contracts are not per se unconscionable. The Court recognized that the roofing supplier’s contract continuously used language to the effect that any attempted disclaimer or limitation did not apply to purchasers in jurisdictions that disallowed them. The Court also found it significant that the agreement contained a severability clause.

In other words, since the objectionable provisions of the contract were outside the arbitration provision, and the arbitration provision is severable from the objectionable provisions, the arbitration clause is enforceable. The Court repeated its earlier point that the arbitration provision facilitates an unbiased decision by a neutral decision maker in the event of a dispute.

I believe we will see more of these cases, and I caution lawyers to be extremely careful in their drafting endeavors.

 

*  One Belle Hall Property Association v. Trammel Crow Residential Company, S.C. Ct. App. Opinion 5407 (June 1, 2016); Smith v. D.R. Horton, Inc., S.C. Supreme Court Opinion 27642 (July 6, 2016); and Parsons v. John Wieland Homes, S.C. Supreme Court Opinion 27655 (August 17, 2016).

**  One Belle Hall Property Association v. Trammel Crow Residential Company, S.C. Ct. App. Opinion 5407 (September 28, 2016)

***  Prima Paint Corporation v. Flood Conklin Mfg. Co., 388 U.S. 395 (1967)

Another South Carolina Arbitration Case

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Following these cases is like watching a tennis match!

This is the third blog on this topic this summer! The June 7 blog surrounded a South Carolina Court of Appeals case* that held an arbitration clause in a roofing supplier’s warranty provision was not unconscionable. The lower court had ruled that the supplier’s sale of shingles was based on a contract of adhesion and that the injured property owners lacked any meaningful choice in negotiating the warranty and arbitration terms, which were actually contained in the packaging for the shingles.

The Court of Appeals indicated that the underlying sale was a typical modern transaction for goods in which the buyer never has direct contact with the manufacturer to negotiate terms. The Court found it significant that the packaging for the shingles contained a notation:  “Important: Read Carefully Before Opening” providing that if the purchaser is not satisfied with the terms of the warranty, then all unopened boxes should be returned. The Court pointed to the standard warranty in the marketplace that gives buyers the choice of keeping the goods or rejecting them by returning them for a refund, and blessed the arbitration provision.

SCORE:  15- Love in favor of arbitration

tennis ball court

Let’s Talk Dirt on July 14 addressed a South Carolina Supreme Court case that appeared to take the opposite approach. ** A national residential construction company’s contract contained a number of “oppressive and one-sided provisions”, including an attempted waiver of the implied warranty of habitability and a prohibition on awarding money damages of any kind. The Supreme Court held that the home purchasers lacked a meaningful ability to negotiate their contract, the only remedy through which appeared to be repair or replacement.

SCORE:  15-all.

Note that Justices Kittredge and Pleicones dissented, stating that the contract involves interstate commerce and, as a result, is subject to the Federal Arbitration Act (FAA), “a fact conspicuously absent in the majority opinion”. The dissent stated that federal law requires that unless the claim of unconscionability goes to the arbitration clause itself, the issue of enforceability must be resolved by the arbitrator, not by the courts. The majority construed the Warranties and Dispute Resolution provisions of the contract as comprising the arbitration agreement and thus circumvented controlling federal law, according to the dissent.

Since the property owners raised no challenges to the arbitration clause itself, the dissent would have required that the other challenges be resolved through arbitration.

In a case dated August 17***, the majority decision is written by Chief Justice Pleicones with Justice Kittredge concurring. (Do you see a pattern here?) This case involved a residential subdivision that had been built on property previously used as an industrial site. The developer had demolished and removed all visible evidence of the industrial site and removed underground pipes, valves and tanks.

The plaintiffs bought a “spec” home in the subdivision and later discovered on their property PVC pipes and a metal lined concrete box containing “black sludge”, which tested positive as a hazardous substance. The present lawsuit was brought, alleging the developer failed to disclose the property defects. The developer moved to compel arbitration.

Paragraph 21 of the purchase agreement stated that the purchaser had received and read a copy of the warranty and consented to its terms. The purchasers had been provided with a “Homeowner Handbook” containing the warranty.

The circuit court, which was affirmed by the Court of Appeals, found the arbitration clause was enforceable for two reasons:

  1. it was located within the warranty booklet, making its scope limited to claims under the warranty. The Supreme Court held that the plain and unambiguous language of the arbitration clause provides that all claims, including ones based in warranty, are subject to arbitration.
  2. The alleged outrageous tortious conduct of the developer in failing to disclose concealed contamination made the outrageous torts exception to arbitration enforcement applicable. The Supreme Court overruled all South Carolina cases that applied to outrageous torts exception, making that exception no longer viable in South Carolina.

The Supreme Court discussed the heavy presumption in favor of arbitration by the FAA and in the federal courts and the push to place arbitration agreements on equal footing with other contracts and enforce them in accordance with their terms.

SCORE:  30-15 in favor of arbitration

You won’t be surprised to learn that there was a dissent, this time by Acting Justice Toal, and a concurrence, by Justices Hearn and Beatty.

And remember that the CFPB recently announced a proposed rule that would ban financial companies from using mandatory pre-dispute arbitration clauses to deny consumers the right to join class action lawsuits.

SCORE:  30-all

All of these authorities affect matters involving dirt law. So the tennis match involving arbitration clauses in our area is still being played, and we will continue to watch!

*One Belle Hall Property Owners Association v. Trammell Crow Residential Company, S.C. Ct. App. Opinion 5407 (June 1, 2016)
** Smith v. D.R. Horton, Inc., S.C. Supreme Court Opinion 27643 (July 6, 2016)
*** Parsons v. John Wieland Homes, S.C. Supreme Court Opinion 27655 (August 17, 2016

The SC Bar Warned Us!

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And then it happened to me.

phishing dangerJune 9th’s E-Blast from the SC Bar contained the following warning:

Alert: Phishing emails targeting lawyers
SC Bar members are cautioned to be aware of emails indicating that a complaint has been made against the lawyer or firm, or that they contain a special message from the Bar president. Such emails are not coming from the Bar and would be an attempt to phish members. Delete them immediately. Phishing emails are fraudulent emails that may contain links to phony websites or may request that you share personal or financial information by using a variety of techniques.

There may be clues, including a suspicious “from” email address. The email may include directions to click on a link, which purports to be a copy of the complaint or of the “special message.” Do not click this link, as it could be an attempt to put “ransomware” on the affected computer. Bar members are reminded that any official grievance would come via U.S. mail from the Supreme Court and that any important Bar announcement would appear in E-Blast or would be sent by an individual Bar staff member.

And on June 20, I received the following e-mail:Microsoft Outlook - Memo Style

A “complaint” is enough to strike fear in the heart of any lawyer. The scammers rely on a stress-induced knee-jerk reaction result in clicking on the link. Clicking on the link is the first reflex in our fast-paced world. Fortunately, we have received warning after warning about this kind of phishing activity.

The most obvious clues in this particular scam were:

  1. The e-mail was from “complaint Dept” and the address was complaint.depts@outlook.com. Nothing there reflects the SC Bar.
  2. The name of our bar association is the South Carolina Bar. The South Carolina Bar Association is a common misnomer.
  3. I don’t have a “law practice”. I work for Chicago Title Insurance Company.
  4. The South Carolina Supreme Court handles disciplinary complaints, not the SC Bar. And the Office of Disciplinary Counsel uses snail mail.

A huge thanks to the SC Bar for the warning!  Be careful out there!

SC Supreme Court Warns Closing Attorneys

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Don’t be used as a “rubber stamp” or “rent” your name and status as an attorney!

businessman nametag for rentIn a disciplinary case filed on April 20,* the South Carolina Supreme Court publicly reprimanded an attorney for failing to properly supervise the disbursement aspect of a residential refinance closing. In a three-two decision, the Court pointedly seized the opportunity to warn residential closing lawyers.

The disciplined attorney worked as an independent contractor for Carolina Attorney Network, a management service located in Lexington, that provides its services to, among other entities, Vantage Point Title, Inc.  Vantage Point Title was described as a non-lawyer owned title company based in Florida. The attorney testified that 99.9% of his business comes from Carolina Attorney Network and that he had no direct contact with Vantage Point Title.

The attorney had previously been suspended for thirty days by the Court for failing to properly maintain his trust account. He stated in oral arguments in the current case that the suspension caused him to lose his ability to perform closings in the normal manner because he lost his status as an agent for a title insurance company. As a result, he said he was forced to handle closings through the management service.

The attorney testified that he didn’t recall the closing at issue, but he described the process. He said he receives closing documents via e-mail and reviews the title opinions. He verifies that a South Carolina licensed attorney completed the title opinions. He also reviews the closing instructions and the closing statements. He does not review the title commitments nor verify the loan payoff amounts. He conducts the closings and returns the closing packages with authorizations to disburse. Vantage Point disburses the funds, records the documents and issues the title insurance policies. Vantage Point then sends the lawyer disbursement logs showing how closing funds are disbursed. The lawyer reviews the disbursement logs to ensure they have a zero balance. He or an employee of Carolina Attorney Network reviews the online records of the ROD to verify that the mortgages are properly recorded.

The loan at issue had been “net funded” and the disbursement log did not “zero out”. The log showed a credit of approximately $100,000, and a disbursement of approximately $800. The Court stated that the disbursement log was inaccurate, and that the lawyer did not even know at the time of closing that the loan had been net funded.

The HUD-1 Settlement Statement in the closing at issue showed Vantage Point received approximately $800 for “title services and lender’s title insurance”, but attorney’s fees were not reflected. In fact, Vantage Point paid Carolina Attorney Network $250, and Carolina Attorney Network paid the attorney $150.

Vantage Point maintains a national trust account for all fifty states, but at some point, it opened “for unknown reasons”, according to the Court, a SC IOLTA account. Two checks were written on the IOLTA account for the closing at issue. When those two checks were returned for insufficient funds, the investigation by the Office of Disciplinary Counsel was triggered. Ultimately, all checks cleared, and no one sustained harm.

Doe v. Richardson is the controlling case. In this 2006 seminal case, the S.C. Supreme Court held that disbursement of funds in a residential refinance is an integral step in the closing and constitutes the practice of law. Richardson further held that although the attorney must supervise disbursements in residential closings, the funds do not have to pass through the supervising attorney’s trust account.

The Court stated the current case presents a situation where the lawyer conducted his duty to supervise disbursement in name only. He “rented” his name and status as an attorney to attempt to satisfy the attorney supervision requirement. There is no question, according to the Court, that the lawyer’s cursory review of the disbursement log did not satisfy the duty to supervise disbursement. The Court stated in furtherance of its concern that attorneys are being used as “rubber stamps” to satisfy the attorney supervision requirement in low cost real estate closings, and it took the opportunity in this case to expand upon Richardson.

The Court clarified that an attorney’s duty to oversee the disbursement of loan proceeds in residential closings is nondelegable. To fulfil this duty, the attorney must ensure: (a) that he or she has control over the disbursement of loan proceeds; or (b) at a minimum, that he or she receives detailed verification that the disbursement was correct.

The Court stated that, in practice, an attorney may find that utilizing his or her trust account and personally disbursing funds provides the most effective means to fulfil this duty. The Court stood by the Richardson holding, however, that residential closing funds are not required to pass through the supervising attorney’s trust account. It held that the attorney’s verification of proper disbursement, via sufficient documentation or information received from the appropriate banking institution, in addition to the disbursement log, is acceptable to fulfil this duty.

In essence, according to the Court, the lawyer was used as a “rubber stamp” for a non-lawyer, out-of-state organization with no office in South Carolina, whose involvement was not disclosed to the clients. The Court stated that it has insisted on lawyer-directed real estate closings in order to protect the public. The lawyer’s method of handling his client’s business was stated to provide no real protection and was held to be a “gross abandonment” of his supervisory authority.

Former Chief Justice Toal wrote the opinion for the Court. Justices Kittredge and Moore concurred. Current Chief Justice Pleicones dissented in a separate opinion in which Justice Hearn concurred.

The dissent characterized the case as a situation that through an error by a title company, the ODC became aware of a single closing where the attorney failed to explain the nature of a “net funding” transaction to clients who suffered no harm. Nothing in this single instance justifies a public reprimand, according to the dissent, nor justifies a modification of Richardson, adopting a non-delegable duty to oversee loan disbursements through “detailed verification” or through the receipt of “sufficient documentation or information” in addition to the disbursement log.

The dissent said that the majority neither explains what this means nor how more oversight could have prevented the title company from issuing checks drawn on the wrong account. In a footnote, the dissent accused the majority of imposing a “new, vague requirement on residential real estate closings”.

The real question becomes….what in the world will the next case on this topic hold?

*In the Matter of Breckenridge, S.C. Supreme Court Opinion No. 27625, April 20, 2016.

Dirt Lawyers: Beware of Marketing Services Agreements

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beware pumpkinsThe Consumer Financial Protection Bureau (CFPB) is scrutinizing Marketing Services Agreements (MSAs) in a way that appears to be contrary to decades of HUD guidance. In addition to a significant number of enforcement actions involving MSAs, the agency issued Compliance Bulletin 2015-05 on October 8 which casts doubt about whether the CFPB would ever approve an MSA.

CFPB Richard Cordray was quoted:  “We are deeply concerned about how marketing services agreements are undermining important consumer protections against kickbacks. Companies do not seem to be recognizing the extent of the risks posed by implementing and monitoring these agreements within the bounds of the law.”

The bulletin began with a seminar message: “The Bureau has received numerous inquiries and whistleblower tips from industry participants describing the harm that can stem from the use of MSAs, but has not received similar input suggesting the use of those agreements benefit either consumers or industry.”

The Bureau’s position appears to be that MSAs serve no useful purpose.

Let’s look at the background. First, the prohibition against kickbacks: Section 8(a) of RESPA prohibits giving or accepting “any fee, kickback or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a party of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” Second, the carve out that MSA participants have relied upon: Section 8(c)(2) provides “(n)othing in this section shall be construed as prohibiting the payment of bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed.”

Based on years of HUD guidance and legal advice from industry authorities, many lenders, real estate agencies, law firms, title agencies and other providers have routinely entered into agreements to pay each other marketing fees. The entities often share office space as well as sophisticated marketing efforts.

The advice of HUD and the experts was, generally:

  • don’t tie the relationship or compensation to sales, referrals or productivity;
  • limit the services to marketing;
  • avoid exclusivity provisions;
  • value marketing services objectively. This requirement was often the sticking point because shared marketing campaigns are difficult to value. Some experts suggested hiring auditing or actuarial companies; and
  • track the services in the event proof is needed.

The bulletin suggested that the kickbacks and referral fees associated with MSAs may result in consumers paying higher prices for mortgages, and that the practice of steering business may indirectly undermine consumers’ ability to shop for mortgages.

Running afoul of the CFPB in this area has resulted in injunctive relief including bans on entering MSAs, bans on working in the mortgage industry for up to five years, and penalties totaling more than $75 million.

Wells Fargo, Bank of America and Prospect Mortgage have announced decisions to discontinue MSAs. The Mortgage Bankers Association, which had asked the CFPB for guidance on this topic, has now warned its members to take the bulletin very seriously because it appears to be a series of warnings rather than the requested guidance.

Because of the possibility of enormous potential liability, I urge South Carolina real estate lawyers to completely avoid MSAs in the current regulatory environment, at least until more guidance is provided either by the CFPB or court action.

Still Need to Reach Out to Your Realtor® Partners About TRID?

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toolboxSome new tools are available!

Residential dirt lawyers may still need to reach out to their real estate agent partners to discuss how the CFPB rules will affect closings after October 3. Some new resources are available to assist in that effort.

I previously blogged about five things real estate agents should know before the new rules become effective. Now there is more useful information in a format that is easy to share.

On September 17, Richard Cordray, Director of the CFPB, met with an officer of the National Association of Realtors® (NAR) to unveil online tools designated to help consumers and real estate professionals navigate the new closing procedures.

The CFPB had previously developed an array of online tools for prospective home buyers, the most important of which is an interactive resource called, “Your home loan tool kit, a step-by-step guide”. This guide allows consumers to perform calculations and obtain information to assist them in understanding their financial prospects for obtaining financing and avoiding pitfalls associated with the process.

The CFPB encourages real estate professionals to consider linking the toolkit on their websites to position themselves as trusted sources of information for consumers.  I encourage residential dirt lawyers to do the same to position themselves for their consumer clients.

Last week’s announcement included a new resource called “Guide for real estate professionals”, the goal of which is to “ensure smooth and on-time closings”.  I encourage real estate lawyers to use this new guide to connect with their real estate agent partners.  Link it on your website. Send the link to you best real estate agent contacts.  Offer to meet with them to answer questions. Your goal is to be perceived as a thought leader and problem solver when questions begin to surface after October 3rd.

we are here to helpSouth Carolina residential real estate lawyers should also keep in mind that their title insurance companies have prepared to assist in the transition. Don’t hesitate to use your title insurance company friends as valued resources. They are ready! Their goal, like yours, is to give their very best customer service as we all navigate these new closing rules together.

Same Sex Marriage Law May Require Tweaks in Title Search Practices

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Males as well as females may change their names.

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On January 1, this blog discussed a South Carolina Department of Revenue Ruling (14-9) that impacts some areas of the real estate practitioner’s world. This Revenue Ruling was issued following the United State Supreme Court 2014 decision, Obergefell v. Hodges, which made same-sex marriage legal in all fifty states.

The most significant changes to our practices from the Revenue Ruling include:

  1. A same-sex legally married couple may be able to qualify their home for the 4% assessment ratio.
  2. If each member of a same-sex legally married couple owns a residence, only one of those residences may qualify for the 4% assessment ratio since as a married couple they may have only one legal residence.
  3. Transfers of property between spouses of a same-sex couple may now be exempted from the assessable transfer of interest rules.
  4. Transfers of real property from one same-sex spouse to the other will now be exempted from the deed recording fee.

Now that dirt lawyers have had a chance to think about how same-sex marriage may otherwise impact our practices, some of us have come to the conclusion that title examiners should now take into consideration name changes for men as well as women. This change in practice may affect every title examination for individuals holding title since 2014.

hello my name isWe have always cautioned that a woman who holds title with two surnames, should be searched under both names. For example, Hillary Rodham Clinton should be searched as Hillary Rodham and Hillary Clinton.

Now consider the name Neil Patrick Harris. Not knowing whether Patrick is a middle name bestowed by parents at birth or a former surname, consider whether he should be checked by both Neil Patrick and Neil Harris.

Undoubtedly, this extra step will lead to many “false positives” with judgments, tax liens and other public record items. As always, the hits that are uncovered should be addressed by paying them at closing or eliminating them with the use of identifying information such as full names, addresses social security numbers, etc. And, when in doubt, get your title insurance underwriter to take the appropriate leap of faith with you.

Remember that buyers should be checked for judgments and tax liens because those matters will attach immediately when property is purchased. And also remember that purchase money mortgages will take priority over tax liens and judgments against buyers.

Unfortunately, it appears that searching titles isn’t getting any easier over time, despite the use of new and improved technology.  It’s public knowledge and common sense that Caitlyn Jenner should be searched as Bruce Jenner. But I have no advice about similar name changes in title examinations. It’s a brave new abstracting world!

Dirt Lawyers Will Like This Mortgage Satisfaction Case

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S.C. Supreme Court holds equity lines are subject to the timely satisfaction statute.

In an opinion written by Justice Beatty, our Supreme Court held on August 5 that open-ended mortgages are satisfied in the same manner as conventional mortgages and under the same statutory requirement for timely satisfaction by lenders.

Regions Bank v. Strawn involved a mortgage foreclosure against Robert and Nancy Borchers. The Borchers counterclaimed seeking to recover from Regions Bank under §§29-3-310 and 29-3-320 of the South Carolina Code based on the bank’s failure to satisfy the mortgage within the three-month time period required.

mortgage jengaThe home had been purchased from Cammie Strawn, who had taken title from her then-husband, Richard Strawn. Mr. Strawn had previously obtained the home equity line of credit. At the time of the Borchers’ closing, the balance of the mortgage was $32,240.42. Immediately after the closing, the Borchers’ attorney, James Belk, had an employee deliver a payoff check and a mortgage satisfaction transmittal letter to Regions Bank. The check had the words “Payoff of first mortgage” typed on it.

Instead of satisfying the mortgage, the bank applied the check to the balance, bringing it to zero, and provided Richard Strawn with new checks even though he had not owned the home for more than two years. Mr. Strawn spent more than $72,000 on the equity line.

When Regions Bank attempted to collect on Mr. Strawn’s debt by foreclosing on the Borchers’ home, the Borchers answered, counterclaimed and moved for summary judgment. The bank argued that a revolving line of credit should be handled differently than conventional mortgages, and this particular mortgage could not be satisfied without instructions from Mr. Strawn.

The trial court and Court of Appeals ruled in favor of the Borchers. On appeal to the Supreme Court, Regions Bank made two basic arguments: (1) open ended mortgages are an exception to the statutory satisfaction requirement because only the original borrower is authorized to request a satisfaction; and (2) the Borchers could not assert a violation of the mortgage satisfaction statutes because their attorney had the authority to satisfy the mortgage pursuant to the attorney satisfaction statute (§29-3-330).

The Court affirmed and held that the first argument failed because the mortgage itself contemplated that the property may be sold and specifically stated that it would be binding on the mortgagor’s successors and assigns. Also, the court stated that anyone with an interest in mortgaged property is allowed to request a satisfaction upon payment, and there is no exception for equity lines of credit.

Sale of a house. Object over whiteAs to the argument that the Borchers’ attorney could have satisfied the mortgage, the Court stated simply that this argument is without merit because the statutory framework does not exempt a mortgage holder of an equity line from the penalty provisions for failing to satisfy a mortgage within the required time frame.

This is a good opinion for South Carolina closing lawyers!