Lenders Title Policy requirement in Mods

[gray517]

Having been a title examiner for over 15 years, let me clear this up for you guys.

A title policy is issued to insure there are no title defects, liens or other outstanding issues on you property. There are 2 different policies issued. The Owners Policy which is issued at time of purchase, insures the only the Owner of the property as long as he owns it. The Lenders Policy insures the only the lender who holds the mortgage is in first lien position and is issued at time of the loan, if you refinance the new lender will get a new Lenders policy insuring their Lien, even if it is the same lender. Once the mortgage is paid then Lenders policy is no longer valid.

The clause to provide lenders title policy is standard in a lot of Modifications and there is nothing required of the borrower, the lender will get a an update on the title to check for any liens and modification to the existing loan policy if they want one.

[gray517]

Also let me try to help with another issue I see alot on this site


Most modifcations offered, regardless of who the lender is or type of modification you receive will put/add the interest portion of the past due payments you owe, as well as fees owed for inspection and escrow shortages into the loan balance and recapitalize the loan balance, causing the payment to go up. This is the standard way of doing a loan modification for all lenders.

For example, if you have a $200,000 loan balance, and you are 8 payments behind, and for examples sake let say the interest portion of those payments is $850 a month, they will take $850 x 8 payments = $6800 and add it to your loan and if your escrow account is short say $2000 they will add that as well.

$200,000
+ $6,800
+ $2,000
___________
= $208,800

Your new loan balance is now $208,800 and they will then calculate your payment based this new loan balance using the existing term (unless extended in the modification) left on the loan with your existing interest rate or new rate if you get one to get the actual principal and interest payment due.

[davephx]

The problem for some is there is a provision if the add on is $20,000 or more they have to get subordination to other liens which may be impossible. An IRS lien could also be an issue.

If the addons go beyond the original mortgage amount my understanding is it will be in a new later recorded and lower priority 2nd position (or 3rd?) which is why the guidelines require subordination of other liens like the 2nd. But why would any 2nds or other liens be willing to.

If the 1st my itself is underwater foreclosue still gets same. But if it every recovered in value the subordination could be important for the add on which would otherwise be a new lower 2nd ...or 3rd....

Very confusing and don't know what servicers are doing in these situations.