The CATIC Title Courier
The CATIC Title
Courier
is published monthly by the New Jersey State Office of CATIC Title Insurance Company. The
Courier
is intended to provide interesting, relevant, and educational articles and information to our agents, attorneys, agent prospects, industry partners, and CATIC friends. You are receiving this monthly newsletter because we believe you fall into one of these categories. To add additional recipients, please send a request via e-mail to
LydiaBell@CaticTitle.com
.
A SPECIAL ANNOUNCEMENT
: Our New Jersey Team will be attending the 2019 New Jersey State Bar Association Annual Meeting and Convention at The Borgata Hotel in Atlantic City on May 15-17. Anyone attending should please come see us on the Exhibitor Floor in Booth 323. Questions about CATIC Title? What makes us different from other underwriters? Title questions or issues that have stumped others? Come chat with us. We have the answers!
We hope you enjoy the May 2019 edition of The CATIC Title
Courier
: Different news and information from a different kind of title underwriter.
See what full-time attorney and title agent support looks like!
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Foreclosure Fixes Signed Into Law
Remember the foreclosure crisis of 2010? It’s a rhetorical question. Who can forget “robo-signing” by people without knowledge of facts being attested to, and accusations of notary fraud that brought the process to a standstill? We have come a long way in New Jersey since then, but according to RealtyTrac, the state of NJ continues to rank #1 with the highest rate of foreclosures: 1 in 605 housing units in some stage of the foreclosure process in 2018. Additional fixes are on the way.
In May of 2017, NJ Supreme Court Chief Justice Stuart Rabner established the Special Committee on Residential Foreclosures. He charged the Committee with reviewing current practices, policies, court rules, and legislation, and suggesting ways to ensure a timely foreclosure process while upholding due process rights. The Committee’s
Report
, issued in August of 2018, made specific recommendations to improve outcomes for homeowners, lenders, and New Jersey communities. Governor Phil Murphy signed a package of new laws last week, implementing many of the measures recommended in the report.
“The foreclosure crisis has hurt our economy and jeopardized the economic security of too many New Jersey families,” said Governor Murphy at the bill signing. “Our communities cannot succeed while vacant or foreclosed homes sit empty or while families live in limbo. I am proud to sign these bills into law today and get New Jersey closer to ending the foreclosure crisis.”
One of the key bills was
A-664
, which creates a Foreclosure Mediation Program to ensure that homeowners receive housing counseling assistance, allowing homeowners and lenders to resolve their disputes and reduce the state’s foreclosure rate.
Other bills signed into law include:
- A-4997, The Mortgage Servicers Licensing Act, requiring mortgage servicers to be licensed by the Department of Banking and Insurance.
- A-4999, requiring that lender contact information be included in residential mortgage foreclosure complaints and the lis pendens.
- A-5001, revising the statute of limitations for residential mortgage foreclosure actions from 20 years to six years from the date on which the debtor defaulted.
- A-5002, giving community associations, in addition to condominiums, a limited priority over prior recorded mortgages and other liens for six months’ worth of unpaid customary assessments.
- S-3411, requiring the appointment of a receiver before commencing certain foreclosure actions, and limiting reinstatements of dismissed mortgage foreclosure actions.
- S-3413, making certain changes to the expedited foreclosure process for vacant or abandoned properties under the Fair Foreclosure Act.
- S-3416, clarifying that the New Jersey Residential Mortgage Lending Act applies to certain out-of-state persons involved in residential mortgage lending in NJ.
- S-3464, revising certain procedures for real estate foreclosure sales, and changing the adjournment of sale process.
These nine new laws are intended to reduce New Jersey’s foreclosure rate, expand the state’s mediation program, and speed up the process to get homes back on the market more quickly. “These efforts, along with our other efforts to work with families to keep them in their homes, will help us move forward — and hopefully very soon — move steadily down the rankings of nationwide foreclosures,” Governor Murphy said. This bipartisan package of new laws will keep New Jersey moving in the right direction.
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A “Goldilocks Economy”?
We had not seen that term before. It turns out that the economy can be just like porridge! Not too hot, not too cold, but just right. The phrase has been attributed to economist David Shulman, in describing conditions existing in the United States in the mid to late 1990’s. From what is being seen today, we are likely to be hearing that phrase more often.
A Goldilocks economy refers to economic conditions that are close to equilibrium: Steady economic growth inhibiting recession, but not so much growth that inflation results. “Goldilocks economy” conditions are characterized by low unemployment, low interest rates, and low inflation. It is an ideal state where the economy is not expanding or contracting too much. It’s just right!
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This one came in as a call from the closing table. The run down search disclosed a direct hit federal tax lien that had just been filed against the purchaser. “Can we still close?” asked the agent conducting the settlement. It was a common question. Agents are often reluctant to pass on direct hit federal tax liens without first speaking with their underwriter. Here, this last-minute disclosure was not an issue at all.
A buyer judgment or tax lien will attach to the purchased premises upon the recording of the deed. That means it is a subordinate item on the Owner’s policy – to be listed on Schedule B-II – and does not affect title or need to be addressed for title insurance purposes until either a refinance transaction or a sale. But what about the mortgage? The federal tax lien will attach in the time between the recording of the deed and the mortgage. Does the New Jersey Purchase Money Mortgage Statute assist here?
NJSA §46:9-8 says: “Whenever real estate situate in this state is or shall be sold and conveyed, and a mortgage is given by the purchaser at the same time, on the real estate sold, to secure the payment of the purchase money or any part thereof, such mortgage shall be preferred to any previous judgment which may have been obtained against such purchaser.” So if the run down search turned up a judgment against the buyer, we would be able to omit. The question is whether a federal tax lien is the same as a judgment.
The Internal Revenue Service answered the question in 1968 when it published Revenue Ruling 68-57. That Ruling relied on the concept that the value of a buyer’s interest in purchased property is limited to the amount that exceeds a purchase money mortgage.
IRS Publication 785
explains that a purchase money mortgage DOES enjoy priority over a previously filed federal tax lien.
Like a lot of the questions we hear, the agent already knew the answer. Those are our favorite kinds of questions.
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Obscure Title Issue: Artists’ Rights
Ever hear of the Visual Artists Rights Act of 1990 (“VARA”), 17 U.S.C. § 106A? For all of us in the title insurance industry, VARA should be on the list of underwriting considerations whenever an artist has used a building as a canvas. If you happen to be underwriting a transaction involving a graffiti-laden abandoned building, VARA should be a consideration in the underwriting process.
VARA states in relevant part that the “author of a work of visual art” shall have the right: “(A) to prevent any intentional distortion, mutilation, or other modification of that work which would be prejudicial to his or her honor or reputation, and any intentional distortion, mutilation, or modification of that work is a violation of that right, and (B) to prevent any destruction of a work of recognized stature, and any intentional or grossly negligent destruction of that work is a violation of that right.” 17 U.S.C. §106A (a) (3) (A) & (B), and as cited in
Phillips v. Pembroke Real Estate
,
459 F.3d 128 (1
st
Cir. 2006).
Under the law, the artwork must be of “recognized stature,” a term that lacks a precise definition. On February 12, 2018, a federal judge relied upon VARA in awarding $6.7 million to the graffiti artists who painted murals at 45-46 Davis Street, Long Island City, Queens, NY. The building, renamed “5 Pointz” in 2002, was destroyed by the New York City developer/owner of the property who tore down the building to build condominiums.
Katherine Craig, a muralist who painted on a building on East Grand Boulevard in Detroit, sued the developer under VARA to protect her work. In areas where redevelopment is hot and murals are common, VARA is a relevant wrinkle in the process. It is a twist on the standard rights of parties in possession exception that should be specifically enunciated when dealing with possible artists’ rights.
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Something to Think About:
Misusing Your Greatest Strengths.
“How Your Strengths Can Sometimes Become Weaknesses”
Strengths viewed through the lens of
Goldilocks questions:
Did you do too little?
Did you do too much?
Did you do the right amount?
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Using your strengths at the right moment and in the right situation can sometimes be tricky. And there is sometimes a fine line between our strengths and weaknesses.
The business of title insurance and title issues? They become easier to deal with if we identify and recognize strengths and weaknesses and take charge of both.
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Jack Sudol
NJ State Manager
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Lydia Bell
NJ Agency Services Advisor
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Lawrence C. Bell
NJ State Counsel
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