Title insurance is a one-time charge paid at the time of closing. It covers your right and legal ownership to your house or land that you have purchased against liens. Josie Anderson, VP of Marketing at Valero Title – the only title company in Texas that offers zero escrow on all products – discusses the importance of having title insurance from a lender’s perspective. She also walks us through the company and what the title insurance cover, as well as touches on T19, title commitments, and more.
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Title Insurance Explained with Josie Anderson
Why Title Insurance Is So Important
You’ll hear my guest, Josie Anderson, talk about putting a class together which we did. I want to thank her for coming on the show and helping to put the class together. What’s the class about? It’s all about title insurance. I was going to say I finally found somebody but truthfully, I finally made it a priority to bring somebody on the show to speak about title insurance from a lender’s perspective. A lot of people think as long as they get a title commitment, it’s fine. I can get a title. There are exceptions. There are things title policies don’t cover. This is going to be an intro into that. I like it because it’s somebody else who is talking about it. Hopefully, I ask the right questions for everyone in the audience. Let’s go ahead and get to the interview with Josie Anderson from Valero Title.
Lender Nation, I am proud to have Josie Anderson on the show. Josie is with Valero Title. I have been chomping at the bit to have somebody from a title company come on and talk about title insurance in the process. Josie, welcome and thank you for coming on the show.
Thanks for having me.
I know you’re not an escrow officer yourself. You’re the VP of marketing. By proxy, you have a PhD in the title process. Walk us through your company Valero Title.
Valero Title is all over Texas. We have an office in Houston, Dallas, Austin, and San Antonio. We’re the only title company in Texas that offers a zero escrow on all products. Whether it be both sides of your contracts, cash out, rate and term revise, whatever it may be, no junk fees. We don’t have courier fees. A lot of title companies have the eFile fee as much as $450 to $500. I was telling people, “That’s an email.” They’re charging as much as $500. The other thing we offer is complimentary mobile notary on anything over $50,000.
You’re investor–friendly. No escrow fees, no junk fees, and the complimentary mobile notary is a lifesaver. As a lender, we usually don’t get involved in the closing. As an investor, when someone shows up to the office and all I have to do is sign a few docs, it removes the friction out of my day. That is a great service. You’re already established. You’re in Texas. Are you in any other states or just Texas?
We do have a sister company in Fort Lauderdale, Florida. That’s a whole other territory. They cover anything outside of Texas.
Any reason you’re Texas-specific than everything else?
Texas is amazing. Our owner is born and raised in Texas. He’s a UT guy. He opened the first office in Florida and knew he wanted to get back to Texas. We’ve been in business in Texas for several years.
Title insurance is something I demand on any of my loans. A good relationship with the title company is you’ve got to have one on your team. It doesn’t matter for me as a lender what title company closes the transaction as long as they are licensed with the Texas Department of Insurance. Their policies are like everybody else’s. As long as everything is above board, I don’t have a problem. I do have preferences with using certain title companies. You can call somebody, “I’ve never heard of this. This is an oddball thing.” How would your underwriter treat that if, “Let’s wrap a mortgage five times?” Would your underwriter do that? It’s an example of why you need a title company on your team. Let’s start with the top. What does the title insurance cover? How does it protect both the borrower and the lender?
I always tell people when you’re getting a loan, especially if you’re getting a loan from a bank. The bank is not going to give you a loan without title insurance. They want to be as protected as the borrower. I always explain in my first time home buying classes like, “Title insurance does not cover you for theft, fire, flood or any of that. It’s a onetime charge. They pay at the time of closing. As long as you own that property, you are covered.” What title insurance covers is your right and legal ownership to your house or land that you have purchased. If anything comes up in the future that you may need a legal backup because it’s something that we missed, whether it is a lien, whether it is a judgment, it’s something our examiners missed. That’s what we’re there for. We’re there to cover that.
If the long-lost cousin or brother accidentally shows up and we thought he got killed at sea and is like, “Here I am. You sold grandma’s house and left me out.” That’s when the title policy kicks in.
That’s something I explain all the time. You don’t want someone to come knocking at your door and say, “This is my grandmother’s house. No one told me this house is being sold and I’m an heir to this property.” That’s exactly what title insurance is for.
Flood, windstorm, fire titles are not going to cover your air conditioner when it goes out. What are some of the things that are typically not covered? I’ve seen it in the past where an investor sold a house. It was a wholesale deal. He came in. He got it and put a little bit of work into it, sold it. Everyone assumed where the property lines were. Come to find out half of the garage was in somebody else’s yard. It got messy. Is that something title would help out with?
Some endorsements can cover that. I’ll give you an example. This is something we had where they decided to build a swimming pool and no one looked at the survey. They built over an easement smack in the middle. It wasn’t a couple of inches or a foot. As a title company, most likely we will not insure that even if you have extra coverage or whatever it may be. Our underwriters will probably turn their nose up at that and say, “No, thank you.”
Having a survey performed before closing is worthwhile. I always go back a few years. If nothing has materially changed on the property, maybe a deck or something fine. If someone has owned the house 30 to 40 years then it’s worth checking those boundaries.
As a title company, as long as it is legible and it is stamped, normally our escrow officers and underwriters will accept it as long as there is a T-19 in place. They will normally accept it even if it is ten years old, twelve years old. As long as it is legible and there is a stamp and it can be read and nothing has changed. We’re normally okay with that. I always say it’s a case by case basis.
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That’s what I’ve found out when it comes to the title. What’s a T-19?
There’s a T-19 and then there’s a T-19.1. The T-19 is actual coverage for the lender. It protects you against violations of restrictions. The owner can also get a T-19.1 on their portion of the title. It protects them as well.
Two policies are issued at closing. There’s one for me, the lender, because I want to protect my money. It’s usually for only the loan amount. If I’m loaning say $100,000 on a property on rehab total, that is purchase and rehab repair costs, my policy will be for $100,000 because that’s what my loan amount is for. The investor or the buyer will usually go for the ARV or the after repaired value would be. This title policy would reimburse them for that full amount or protect them up to that full amount.
I would throw in there so people know, as a title company we are regulated by the state, by the Texas Department of Insurance. As far as title fees go, it should be the same across the board where the difference comes in or the escrow fees, junk fees, mobile notary fees, but everything else should be straight across the board.
My day job is insurance adjusting so I know a little bit more than the average Joe. The premium is going to be standard for the premium for the policy that is. That’s going to go through Austin. They got to stamp it and say, “You’re not charging $1,000 per $10,000 for title insurance.” They’re going to make sure no one’s getting gouged. That goes across other states as well. I don’t speak for them as we we’re in Texas. The Texas Department of Insurance, that’s who issues my adjuster’s license. I have to keep happy every couple of years for my continuing education. The same people are overseeing the title premiums, what’s covered, what’s not and what products are allowed. Let’s say you wanted to get a specific endorsement for your father’s third ex-wife’s brother to come back in one of camp out on your plate, you can do it. TDI, the Texas Department of Insurance will say, “Yes, but we’re going to oversee the premiums for that.” What’s the risk? What are the odds of that happening?
We honestly do not get a lot of that. 99% of the time whenever you see endorsements, they are going to be on the commercial property or additional endorsements. You don’t see that as much on residential property. Can it be done? Yes. Can I speak about it a whole lot? No, because I’d be lying to you if I told you all the different endorsements that could be added on.
With the way the show is geared, the first couple of years are going to be all residential. Ultimately, I do plan to get into the topics of multifamily and commercial deals. If you could give us a high level of what are some of the endorsements that a commercial policy would have you wouldn’t find on a single-family, for example.
Going back to a commercial endorsement, you’d be also looking at the T-19. Why? When they buy a piece of land, they want to make sure they can build a structure on it. I asked one of our examiners and that’s what he was telling me. He is 40 years in the business. He’s been an examiner forever. He’s a book of knowledge. He’s like, “Josie, you don’t see a lot of other endorsements between the residential and commercial.” The ones you see in commercial are the T-19 because they want to make sure they can build some structural building on there once they buy this property. There are mineral rights involved and everything else. He said that’s one of the biggest ones you see as far as commercial goes.
Most of your residential property is already planted, plotted down at the county courthouse. It’s a residential.
I had a gentleman that we closed on here in the Heights. He bought in a nice townhome, subdivision, gated. We were going over the mineral rights as far as residential and him not having any and so forth. He’s like, “I could always put a piece of artwork in the front and say that it’s art. They’ll never know.” He’s like, “I’ll put a piece of art at the front and they’ll never know that it’s oil.” I was like, “Good luck with that.”
Whoever developed the Heights took those mineral rights years ago if there were any. I know a guy who buys raw land and strips the mineral rights from it and sells it back for the same price. He doesn’t care about making money. All he’s doing is leaving a legacy for his family in mineral rights. He’s buying up all the mineral rights. I’m walking into the title company out of the blue. I got my first-time home buyer credit and whatever. What’s the process? Once I start saying, “I want to buy 101 Main Street. I need to get a title commitment.” Walk us through that process. What does a title commitment give us and so on?
I always tell people as far as the title company, we’re involved from the beginning to the end. Once you have a contract in place and you have earnest money in place and that’s delivered to the title company. We then get that contract receded and make sure everyone gets copies of who’s involved, what’s involved. Let them know we’re working on the search examination of the title. Our examiners then turn around and start searching the property. They go back as long as the property has been there. They go as far back as they can. Our examiners, they’re behind a computer. They don’t want to talk to anybody. They don’t want to see anybody. They work from home, “Leave me alone. Let me do my research.” They’re looking for judgments. They’re looking for child support liens. They are looking for any IRS liens, anything you can imagine. It normally takes them anywhere from 24 to 48 hours to get that title commitment back to us. At that point, we want to make sure the address is correct, the lot and block are correct.
The most important part is looking at Schedule C where anything attached to the property will be on Schedule C. Any liens, judgments, anything will be on there that would affect you and may keep you from closing that property. If there are any IRS liens, the IRS wants their money regardless. There are no ifs, ands or buts about it. It’s the same with child support liens. People think men or women that pay child support to think, “It’s not going to affect me.” It will affect you and they want their money too. Once we get the title commitment, it goes to all the parties involved so everybody has a copy of the title commitment. If there are any liens or judgments, our escrow officers and the examiners are working behind the scenes to try to get all those cleared up. Once those are clear, then we can move forward. At that point, we’re working directly with the lender so we can go ahead and get the transaction ready for closing. They can either come to the office. They can go to their home, job, whatever it may be to get their transaction closed. Keys are exchanged and everybody’s happy. Let’s not forget the funding, the money.
That’s the important part. Nobody buys a house without unless they’re paying cash, but even then it has to be funded. It’s got to hit the escrow. One of the beautiful things about title companies is I would never give borrower money directly. I give it to a third-party title company. They get my instructions from my attorney. They confirm this guy is who he says he is. If it was to bring something to the table, whether it be money, keys, the title to a car, a boat, whatever because it’s not always cash that changes hands at a closing table, they get all that together. Once all the insurance in place, the binders are there. You have windstorm because we’re in Texas, Gulf Coast. You’ve got flood because we’re in Houston. Southeast Texas is a flood zone. It’s not in the FEMA maps yet.
Once all that’s in place and the escrow officers ticked all the boxes, the money goes from my bank to your escrow to the seller at that point. Could you send us an example of a bad Schedule C? We take out all the personal information or property information. A normal Schedule C there was a lien from the purchase of a mortgage. There was a refi. Here’s the payoff amount if it’s going to change hands. Can you show me there’s child support, IRS all that stuff?
One of our underwriters comes in and does classes for our lenders and our realtors on how to read a title commitment. She has some gnarly stuff. Things that you see are crazy. Where someone’s name was there and they were married. The way that it was vested is in somebody else’s name. It goes all over the place.
The escrow officer is your go-to person. They're going to be answering any questions from beginning to end.
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I didn’t think about, unfortunately, all the liens and everything. As a lender, I look at all the commitments to see what’s listed. If there’s still a lien or an heir or something from 1775, I’m not going to worry about that too much.
It’s the risk. How risky is it? That’s one of the things. I’ll tell you what we did at Valero Title. We created a hybrid position is what it is. We hired this examiner then who has been in the industry for 40 years. He has done everything from closings to escrow officer, you name it. He has held every position at a title company. He was trained by attorneys that did all this commercial real estate here in Houston. We created a position for him. He’s a middle man. He’s more of a talker than our examiners are. If we have a title that is super dirty and you’re like, “Josie, what is all this?” I’m like, “Let me let you talk to Manny.” Manny can explain it to you in layman’s terms. Sometimes our underwriters and our examiners, they don’t speak our language. They speak the title language. It’s always nice to have somebody there. We’re excited to have him on board and to be able to fill that gap between the examiners, our escrow officers and our clients. It’s working out well. Things he can fight for us for our examiners may not have had because they’re busy putting out these title commitments. One thing I always like to say is a title company is a third party. As a rep for a title company, I always tell people we are a third party so we don’t make the rules. You as a lender tell us what to do and we go from there. When somebody tells us, “Why?” We’re like, “We’re doing what we’re instructed to do here.” I tell people all the time.
Everybody is bound by that same document, that title policy. You’re going to follow the lender’s instructions to make sure everything happens so the money can flow, the title can change. You guys file with the county clerk to make it all nice and legal and send the docs back. If God forbid, anything ever come up, we call the title company. The cool thing about this is the state regulates it. People are like, “What if the title company goes out of business?” If all state went out of business, you’d still be okay. The state is going to regulate and make sure if you have a policy that you’re covered.
That has happened where title companies one day people show up to work and the doors are locked. That happened in Houston probably about a few years ago with the big title company that was here in Houston. My phone was ringing off the wall and saying, “Can I please transfer this over? Can you please close this for? It was supposed to close a day.” They close their doors down so it happens. You’re still good because when the state of Texas and we’re covered.
That’s something I tried to get across to people because I broadly understand insurance a little better than the average Joe. I should know more about title insurance as a lender. I know the basics. That’s why I’m happy to have you on.
We’re here to cover.
I know some states you can close either at a title company or a lawyer’s office. It’s the same thing. The lawyer is not going to research the title policy for you. As far as the closing is concerned, as a lender, I’m not going to send it straight to the borrower. I’ll send the money to a title company. I’ll send it to an attorney, an unaffiliated third party that can get in trouble if they don’t do right.
The nice thing in Texas is we do have the right to close anywhere. You don’t have to close at a title company except if it’s a cashout. When you’re doing a refinance cash out then that does have to close at a title company or the attorney’s office. Those transactions do have to.
What’s the reason for that?
I don’t know the exact reason behind it, but the law was changed probably a few years ago because we used to be able to close at the lenders. We used to go to Wells Fargo and close there. We used to be able to go to Chase and close there, even if it was a cashout. They did change the law. We can still do that going back to the title, but we have to take out certain verbiage. The commitment and most lenders do not want us to take out that verbiage. It can be done. We have to remove one of the endorsements. It will allow us to do it to say it was closed elsewhere outside of the fee attorney or a title company. The lender does not want us to remove that.
Let’s talk about this class about how to read a title commitment. How often is it put on? I know you worked with your lenders. Can private lenders come to this class?
Anybody is welcome. That’s what’s nice about it. When we do classes on how to read a title commitment, how to read a survey, which is also a good class. I am hoping to schedule one. I schedule it with one of our underwriters. If somebody says, “Josie, let’s put on a class for how to read a title commitment or how to read a survey.” From one of our underwriters she’s like, “Let’s do it. I’m ready.” She does a good job because she used to be an escrow officer as well. She can dumb it down so everyone can understand. She’ll start with the basic title commitment, a clean one. She starts to add a little bit of junk in there. She may throw you off with the address like, “Did you guys notice the address does not match this?” Things like that. If you ever want to put one on say, “Josie, how can we get the schedule?” I’ve no problems doing it. We can do it at any time.
That is such a valuable service you provide. I used to say I need 24 hours to review all my documents before closing. Now I say 48 because it’s another set of eyes. It’s my eyes as well. I understand the machinations of a title company, but let’s go through the examiner, the escrow officer, the closer, the underwriter. Can you walk us through each person?
Our escrow officer is your go-to person. That’s a person you’re communicating with at all times. Whether we’re asking for a seller’s information sheet because I always tell people to remember at the beginning, we are researching the seller. We want to see, “What’s going on?” Anything we need to know. If there is a lien, we need to check it against Social Security numbers, whatever it may be. Those are the people that are going to be looking at the numbers from the lender, putting a closing disclosure together for you. They’re going to be answering any questions from beginning to end. When escrow officer/closer because some companies call them closers and some companies call them escrow officers. I would say escrow officer/closer because it depends on what they call them at the title company. We call ours escrow officers.
The examiners, that’s our research team. You will never see them. You will never hear from them. You don’t even know they exist. They are at home behind their computers. They work day and night. These guys love to do research. These guys are trained to examine and research title. This is what they do. This is what they love to do. They’re the ones that prepare the title commitment. Their work is important for a title company because they’re the ones giving us a title commitment to see if it’s insurable. One mistake from them can be costly to us. We are blessed to have great examiners on our team. The underwriters, this is who insures us. They insure the title we’re insuring. I say lenders have underwriters. We have underwriters. Everyone involved has underwriters. If we think something looks good and then the underwriter says, “No, I don’t want to insure this.” If they don’t want to insure it, there’s nothing we can do about it.
Let’s take a look at a typical retail sale Bank of America, Wells Fargo. The mortgage company, the bank is going to have an underwriter. They’re going to underwrite the loan. Is this person creditworthy? Is this property up to our standards? That’s one sense of underwriting. In the insurance world, underwriting isn’t looking at the loan, it’s looking is this risk worth the money we’re going to get for it? What’s the probability we’re going to have a headache for the $800, $1,200 we charge for this policy? They’re the ones that ultimately make the final decision on whether or not there’s insurability.
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I’ll tell you what our escrow officers are great at Valero is they’re good as far as reaching out to our underwriters. We never say, “We don’t do this.” We never say, “This can’t be done.” We always say, “We look at them on a case-by-case basis.” The good thing about that is our escrow officers are good at reaching out to our underwriters and the attorneys over at the underwriting company and say, “Keith sent us a loan that needs a power of attorney because of this and this.” They will look at every loan as individuals. They don’t say, “No, we’re not taking power of attorney. No, we’re not going to do this. No, we’re not going to do that.” We’re lucky to have underwriters that are always willing to listen. If it makes sense, then a lot of the times they’ll insure it as long as it makes sense.
We bought our house that we’re in now. Why was it in the husband and wife’s name? The husband was here, he’s an ex-pat Brit working in the oil business. His wife was an Italian national and she was traveling in Russia or something at the time of closing. They had to produce a power of attorney. It was a limited power of attorney because he can sign my name on my behalf for this real estate transaction.
It has to be specific to the transaction.
There was a window too. If the closing didn’t happen, we had to get another power of attorney because it was a limited document. Everything went well.
One of the things to remember is people don’t realize when you’re using a power of attorney, as a title company, we have to be able to call and speak to that person to make sure they’re alive and well at the time of closing.
You have to put them by phone.
We have to be able to communicate with them.
Are internet closings the wave of the future?
We’re there. All of our escrow officers are trained to do paperless signings on the computer via FaceTime, via Zoom, whatever it may be. They will sit at the leisure of their office here at the Galleria while you’re at home and they walk you through the documents. We’re prepared for it. The only thing is we can only do it when the lender sends over the instructions for it to be a paperless closing.
I’m not opposed to electronic closings myself as long as all the protections are in place. Thank you for coming on. I know you have some other goodies about Valero Title you’d like to share with us.
Have you heard of the ZOCCAM app? The ZOCCAM app is big for realtors because they can download it on their phone. You put in your information, the seller’s agent, buyer’s agent. Take a picture of the front and the back of the check and it is in our office within five minutes. It’s like a Chase to Chase transfer.
You take a picture of a cashier’s check.
It has to be an actual personal check.
Everything is going electronic.
Our realtors in Houston love it because you can drive an hour before you even get anywhere.
I travel a lot for my day job. At [5:00] AM, it still takes me 50 minutes to get to the airport. I’m not going to admit to exceeding the speed limit. I’m going to say there’s a possibility I may be at one or two toll bridges I may have gone a little fast. This is the fact that you guys are doing the mobile notary. That alone is a huge help to have someone else with the electronics. Zero escrow fees and the junk fees because it’s $35 to do it electronically. It depends on the county.
It’s $25 or $35, but this you don’t have to pay for anything. Valero Title pays to use this app. We injure that cost. You do not have to do it. It makes it super easy. The other thing about Valero Title is we’re not your regular 9 to 5. If you want to close [5:00] AM, midnight, [1:00] AM, we will accommodate you with whatever needs to be done.
How do people get ahold of Valero Title if they want to learn more or use you guys for their transactions?
My name is Josie Anderson and my email address is JAnderson@ValeroTitle.com. Our Houston email is Houston@ValeroTitle.com. It goes to everyone in our Houston office plus our owners of Valero Title so they get to see those as well. Our owners are escrow officers as well. They’re working like we are. They’re not out playing golf, even though he’d like to be but he’s not.
In the trenches with you?
They run the Austin office.
Josie, thank you so much for coming on.
Thanks for having me.
I want to thank Josie Anderson for coming on the show. I want to thank you for reading and for sharing your time with me. If you want to find out about the next Private Lender Academy Class, please go to PrivateLenderPodcast.com/Events. Please leave a rating and review over at iTunes, Google Podcasts, Stitcher, SoundCloud or whatever platform. It would be even more helpful if you could go to iTunes and leave a review. iTunes is still the largest podcast platform, whether you like it or not, but it would help to get this podcast into the ears of more people if you could leave an honest rating and review. If you know someone who can benefit, please help spread the word. You can connect with me and share this episode on social media, Facebook, Instagram, Twitter, LinkedIn and BiggerPockets. I wish you above all else a feeling of contentment in at least a few areas of your life, if not all. I’d like to wish you a happy and prosperous private lending. I’ll catch you in the next episode.
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About Josie Anderson
Josie Anderson works for Valero Title a Texas-based Title Insurance company