Title Agents and the HELOC Opportunity
by Shamit Vohra
With originations and refinance volumes diminishing, HELOC loans offer good opportunity for lenders to grow their business. While lenders target a set of borrowers for HELOC, this also means a great business opportunity for title agents, who are required to do the necessary due diligence before HELOC is issued.
HELOCs function like a credit card for the borrowers; it allows the withdrawal of the funds whenever required up to the sanctioned limit. As the amount sanctioned is based on the credit line that treats a home as a collateral, it becomes essential for the lender to be sure about the details of the property.
A title agent or a title company plays multiple roles in ensuring that the property title is clean with all recorded owners and the property doesn’t have any related violations.
The lien search is one of the most important areas that a title agent focuses on. There are multiple scenarios where one of the previous owners of the property didn’t pay bills or didn’t maintain the books. If the lender / bank doesn’t see the papers of any payment, they can very well place liens on your property for unpaid bills although you are not directly responsible for the non-payment.
Other than lien searches there are several places where title agents add significant value. Right from gathering documents, verification with the county office, ensuring legitimacy of the line of credit to verification of any loophole in the title chain.
Four key areas where Title agents contribute the most are:
Ensuring that HELOC is legit
The lenders may have identified a set of properties, for which they can target the borrowers for HELOC loans. The assignment and lien search done by title agents provides some very good inputs to decide if the incremental home equity is truly accumulated in the loan or has been withered away due to liens and judgements. Once lenders get a confirmation from title agents, they are in a good position to take the targeting to a new level and approach the borrower for the HELOC loans.
Verifying the Titles and other Legalities
For a lien research banks and lenders rely on the Title agents so that they can reveal any hidden issues that a property might have, highlight any code enforcement, building violations, permits and more. The lender needs assurance that the application for loan has been made by the property’s legal owner and if the title is clear of any issues or legal problems. Although the property would have got the clearance for its title, the lender needs to verify that nothing has changed since then.
Closing and Settlement Statement
The closing agent who works with a title agent or a title company ensures all documents are gathered for the closing meeting that are required for the HELOC. The title agent prepares a settlement statement that is signed by the borrower and covers the amount to be disbursed as well as bills that need to be paid from the loan proceeds. He later needs to submit this document to the recorder’s office.
Insuring Coverage in Legal Disputes
HELOCs allow title agents to offer insurance to both lenders and borrower so that they are well covered in case of a legal dispute with regards to the ownership of the property. Although title agents perform title searches beforehand, there still could be unknown factors that can lead to a legal glitch.
With such a critical function of the Title agents and a rising number of HELOCs, it is important for the Title companies to pursue this opportunity. As a Title company, to prepare yourself for the HELOC challenge you can Contact us.