Two For the Road! No comments yet

My clients were a team of a very savvy realtor, Joe Velasco, and a Pensco Trust client, Peter Sanchez.  Their concept was simple enough: refinance an IRA property that had recently been purchased with all cash; then use that cash along with Mr. Sanchez’s other IRA funds to purchase a second rental home for his IRA.  One issue we had to deal with was the renovation work being done on the home that had just been purchased.  This had to be completed before we could get it appraised.  However, it had to be appraised before they could go forward with the other purchase. After some delays the appraisal was done so the refinance loan could be finished. Then the purchase was ready to be made. So far, so good – we were on schedule to close the purchase on time according to the contract.

Guess what? The fun of overcoming another adversity to be able to close on time was just beginning. The problem was with the title report that was filed on the property that had already been purchased which we needed to refinance. This property was an REO (a bank owned property).  As such, it was necessary to have the name of the state on the grant deed where the bank that owned the property originated.  In addition, the title company handling this transaction also required the signed power of attorney to be recorded, but it wasn’t.  To make this more interesting, the title company that handled this original transaction of Mr. Sanchez’s first IRA purchase was a division of the same title company (in a different city) that was handling the refinance of the same property.  So this was an internal problem that the Chicago Title Company was dealing with.  The escrow officer in the office where the title insurance was issued when the first purchase was made insisted that the grant deed didn’t need to name the state in which the lender (from whom the property was purchased) was located.  Nor, did they require the power of attorney to be recorded.  The Senior Title Officer for Chicago Title insisted the state was required to be named on the grant deed and the power of attorney had to be recorded.  In the end he was correct; however, we lost more than a week due to this mistake and internal issue at the title company.  The title officer handling this escrow said she had never seen this occur in her 20 years in the business.

The lender would not wire the funds to Mr. Sanchez’s Pensco Trust account for the refinance until this issue was settled. The title company handled their internal discrepancies and re-did the title insurance policy for the first purchase correctly so the lender could wire the funds to Mr. Sanchez’s Pensco account providing enough funds to fund the purchase of the second home. All in all, Mr. Joe Velasco, the ‘savvy’ realtor kept it all together and obtained the necessary extension from the sellers to make it work.  The purchase was concluded successfully only 2 days later than the contract date. The transactions were done within days of each other and Mr. Sanchez now owns 2 properties in his IRA.

The Word ‘The’ in the Loan Papers No comments yet

Lending Resources recently helped an IRA investor obtain non-recourse financing for the purchase of a bank owned single family residence. There were many delays in trying to close this transaction.  Some of those delays were the result of the bank dragging its feet on completing the paperwork or following through on the required approvals.  Other delays were due to the usual last minute details of obtaining insurance for example. However, when it came to signing the actual loan papers, some of the parties involved in this transaction thought that the title to the property was not written correctly.

Title to property bought with IRA funds is usually written in the name of the IRA custodian company for the benefit of (fbo) the IRA investor (their name).  In this case, the custodian’s name was titled with the word ‘The’ and then their full name.  The IRA holder didn’t sign the papers when he received them, because he was told by one of his advisors that the title was incorrect due to the word ‘The’ in the title.  In addition, he thought his IRA’s designated number was supposed to be on the title which also caused him to question the validity of the paperwork.

Lending Resources sought to answer these questions once and for all. As it turned out the word ‘The’ was in the original corporate paperwork given to the lender’s legal department when that custodian originally filed its official name with that bank.  Therefore, the bank would only use the name of the custodian on the loan papers as it was originally submitted to them. Further, to protect the IRA investor’s right to privacy, the bank never puts the IRA designated number in the title of the loan papers.

As a result of these questions regarding the way the title was written in the loan papers, there was a 2 day delay in getting these documents signed, returned to the title company and, ultimately, the bank for the loan to be funded. Nevertheless, it was a good lesson for all parties concerned and helped to confirm that the lender had written the loan papers correctly.  The loan funded in time to satisfy the bank’s required timeline.