Bulletin: CA000027

Date:
December 01, 1997
To:
All California Issuing Offices and Agents
RE:
Blind Payoffs

Dear Associates:

Title insurers and its agents are receiving requests from customers to handle "blind payoffs".

The euphemism "blind payoffs" is used to describe the payoff of an existing deed of trust without requiring a demand from the existing lender. The "blind" part of the payoff is reliance on the new lender's and borrower's calculation of the amount of money due the existing lender. The payoff is blind because you do not have a demand from the existing lender.

A blind payoff occurs in the following setting:

  • There is an existing mortgage on the land.

  • Borrower/owner decides to replace the old loan with a new loan and a new lender.

  • In escrow, we are asked to create a subescrow to payoff the old loan.

  • New lender and borrower calculate the amount necessary to payoff the old loan.

  • An indemnity from the new lender to the Company is executed in which the new lender agrees to cover shortages in the payoff to the existing lender.

  • A payoff check is sent to the existing lender drawn on the escrow.

The basic business reason for engaging in a blind payoff is the new lender does not want the old lender to contact the borrower and offer the borrower a new loan since this may eliminate the new lender's opportunity to loan money to the borrower.

This, presently, is not an avenue of business we want to pursue. We do not want you to handle blind payoffs.

Not to write too long and take more of your time for this simple subject, the reasons for our decision are practical ones. They include an anecdotal survey of affiliates yielding evidence that this is not a profitable area of business and that the lost opportunity costs of pursuing this area of business outweigh the potential for gain. And, too, the existing lender may be a good or potentially better customer than the new lender.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None