Originating loans to real estate investors IS for the faint of heart. Done right, it’s boring. My business runs like an In an Out Burger (an analogy I’ve borrowed from a more talented investor than me). I offer just a couple of options & there’s no hidden menu.
My day to day focus—aside from drumming up more business-is avoiding unforced errors. Benjamin Graham called fixed income (this week oils include Hard Money) a negative art, more on that here:
So I use a checklist. It’s a living document. Just like an insurer adds language to their policies based on bad experiences, I add to the checklist over time as I learn more.
Hat tip to Dr. Gurner for getting me thinking about this.
We closed a loan last Friday. The last item on my checklist rarely applies because typically Fidelity, Old Republic, Stewart or First American is issuing my policy directly. But it applied last Friday. The list item says “Confirm Agent is in good standing with the Underwriter.” In this case the “title” company that drew up the commitment was just acting as agent for First National Title Insurance Company. First National authorizes agents to issue policies on its behalf. More info is here: https://fnti.com/contact/become-an-agent/
What if, I ask myself, the Issuing Agent is no longer in good standing with the Issuer but they still crank out commitments? Where does that leave me if there’s a claim?
As expected First National Title Insurance Company confirmed that the Issuing Agent is in good standing to issue policies. I funded the deal, and the Issuing Agent was none the wiser.