Title industry rebuffs Denver’s request to ensure compliance with affordable housing program rules

AAron Ontiveroz, The Denver Post

The Land Title Association of Colorado has rejected a request from Denver Mayor Michael Hancock to make compliance with the city’s affordable housing rules a requirement for obtaining title insurance.

But it did hold out an olive branch that other solutions could be found, including adding the addresses of the city’s affordable homes to a database that title workers could use in their research.

“(The association) is ready and willing to work with the city of Denver to find ways to ensure that this problem does not continue in the future,” Kelli Klein, the president of the industry trade group, said in her response.

Hancock, in a March 30 letter, requested that title insurers list the city’s affordable housing program covenants under the “requirement” section of a title policy rather than treating it as a less visible “exception” that doesn’t weigh on title insurance.

Without title insurance, lenders won’t finance a buyer, which creates a market-based way to enforce program requirements. Although the rules varied slightly, they generally limited home-price appreciation at time of sale to 5 percent a year and required any buyer to prove to the city they didn’t make more than 80 percent of Denver County’s median household income.

But Klein said in her response that the program requirements were recorded in public records of “Covenants Conditions and Restrictions,” which meant they didn’t effect the transfer of title or the position of the lender.

Hancock’s request followed the sale of hundreds of homes designated as affordable to buyers who made too much money. Although sellers were required to disclose the program to buyers and make sure the city income-qualified them, a significant percentage didn’t. Some affordable homes have gone through multiple sales where the rules weren’t followed.

The city, which reduced oversight of the program after staffing cuts during the recession, had counted on title insurers and others in the real estate industry to provide a backstop when original buyers didn’t disclose their homes were in the program.

“I am writing to request that (Land Title Association of Colorado) review the due diligence practices performed by the title industry as it relates to local affordable housing covenants, provide guidance and set standards regarding best practices in order to avoid this situation in the future,” Hancock said in his letter.

Hancock noted that industry workers last decade were provided with training on how to handle the program in title policies. But over time, the standard practices the industry had agreed to were either forgotten or disregarded by some firms.

In a statement emailed to The Denver Post, Eric Hiraga, the executive director of the Denver Office of Economic Development, focused more on providing training to industry workers, including at the association’s annual conference, rather than making a legal rebuttal.

“We remain committed to working with the Land Title Association of Colorado and our public and industry partners to identify improvements and education that ensure complete and timely information is provided to owners and potential buyers of restricted affordable housing in Denver,” he said. “We will provide information that will be helpful to this collective goal.”

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