No Investors Allowed at Homeowner Auction
Responsibility for reselling FHA foreclosed homes falls to HUD, who has a policy of giving traditional buyers at least 30 days to bid on new listings before opening them up to investors to bid. Accordingly, HUD contracted with BLB Resources, an asset-management firm based in Irvine, CA, to dispose of some foreclosed FHA-backed homes in the Phoenix area. BLB said there were several thousand HUD foreclosed homes in the Phoenix area, and that it had been offering them online at hudhomestore.com . But BLB decided on an experiment, a live auction that featured 150 HUD homes, and they did not allow investors to bid.
“It turned out to be phenomenally successful, attracting about 600 attendees, said Crystal Wright, spokeswoman for Phoenix-based auctioneer Hudson & Marshall, which conducted the auction on March 26th.”
A very proud 23-year-old solar panel-installer Aldo Reyes of Phoenix, was the winning bidder of a three-bedroom, 2,700-square-foot home in built in 2008. His winning bid on the HUD home was $82,500.
FEDERAL REGULATION OF TITLE INSURANCE – WHY NOT?
There has been much discussion about regulating insurance, including title insurance at the federal level.
Of all the lines of insurance, none are as inexorably entwined in state and local laws as title insurance. Local practices regarding real estate vary from state to state and even county to county within a state. The abstracting, examining and underwriting of title insurance involves a review and assessment of these state and local-specific records, so that title policies can only be properly issued in connection with inherently understood local transactions. I believe it would represent an enormously burdensome and expensive undertaking for a federal agency to establish federal regulations that would reflect variations in the real property law of all 50 states. State regulators are much closer to local practices and can respond to changes in the marketplace more quickly. Therefore, I believe state regulation remains the most effective form of supervision for our industry.And since when is a “bigger government agency” better than local government?
MN Department of Commerce Announces Staff
ST. PAUL, MN – Department of Commerce Commissioner Mike Rothman announced Steve Carlson as Deputy Commissioner of Administration. Kevin Murphy was re-appointed as Deputy Commissioner of Financial Institutions and Jaki Gardner will continue as Assistant Commissioner of Insurance. More detail on staff appointments in Commerce Press Release
Twin City Attorney Disbarred
A Twin Cities lawyer who pleaded guilty last year to federal fraud and money-laundering charges, Trent C. Jonas, has lost his license to practice in Minnesota. Authorities said Mr Jonas siphoned about $5.3 million from more than 3,000 mortgage transactions through Jonas’ title insurance companies, Title Source and Zen Title. More at The StarTribune
Lenders Must Follow Local Recording Rules
An interesting case out of North Carolina. Orange County, No. Carolina has designated a PIN System (Property Identification Number) as the “official recording index.” In the case where two parcels were listed on a deed of trust, but only one PIN was listed on the DOT, the Court Ruled there was no constructive notice of the second parcel, even though the legal description and the names of the Grantors and Grantees were properly listed on the Deed of Trust. Therefore the typical rule that “if you can find it in the Grantor-Grantee Index, you have constructive notice” is out the window.
“…Because the deed of trust did not include the PIN for Tract I, it would not have appeared in any bona fide purchaser’s search for Tract I in the PIN Index. Requiring a bona fide purchaser to search the grantor/grantee index in addition to the PIN index would render the PIN Index superfluous and the North Carolina law adopting it meaningless.”
Read more at Legal Blog
Huge Loss for MERS in NY Court
An important state case – NY court holds that the appointment of MERS “as nominee for the lender and its successors” is insufficient to allow MERS as an agent with legal ability to assign mortgages.
UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK
In re: Case No. 810-77338-reg
FERREL L. AGARD, Chapter 7 Debtor
MEMORANDUM DECISION
The Debtor’s argument raises a fundamental question as to whether MERS had the legal authority to assign a valid and enforceable interest in the subject mortgage. Because U.S. Bank’s rights can be no greater than the rights as transferred by its assignor – MERS – the Debtor argues that the Movant, acting on behalf of U.S. Bank, has failed to establish that it holds an enforceable right against the Property.۩۩۩۩۩۩
“The Court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However, the Court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law.”
MD Regulator Suspends Title Insurance License
Maryland insurance regulators have suspended the license of Beltway Title and Abstract Inc. of Crofton and related settlement companies due to misappropriation of funds. The company used more than $1 million that was set aside to pay mortgages or closing expenses for clients to cover its business expenses. Acting State Insurance Commissioner Beth Sammis says, “We’re going to work with the industry and all producers to find the best way to ensure that Marylanders can have faith that when they close on a house, it’s done properly.” Read story from Baltimore Post
Minnesota Department of Commerce Seeks Information on Escrow Accounts
The Minnesota Department of Commerce(Department) is conducting an informal investigation regarding
the interest or other monies earned on title trust and escrow accounts. Please submit detailed responses
to the following questions no later than February 28, 2011.
An officer of the agency must attest to the accuracy of the responses and sign the responses. Failure to
comply with this subpoena may result in legal action being taken against your company to compel
compliance pursuant to Minn. Stat. §45.027, subd. 3 (2008), and may be subjected to civil penalties of up
to $10,000 per violation.
Please direct any inquiries concerning the above questions to the undersigned.
Thank you for your cooperation.
Kerry Banks
Minnesota Department of Commerce
kerry.banks@state.mn.us
Phone: 651-296-9082
Fax: 651-296-4328
SURVEY
Company Name (as licensed):
Company NAIC Number (if underwriter)/License Number (if agency):
Mailing Street Address:
City:
State:
Zip Code:
Date:
As an officer of the company to whom this letter is addressed, who is authorized to sign on behalf
of the company, I do hereby attest to the accuracy of the above responses.
Company Officer:
Company Officer Title:
Company Officer Telephone Number:
Company Officer E-mail Address:
We are seeking Minnesota specific information only. Responses provided should only reflect
monies related to Minnesota transactions. If you are unable to provide Minnesota-specific
information, please provide a detailed explanation, in the space provided under question number
15 below, of what other states are included in your figures as well as the approximate
percentage that reflects Minnesota transactions.
Trust Account Questions
1. Is your company’s trust account an interest-bearing account? Y/N
2. If your company’s trust account is interest-bearing, is the interest a fixed or variable rate?
2a. If fixed, what is the interest rate?
2b. If variable, please describe how the interest rate is calculated and provide the rate,
effective 12/31/2010.
3. Please provide the average daily balances for your company’s trust account, whether
interest-bearing or not, for the following months:
February, 2010:
May, 2010:
August, 2010:
November, 2010:
4. What does your company do with any interest earned from the trust account? Please select
the best option and provide a detailed explanation of how the money is returned, used,
donated or otherwise treated. If you select option “d,” please include a breakdown, by
percentage, of how each option is applied.
a. The interest earned is returned to the buyer/seller/borrower
b. The company keeps the interest
c. The company donates the interest
d. A combination of the above
e. Other
5. If applicable, approximately how much interest did your company’s trust account earn
during the calendar year 2010?
Escrow Account Questions
6. Does your company maintain any interest-bearing escrow accounts? Y/N
7. If your company’s escrow account is interest-bearing, what monies are typically deposited
into such accounts?
8. If your company’s escrow account is interest-bearing, is the interest a fixed or variable
rate?
8a. If fixed, what is the interest rate?
8b. If variable, please describe how the interest rate is calculated and provide the rate,
effective 12/31/2010
9. Please provide the average daily balances for your company’s escrow account(s), whether
interest-bearing or not, for the following months:
February, 2010:
May, 2010:
August, 2010:
November, 2010:
10. What does your company do with any interest earned from escrow accounts? Please select
the best option and provide a detailed explanation of how the money is returned, used,
donated or otherwise treated. If you select option “d” please include a breakdown, by
percentage, of how each option is applied.
a. The interest earned is returned to the buyer/seller/borrower
b. The company keeps the interest
c. The company donates the interest
d. A combination of the above
e. Other
11. If applicable, approximately how much interest did your company’s escrow account earn
during the calendar year 2010?
Other/Combined Questions
12. If your company’s trust or escrow account is not interest-bearing, do those accounts
provide your company with value in some other way (through account analysis, short term
CD’s, value-added accounting, etc.)? Y/N
13. If your answer to question 11 is yes, please describe the nature of the value provided.
14. If your answer to question 11 is yes, please quantify to the best of your ability the value
provided during calendar year 2010.
15. Does your company contract out any closing and/or settlement services?
If “yes,” please complete the following:
15a. What types of services do you contract out, and when do you contract these services?
15b. From whom do you contract out these services? Please provide name and contact
information for ALL entities with which you contract.
15c. For services contracted, are escrow monies (other than title premiums) ever returned
to the agency for disbursement?
16. Please provide any additional information you may deem necessary to support or explain
the answers you supplied above.
Changes in Closing Under the Consumer Financial Protection Bureau
The new Consumer Financial Protection Bureau (CFPB) published the first of a series of five question interviews with Treasury officials. Elizabeth Warren, Special Assistant to the President, is the lead administrator of the CFPB and answered the Questions below. This is of special interest to closing professionals because the CFPB will play a key role for Title Insurers and Closers in revising the closing process. A simplification of Documents would be greatly appreciated. For mortgage closers, the explanation process at closing has become quite complex and overly burdensome because, for most people, the mortgage process and mortgage fees are buried in a foreign language.
Q&A
1) With hundreds of problems in the consumer financial products and services marketplace that the CFPB could chose to focus on, how do you decide where to dive in and begin? What have your top priorities been out of the blocks?
Credit cards are a top priority because they are the most widely held credit product in the country. Four out of five families have a credit card and 50 million American families cannot pay off their credit card debt each month in full.
Mortgages are the other top priority because they are the single most important financial decision that most families will make. We have learned from recent history that a bad mortgage can not only destabilize an entire family, but that enough of them can destabilize the entire economy.
2) You frequently cite streamlining disclosures as a way to level the playing field and give families better tools to make the choices that are best for them. When will consumers start seeing a difference?
Consumers can already see a difference. Look at what the banks are advertising right now and see how often phrases like “simplicity,” “no tricks” and “clarity” are showing up. The industry recognizes that these consumer credit markets have to change.
3) Your first week on the job, you and Secretary Geithner held a mortgage disclosure forum at Treasury and just this week, the CFPB implementation team held a follow up symposium. What have you learned from these sessions?
The current disclosures increase costs for lenders while providing very little benefit for consumers. We want to reverse that and decrease the costs of disclosure while increasing the value to consumers. The way to do that is to make that disclosure clearer and more usable for consumers.
4) You’ve spoken a lot about how the consumer credit market is “broken.” How do we know the market isn’t working and what can the CFPB do to fix it?
When a family cannot tell the cost in full of a credit card, when it is not possible to determine the risks of a mortgage in advance, and when people can’t directly compare three or four products– apples to apples – to tell which costs the most and which bears the most risk, then the market is broken.
This agency will drive toward making the costs clear, making the risks clear, and making it easy for consumers to compare one product with another. When they can do that, credit markets will work for families.
5) What roles will personal responsibility and financial education play in the consumer credit market once the CFPB is stood up?
I believe in personal responsibility, but it only works when prices and risks are clear up front and not buried in pages and pages of incomprehensible fine print. But, I also believe in American families. When they have better information they will make good decisions and those good decisions will make families stronger and ultimately will make the entire economy stronger.
New Systems have Short-Circuited Foreclosures
“The problem with foreclosures is that we have short-circuited all of the legal processes and safeguards that our courts are supposed to provide,” said Matthew Weidner, a real estate lawyer in St. Petersburg. Fla.
It will be interesting to see how each state deals with the foreclosure mill issues where law and order has given way to fast and dirty processing. Clearly it is often unclear as to who “owns” the mortgage, who is foreclosing on behalf of whom, or even has the mortgage been sold more than once to different parties. It is certainly a debacle.
Read more at ABC News
Home Closing 101: An Educational Initiative of the American Land Title Association
