Affiliated Title businesses

CFPB Loses Case Over RESPA

A lawsuit brought by the Consumer Financial Protection Bureau against a Louisville law firm was dismissed on Friday.

In a summary judgment ruling, the U.S. District Court for the Western District of Kentucky found that law firm Borders & Borders PLC followed the Real Estate Settlement Procedures Act (RESPA) while operating title insurance agencies from 2006 to 2011, according to a NEWS release.

Morgan Ward, a partner with Stites & Harbison PLLC and one of the attorneys who defended Borders & Borders, said: “The CFPB was overreaching, and it’s unfair to target a small firm as part of a regulatory agenda.”

The case “appears to be the CFPB’s first loss on the merits at the federal trial court level,” according to the release.

The CFPB sued Borders & Borders in 2013 after the firm refused to agree with a punitive consent decree levied by the agency. The CFPB alleged that the firm and principals Harry Borders, John Borders Jr. and J. David Borders accepted kickbacks in exchange for referrals of real-estate closing services.

Borders & Borders operated nine title insurance agencies as joint ventures with local real estate and mortgage brokerage companies, according to the lawsuit, as was allowed under RESPA’s safe harbor for affiliated business arrangements. Those companies referred home buyers to Borders & Borders for settlement services, and the firm then would have the title insurance issued by one of the joint ventures.

The profits from the arrangement were split among the title insurance agencies’ owners — Borders & Borders, its principals and the referring company, according to the lawsuit.

Morgan Ward, a partner with Stites & Harbison PLLC and one of the attorneys who defended Borders & Borders, said that under RESPA, it is illegal to pay for referrals unless the law firm and mortgage broker share owners, as was the case with Borders & Borders. Consumers also must be aware of and agree with the arrangement.

Ward said the CFPB viewed RESPA’s safe harbor for affiliated business arrangements as a loophole and decided to try to close it through the courts instead of going to Congress to change the law.

“This really was a David versus Goliath kind of case,” Ward said. The CFPB “tried to send a chilling effect to the marketplace by punishing a family-owned local law firm.”

Mobile Notaries – Do You Have the Required Minnesota Closer License

Minnesota is sending out Enforcement Notices to Mobile Notaries reminding them that under Minnesota Law, those who notarize deeds, mortgages, affidavits and other documents to assist a party in buying or selling real estate in Minnesota are required to have a Closer’s Licence from the Minnesota Department of Commerce.

The primary Closer License Laws are MN Statute 507.45 and MN Statute 82.641

The Commerce Department is authorized to penalize those who are not compliant, so please be sure to obtain the proper license. More information about Closer Licensing can be found here on the Commerce Department Website.

Title Companies should also assure that any closing agents they use are duly licensed under the law.

Mortgage Note NOT Assigned to Foreclosing Lender?! OOOPS -It’s all in the Details

Interesting case out of Alabama.  See more detail.

Her mortgage had been foreclosed, but the mortgagor challenged the foreclosure by appeal, saying the lender who foreclosed had no legal interest because the note was not properly assigned. The appeal court agreed and the foreclosure sale has been  reversed and remanded to the trial court.

Moral of the story: Dot your I’s and cross your T’s when it comes to assignment of mortgage notes.

New Construction Homes – Are You Getting the Right Indemnities

Interesting case regarding new construction law. Although out of a Missouri Court, the takeaway still applies. When obtaining a Sworn Statement from a Builder stating that all subcontractors have been paid, do you also obtain a personal indemnity? Do you know the financial condition of your builder?  

In this case, Frank Miceli lied to Commonwealth Land Title when he signed sworn statements at closing  that all contractors, subs and materialmen were paid on three homes. There were no assets in Miceli Homes, the name the homes were built under. The court initially found that consent judgments barred particular claims against defendant Miceli Homes.

After much ado, the courts were convinced that it not bar claims against defendant Frank Miceli, individually, who held assets  in  his individual capacity; trustee of the Frank Miceli Revocable Trust;  Miceli Homes, Inc; Miceli Development Company;  Miceli Holding Company; Masterwork Homes, Inc.; and Miceli Masterwork Homes, Inc., D/B/A Miceli Custom Homes. 

With much effort, and several appeals, Commonwealth was able to convince the court to pierce corporate veils to look at recouping  the $1.5 million dollar losses paid in mechanic’s lien claims.  A good case for all title people to understand. 

After all, we all know builders who go out of business one day, only to start up the next under a similar name. Names DO matter. And signatures on indemnities matter. Is the signature that of an officer of the Building Corporation, or is their also a personal indemnity to back it up.  In the Miceli case, the personal responsibility made all the difference, because none of the assets were in the name of Miceli Homes. 

Read the whole Commonwealth Land Title Vs. Frank Miceli et al here

Legal Issues Affecting Real Estate and Mortgage Title Closings

Excellent article by  Alston and Bird (

Non-Agency Residential Mortgage Loans in 2014:   A Survey of Legal Issues Affecting the Market. (Read entire article)

It covers in a solid overview of :

  • Qualified Mortgages
  • QRM and Risk Retention
  • Due Diligence Rule
  • Developments in Mortgage Servicing and ECOA
  • Mortgage Servicing Transfers
  • Proposed Changes in Mortgage Servicing and Safe Harbor Protection


As can be seen, 2014 was a watershed year in the history of residential mortgage finance. More regulations were passed than would be ordinarily expected in a full decade.  A lot remains to be digested, and some areas of regulation are still unresolved, but overall the biggest surprise was that all of these regulations had a surprisingly small impact on the RMBS market. Origination standards had tightenedso much after the financial crisis that the changes from QMs had very little impact. QRMs did not have a loan-to-valueratio requirement and was virtually the same as QMs, so the impact on the market was negligible. Regulation AB IIhas resulted in no real change in the RMBS market, which was completely private anyway. There were a number ofchanges in mortgage servicing, and the mergers and acquisitions market was surprisingly active.”

Penalties Continue to Add Up for RESPA Violators

Reuters continues to report on the now defunct Genuine Title, as well as the Wells Fargo and JP Morgan violations under RESPA.  In addition to enormous fines by the lenders, the CFPB went after individual loan officers for penalties. Todd Cohen and wife Elaine Oliphant Cohen are said to be settling for $30,000. Read more at Reuters


Captive Title Insurers – A Good Thing or Not?

I have had concerns for a long time that the Title Industry has captive title insurance agents who receive such a large portion of the pot, that the Title Underwriters are putting themselves at risk. When a large captive agent receives 90% plus of the title insurance premium along with many other fees, that doesn’t leave much for the actual insurance IBNR for claims. Sounds like a risky business.  With the expansion of Title Underwriters risks, including covering agents for the many possible and likely places to err in the Closing Process, to the problems with Identity Theft and Fraud, one would think that the portion retained would be greater.  The title insurance industry has not seemed to change much over the decades. But the risks have. There is more and more detail, and more and more oversight, and more and more room for error and planned fraud.

Here are a couple of very good articles from Forbes about the pros and cons of Captive Insurance. If done correctly, Forbes says, it can be a good thing.  But being done correctly means regular and proper oversight by the Title Underwriter who takes all the risk.

Forbes author, Jay Adkisson says:

A captive can be a wonderful risk management tool when used correctly — but therein lies the rub, many are not. So, in reverse order, here are my 10 pet peeves: Captive Insurance Companies 10 Pet Peeves

On the flip side, when done right, Forbes lists good things about captive insurers.  Ten Good Things About Captive Insurance Companies.  I would be interested to know how carefully his ideas are being followed. Captive Title Insurers? A good thing or not?  That depends…



What Will the New Federal NARAB Mean to the Title Insurance Industry

On Jan. 12, President Obama signed legislation establishing the National Association of Registered Agents and Brokers (NARAB), where any licensed insurance producer meeting requirements can belong.  Starting in 2017, any NARAB member licensed in its home state will be able to obtain a non-resident insurance producer license in any other state.

This is a huge change for all insurers – Property and Casualty, Life, Health, Agricultural, Car Insurers and Title Insurers.  In the past title insurers were required to be licensed in each and every state in which they do business.  Insurance has always fallen under state control. Will this simply be another layer of over-site at the Federal Level?

  • Will it be easier for Large Banks to get into the National Title Insurance Business? (meaning more competition with the same number of transactions)
  • Will it be easier for Large Real Estate Agencies to get into the National Title Insurance Business? (meaning more competition with the same number of transactions)
  • Will it be easier for Title Insurance Underwriters to open operations in nearby states (allowing small regional underwriters to become larger)
  • Will it be easier for Title Insurance Agents to open in nearby states (possibly increasing their book of business)
  • Will it be easier for Affiliated Businesses to extend their reach by opening title insurance operations in multiple states?

I can’t even guess if this will be a good thing or a bad thing for the industry or consumer.  But, nothing stays the same forever. So, be prepared for more and more government involvement in insurance, it will be an interesting (and I am sure bumpy) ride.

For more detail on NARAB, see the Holland and Knight article in Lexology

Info On Home Closing

Home Closing 101: An Educational Initiative of the American Land Title Association