Education

CFPB Issues Summary of Changes and Clarifications to TRID

To support implementation of the recently issued 2017 TILA-RESPA Rule, the Bureau has issued a Detailed Summary of Changes and Clarifications.

You can access the Detailed Summary of Changes and Clarifications here.

FinCEN Advisory on Money Laundering Scams

FinCEN Advisory

See Advisory HERE

Lender Sues Specialty Insurer for Cyberspace Crime

A California-based mortgage company hit its insurer with a lawsuit in a New York federal court Tuesday seeking to recoup under a $3 million policy “substantial” losses incurred when an impostor duped the mortgage lender into wiring money for a nonexistent transaction.
American Pacific Mortgage Corp. asserts that Aspen Specialty Insurance Company must indemnify it for a cyberattack that resulted in an employee wiring more than $75,000 to a fictional company.

More here at Housing Wire

Last year, the Federal Trade Commission and the National Association of Realtors issued a warning to people interested in buying a home that scammers were posing as real estate agents, Realtors and title insurance companies to steal consumers’ closing costs.
And earlier this year, the FTC and NAR reissued that same warning because similar scams are still taking place.
In these scams, hackers take over the email accounts of homebuyers, real estate agents, lenders or Realtors. They obtain information about upcoming real estate transactions and send an email to the homebuyer, pretending to be the real estate agent or the title company that’s being used for the closing.

The email tells the buyer that there has been a last-minute change to the wiring instructions, and instructs the buyer to wire their closing costs to a different account – one controlled by the hacker. Then, once the buyer sends the money to the scammer’s account, the money disappears.

Do you have Cyber Insurance?

E-Recording Continues to Grow at Rapid Pace

Technology
Thursday, August 10, 2017

Since the start of the second quarter, CSC has added 61 counties in 25 states to its eRecording network, the company announced.

“By partnering with CSC, these counties and their clients will now enjoy the benefits of award-winning service from an industry pioneer,” CSC Sales Director Kevin Kinderman said in a release. “We provide a total recording solution through our eRecording network and our national paper recording services. We’re looking forward to making our county and submitter partners’ lives easier.”

The new counties are in Arkansas, Florida, Idaho, Illinois, Indiana, Georgia, Kansas, Louisiana, Michigan, Minnesota, Nebraska, New Hampshire, Nevada, New Mexico, New York, North Carolina, Oklahoma, Ohio, Oregon, Pennsylvania, South Dakota, Texas, Virginia, Wisconsin and Wyoming.

Protect Your Money from Wire Fraud Schemes – ALTA Video

Buying and selling a home is an exciting time, but there can be pitfalls for unsuspecting consumers . The American Land Title Association wants homeowners and sellers to be aware that criminals are using wire fraud schemes to steal money meant for home purchases or the proceeds from the sale of the property. Watch this video for four tips to protect your money and advice for what to do if you’ve been targeted by a scam.

See the ALTA VIDEO HERE

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.”

At First Look Emails Seem Legitimate

At first glance the emails look legitimate.

But businesses get defrauded of millions of dollars daily by people using spoof emails and other false documents to steal funds, said Randy Roewe, chief risk officer for First Financial Bank.

“We get things from time to time that look exactly like a company logo,” said Darren Faulk, who is in business development for Stewart Title Co.’s Cleburne office.

With these spoofed emails, however, there is always something off with them, he said. “Title companies get targeted more than anybody because we’re moving large amounts of funds.”

Because transactions could be moving millions of dollars electronically, title companies have to be extra vigilant about security, from verifying information to keeping information private, Faulk said.

‘We do everything possible to keep things secure,” he said.

Electronic crime has become such a big business, Roewe said, the FBI has developed the Internet Crime Complaint Center — or IC3 — to track electronic crime. Over the last three years, businesses in the U.S. have lost $1.5 billion to internet fraud.

Much of the money being lost is going to Asia, especially China, although the United Kingdom is also becoming prominent, he said.

Email fraud is one of the most prevalent ways businesses get defrauded of money, Roewe said. Nationally, title companies are some of the hardest hit, losing more than $17 million last year.

But every business, from legal services to food service and manufacturing, is vulnerable to losses, he said.

By stealing basic information through company websites and tracking social media, crooks determine who to target and impersonate in an email to perpetrate their scams, Roewe said.

Usually, compromised email attacks will come in the form of electronic funds transfer requests, he said. Such transactions go so fast, they are hard to catch.

“We encourage you to use electronic funds transfer,” he said, but when using any banking service businesses have to be aware of risks and how to manage them.

These emails might appear legitimate, he said, and the criminals usually pose as a CEO or other executive but the emails will usually come from a look-a-like domain camouflaged by as few as one or two letters off the real site. The crooks might alter a domain like “payme.com” to “payrne.com” that at a quick glance might look like the real thing.

They also might leave clues in subject lines or in the body of the email itself, he said. Usually messages and subject lines contain a sense of urgency in the request or a request for secrecy.

When checking email from a phone, if a request comes in from a CEO or executive, it’s usually good to double-check on a computer to see the actual address the email is coming from, he said.

Besides using fake emails, criminals also create fake invoices or concoct elaborate stories to steal money, he said. Like fake emails, fake invoices might look legitimate, using company logos or real names, but will be off in some way, usually through account numbers.

Thieves will concoct elaborate stories to attract third party “mules” to have money sent through them for part of the cut, he said. Work from home offers are also usually to good to be true scams to get people to release their information.

The thieves are sophisticated, he said. With one recent scam the bank discovered, for instance, a Houston title company was sent a money transfer request, one that looked completely legitimate, using the same language used in transfer and even a real routing number to an account at a bank in Ohio.

What clued the title company into the scam was the routing number — it was for a personal rather than business account, he said. The company had checked and confirmed with the bank in Ohio that the account stood out.

It’s through diligent action like checking and confirming and coaching employees to recognize fraud that will save businesses from its headaches.

Implementing dual controls — where two people are responsible for one operation — is one of the best ways to deter fraud, he said.

While email and other electronic fraud are prominent, checks are still used to commit fraud, said Daniel Neely, First Financial Senior Vice President of Treasury Management Solutions.

Checks can be altered or forged or counterfeited, he said, and as with other forms of fraud, diligent checking and confirming will help prevent loss. He recommended reconciling accounts daily as a way not only of keeping books current but of checking for fraud.

But most important, knowing who you’re doing business with will lower risks, he said.

First Time Homebuying Reaches 15 year High

Since the housing crash, first-time homebuyers who finance their homes through the Federal Housing Administration (FHA) and the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac have outnumbered repeat buyers every year, according to data in the Urban Institute’s July Monthly Chartbook. Before the crash, these roles were reversed.Existhome

Much of the increase in first-time homebuyer activity has been through the GSEs. As of this past April, 47.8 percent of mortgages backed by government-sponsored enterprises (GSEs) Fannie and Freddie went to first-time homebuyers, the highest level in 15 years, according to the Chartbook. The GSEs’ share of first-time homebuyers stood at about 40 percent from 2007 to 2013, but has been rising over the past few years.

When combined with FHA-backed mortgages, of which the vast majority (82.7 percent as of this past March) go to first-time homebuyers, the total share of first-time homebuyers using GSE or FHA financing this past April stood at 60 percent.

Part of the reason for the rising share of first-time homebuyers in the market is a decline in repeat buyers, mostly since the housing crisis. The FHA and the GSEs financed 1.8 million repeat homebuyers in 2001. This number fell to around 1.5 million in 2007 and then dropped drastically over the next four years, hitting a low of just above 600,000 in 2011, according to the Chartbook. In 2016, repeat-homebuyer numbers had recovered to just over 1 million, but this number was still just 57 percent of the 2001 total.

In contrast, 1.4 million first-time homebuyers used FHA or GSE financing in 2016, slightly higher than the 1.3 million in 2001, and the highest number in the last 15 years.

CFPB Finalizes Updates to “Know Before You Owe” Mortgage Disclosure

Press Release
July 7, 2017

The Consumer Financial Protection Bureau (CFPB) today finalized updates to its “Know Before You Owe” mortgage disclosure rule with amendments that are intended to formalize guidance in the rule, and provide greater clarity and certainty. The changes will facilitate implementation of the Know Before You Owe rule by the mortgage industry. The CFPB is also releasing a limited follow-up proposal to address an additional implementation issue.

“A mortgage is one of the largest financial decisions a consumer will ever make, and CFPB’s rules help ensure consumers have the easy-to-understand information they need before making a decision that will significantly impact their financial lives,” said CFPB Director Richard Cordray. “Our updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process for lenders and consumers.”

The Know Before You Owe mortgage disclosure rule took effect Oct. 3, 2015. The CFPB’s rule created new, streamlined forms that consumers receive when applying for and closing on a mortgage. In addition to clarifications and technical corrections, the amendments that the Bureau is finalizing today address a handful of other issues within the rule, including:

Tolerances for the total of payments: Before the Know Before You Owe mortgage disclosure rule, the total of payments disclosure was determined using the finance charge as part of the calculation. The Know Before You Owe mortgage disclosure rule changed the total of payments calculation so that it did not make specific use of the finance charge. The Bureau is now finalizing updates to include tolerance provisions for the total of payments that parallel the tolerances for the finance charge and disclosures affected by the finance charge.

Housing assistance lending: The Know Before You Owe mortgage disclosure rule gave a partial exemption from disclosure requirements to certain housing assistance loans, which are originated primarily by housing finance agencies. The Bureau’s update, as finalized, promotes housing assistance lending by clarifying that recording fees and transfer taxes may be charged in connection with those transactions without losing eligibility for the partial exemption. The update also excludes recording fees and transfer taxes from the exemption’s limits on costs. Through the update, more housing assistance loans will qualify for the partial exemption, which should encourage these loans.

Cooperatives: The Bureau is finalizing updates to extend the rule’s coverage to include all cooperative units. Currently, the rule only covers transactions secured by real property, as defined under state law. Cooperatives are sometimes treated as personal property under state law and sometimes as real property. By including all cooperatives in the rule, the Bureau is simplifying compliance and ensuring that more consumers benefit from the rule.

Privacy and sharing of information: The Know Before You Owe mortgage disclosure rule requires creditors to provide certain mortgage disclosures to the consumer. The Bureau has received many questions about sharing the disclosures provided to consumers with third parties to the transaction, including the seller and real estate brokers. The Bureau understands that it is usual, accepted, and appropriate for creditors and settlement agents to provide a Closing Disclosure to consumers, sellers, and their real estate brokers or other agents. The Bureau is finalizing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.

The finalized amendments are available at:
http://files.consumerfinance.gov/f/documents/201707_cfpb_Final-Rule_Amendments-to-Federal-Mortgage-Disclosure-Requirements_TILA.pdf

In addition to the final rule, the CFPB is issuing a proposal addressing when a creditor may use a Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith and within tolerance. Comments are due 60 days after the proposal’s publication in the Federal Register and will be weighed carefully before a final regulation is issued.

The proposal is available at:
http://files.consumerfinance.gov/f/documents/201707_cfpb_Proposed-Rule_Amendments-to-Federal-Mortgage-Disclosure-Requirements_TILA.pdf

License Renewals for MN are Due by June 30th

Real estate agents, abstracters, closing agents and brokers are reminded that they must renew their licenses on or before June 30th. So please check your license for renewals.

Information from the Commerce Department on MN state licensing can be found here.

Pulseportal information can be found here.

Info On Home Closing

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