Insurance

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?

HUD REACHES SETTLEMENT AGREEMENTS COMPANIES RE: VIOLATING FAIR HOUSING ACT

HUD Press Release
Thursday January 26, 2017

WASHINGTON – The U.S. Department of Housing and Urban Development announced agreements with two insurance companies in Ohio and Florida settling allegations the companies violated the Fair Housing Act by denying insurance coverage to properties that contain “subsidized housing” and “low-income housing.”

The Fair Housing Act makes it unlawful for providers of housing-related services or products, including insurance providers, to discriminate because of race, color, religion, sex, national origin, disability, and familial status.

The agreements stemmed from a Secretary-Initiated complaint HUD filed after receiving reports the insurance companies’ policies and practices had a discriminatory effect because of race and national origin. Specifically, HUD’s complaint alleged that the companies refused to provide umbrella coverage, which provides additional liability coverage when an insured’s other primary policy limits have been reached, to properties containing subsidized or low-income housing.

Under the agreements, McGowan and Company will remove “subsidized” and “low-income” from its list of prohibited properties, spend $100,000 to affirmatively market its services and products to the affordable and low-income housing markets and provide fair housing training for management and staff that review and/or approve applications for insurance. Mack & Waltz will spend $10,000 to affirmatively promote its services in affordable and low-income housing markets, and provide fair housing training for its management and staff.

People who believe they have experienced discrimination may file a complaint by contacting HUD’s Office of Fair Housing and Equal Opportunity at (800) 669-9777 (voice) or (800) 927-9275 (TTY). Housing discrimination complaints may also be filed by going to www.hud.gov/fairhousing, or by downloading HUD’s free housing discrimination mobile application, which can be accessed through Apple and Android devices.

 

Title Insurance Costs Exceed Estimates by Thirty Percent

RedVision/Accenture have put out a study on the changing costs for Title Insurers due to what it aptly calls “Multiple Disruptive Forces” including such things as regulatory changes, digital operations, industry convergence, and a subdued economic outlook. The benchmark study focuses on the true costs of title insurance origination and finds that the true cost is about 30% higher than their study participants estimated.

From my perspective, it’s a thoughtful analysis. I think the ultimate thought would be to have all the information simply digitally dumped into an automated system that would spit out a title commitment. But, as we all know, as the chain of title is put together, there are many stops involved and many places to collect data, all with different systems:Treasurers, Auditors, Assessors, County Recorders, Cities, plats/surveys, etc.etc. And while I know there are inefficiencies in manually obtaining data, and I recognize that much of the information can be downloaded, I believe we are light-years away from a one-stop automated process.

In order to have a “good” title product, someone has to actually LOOK at the data as it will not simply download into the appropriate category. There are too many variables. A good search needs to verify the physical signatures on that deed, look for recitals in documents, review divorce decrees, etc. Yes, streamlining is very important, but so is the knowledge of those persons who examine the instruments. On the other hand, if the industry wishes to become completely automated, it could choose to do so and become like a casualty underwriter – don’t check past history, just prepare and reserve for much higher claims.

FEMA Flood Maps Can be Appealed to Lower Flood Insurance Costs

Harrisburg, PA – Insurance Commissioner Teresa Miller today issued a consumer alert telling homeowners about a process by which they can appeal their property’s placement in a flood zone by the federal government, which in many cases requires them to purchase flood insurance.

“The Federal Emergency Management Agency (FEMA) recently re-mapped most of the country using 100-year flood projections, resulting in many homes being designated in flood zones which were never there before, despite many of these homes never or rarely having experienced flooding,” Commissioner Miller said. “If the mortgage on a home is backed by the federal government, which many are, then the homeowner must buy flood insurance.”

To appeal a home’s placement in what is officially called a Special Flood Hazard Area, the homeowner must show the lowest adjacent grade, or the lowest ground touching the structure, is at or above what is called the Base Flood Elevation. The Base Flood Elevation is the computed elevation to which flood water is anticipated to rise during the base flood used in determining the land is in a Special Flood Hazard Area.

Commissioner Miller noted that it is the homeowner’s responsibility to provide this information in a letter to FEMA. For this type of appeal, called a Letter of Map Amendment, there is no charge to the consumer.

Homeowners can get more information on how to appeal a flood zone designation, get a flood map, and find answers to other questions, by going to https://www.fema.gov/information-homeowners. Homeowners can also call 1-877-FEMA-MAP (1-877-336-2627) to get information on appealing a flood zone designation.

As NFIP premiums have risen and more homes have been re-mapped into flood zones, more private insurers have started entering the flood insurance market. However, private companies may not cover higher risk properties, leaving the NFIP as the only option for some homeowners.  Homeowners who now have NFIP insurance with a subsidy, and switch to a private policy, will likely not be eligible for any subsidy if they later go back to the NFIP. Currently, only those homes insured through the NFIP are eligible for federal grants to help cover the cost of flood mitigation work, such as raising a home to lessen the chances of flooding in the future.

“In many cases, we have found comparable private flood coverage is much less expensive than the NFIP product,” said Commissioner Miller. “I encourage consumers who need or want flood insurance to shop and find the best coverage for them at the best price.”

It has been a long time since I have seen information from Commerce on the Licensing requirements for Abstracters, and I was pleased to see their latest bulletin.  While I know there is no education requirement, the content is significant and requires a good working knowledge of the trade. For those who need assistance with the legalese in title searching the online Principles of Abstracting course can help.  In any case, here is the outline from the PSI bulletin.

ABSTRACTER EXAMINATION CANDIDATE INFORMATION BULLETIN

Legal description and elements of real property (10 items)

  1. Definitions and components of real property
  2. Methods of legal description
  3. Estates in real property
  4. Forms of ownership
  5. Transfer / alienation of real property
  6. Deeds
  7. Types
  8. Characteristics / elements

iii. Warranties

  1. Land use controls
  2. Public
  3. Private/Covenants, conditions, and restrictions (CC&Rs)
  1. Condominium Law

Documents (15 items)

  1. Conveyance
  2. Recording
  3. Torrens
  4. Encumbrances
  5. Types and priorities of liens
  6. Easements
  7. Encroachments

Research and Compilation of Abstract (20 items)

  1. Indexes
  2. Search requirements and techniques
  3. Documents and Entries
  4. Legal description in abstract
  5. Searches (including judgments in favor of the U.S.)
  6. Certification

Licensing and Professional Conduct (5 items)

  1. Licensing requirements
  2. Prohibited conduct

 

Due Diligence Required of ALL Closing Staff

We all use auxiliary help when times are busy.  Signing agents and temporary help.  But beware; are you giving “non-employees” dangerous access to personal information that you are responsible for?

The DOJ has issued a press release regarding  a temporary employee who’s job was simply copying loan documents. In that capacity, she  stole personal  information belonging to over 250 would-be home buyers and used that information to obtain fraudulent credit cards.

Use due diligence in the hiring and overseeing of all of your help and assure they are properly licensed.   Even non-employees require oversight in the title and closing business.

Department of Justice Press Release – Temporary Help Steals Information to Get Fraudulent Credit Cards        Read article here at the Department of Justice Website

Statute of Limitations on Title Policies

Good case on the statute of limitations for Title Policies.   The case shows that the owner’s claim for breach of their title insurance policy doesn’t start until the title insurer refuses to adequately compensate the owner for a covered loss – Spalding v. Stewart Title Guar. Co., Case No. SC 94580, 2015 WL 2228547 (Mo. May 12, 2015) (affirming amended judgment after jury trial).

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

Handle Title Claims Timely or Pay the Penalty

I have commented in the past on how not handling title claims in a timely manner can cause damages, and I use real examples to stress the point. Well, comes another heavy duty example.  The Superior Court of Pennsylvania has upheld $1,572,909.24 in punitive damages in Davis V. Fidelity National Title Insurance Company for what could have/should have been a fairly minor claim.

Here is a quote from the court document:

 

Initially, we note the trial court awarded Davis $393,227.31 in compensatory damages and $1,572,909.24 in punitive damages. This represents a 4:1 ratio of punitive to compensatory damages. The United States Supreme Court stated: We decline again to impose a bright-line ratio which a punitive damages award cannot exceed. Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. In [Pacific Mut. Life Ins. Co. v.] Haslip, [499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991)] in upholding a punitive damages award, we concluded that an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety. 499 U.S., at 23- 24. 111 S.Ct. 1032. We cited that 4–to–1 ratio again in Gore, 517 U.S., at 581, 116 S.Ct. 1589. The Court further referenced a long legislative history, dating back over 700 years and going forward to today, providing for sanctions of double, treble, or quadruple damages to deter and punish. Id., at 581, and n. 33, 116 S.Ct. 1589. While these ratios are not binding, they are instructive. They demonstrate what should be obvious: Singledigit multipliers are more likely to comport with due process, while still achieving the State’s goals of deterrence and retribution, than awards with ratios in range of 500 to 1, id., at 582, 116 S.Ct. 1589, or, in this case, of 145 to 1.

Remember, Title Agents, Title Insurers, the face amount of the Title Policy is NOT the ceiling on your title claims.

Info On Home Closing

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