ALTA Comments on CFPB Report on Consumer Experiences at Closing

Press Release

Our members strongly support efforts to identify and alleviate the pain points consumers have experienced during the home closing process,” said Michelle Korsmo, ALTA’s chief executive officer. “While we are focused on technology and the ability for us to receive, sign and return, and retain electronic documents, we cannot lose sight of the importance of personal interaction during the closing process. At the end of the day, consumers are not buying a home from a computer.”The American Land Title Association (ALTA), the national trade association of the land title industry, released the following statement today from CEO Michelle Korsmo in response to the Consumer Financial Protection Bureau’s report on consumer experience during the mortgage closing process:

“Improving the closing the process through technology by providing electronic documents to the homebuyer will help give the consumer more to time to digest the information about their purchase prior to the closing. We agree with the CFPB that any implementation of new technology in the home closing process should not reduce opportunities for consumers to ask information or replace the ceremony of the closing process which indicates the importance of the transaction. Based on our members’ unique vantage point working with all the parties at the closing table, the Bureau should not only focus on technological innovations but also on improving consumer education about the closing process. The new integrated mortgage disclosure forms that the CFPB developed and will be implemented in August 2015 will help ensure the personal interaction and explanation remains part of the closing experience for consumers.”

“We look forward to continuing to work on this important initiative with Director Cordray and staff at the CFPB on this important consumer initiative.”

Closers Can Relate to the Judges Wit in Divorce Case

Having closed a number of homes where husbands and wives were in the middle of a contentious divorce or separation, I know all real estate closers and title insurance closers have their fanciful divorce stories. For me – from the wife who refuses to have the husband declared dead – even though the husband  “went out for cigarettes” more than thirty years ago, to the husband who brings his soon-to-be wife to closing only to sit  across from his soon-to-be ex-wife.  But this judge made good fun of the over-the-top feud between husband and wife. Go Judge   See Story Here.

Minnesota Bans Private Covenant Transfer Fees

As I have been pointing out in recent Seminars, there has been a new movement afloat to put an onerous burden on sellers of property. It is a restrictive covenant, perhaps slipped into a deed or C,C&R stating each time a property is sold, a fee is due upon sale to the original developer of the property. It is a way, developers say, to lower their fees to the original consumer by getting fees spread out over a number of years. Minnesota disagreed, and Governor Pawlenty has now signed a law making them illegal.

This should help abstractors, closers and title company employees sleep a bit better…

New York Looks at State Run Title Insurer

Is it the End of the World as We Know It? New York is considering a state run “Title Guarantee Department” that would appoint directors who in turn would appoint and hire “officers and agents as it may require,” according to

In response, a new lobbying group has taken the initiative to attempt to stop what could be a very significant change in the way the Title Insurance industry currently works.

Steven Day, Senior Vice President for the Fidelity National Title Group, speaking for the New York Taxpayers for Economic Justice is quoted in PRNewswire, as saying

“Simply put, this proposal now being considered would endanger an entire industry, throw thousands of people out of work and place under a new and costly state bureaucracy the ability of men and women, corporations and investors to go to a real estate closing in a timely and efficient manner. This scheme is based on a fundamentally flawed understanding of the economics that drive Title Insurance and ignores the agents, underwriters, searchers, closers and attorneys who spend hours to determine title is valid before anyone invests a dime. Also ignored in this proposal is the role the industry plays in defending against fraud and the indemnification against loss or damage. This plan is repugnant to every taxpayer who believes in the strength of the private sector and wants less government and lower taxes.”

Another Short Sale Fraud Uncovered

Title Insurers and Closers, beware. CNBC has picked up yet another RESPA violation.  It would seem that some second mortgage lenders are asking for “payments on the side – i.e. off the closing statement,” (clearly illigal under RESPA) in order to release liability under the second mortgage.   Their leverage is, if you don’t pay, we won’t release, and you will have to go into foreclosure- wreck your credit – Your choice. Pay us, or we blow your short sale.  Read the full  CNBC Article here.

Flood Insurance Program Extended

Closers,  Insurance and Financial Advisor reports that the House and Senate have passed a two-month extension to the FEMA federal flood program to run through Feb. 28, 2010. This is the third short-term extension of the program this year.  The Property Casualty Insurers Association of America (PCI)  spent this  year urging Congress for a long-term extension of the program that protects against flooding for more than 5.5 million homeowners nationwide and of particular concern to Florida residents where many owners rely on the insurance.

Real Estate Titles US – Inexpensive Title Education

A new online education company, (RETUS) has been formed specifically for title professionals. Its purpose is to provide high quality, inexpensive education for those involved with real estate titles. That includes: Closers, Abstractors and Title Searchers, County Recorders, Real Property Attorneys, Title Examiners, Title Agencies and Title Insurance Underwriters. The company offers primarily Professional Development courses for its customers, as most states have no education requirements for these professionals, but also offers some continuing education classes for those states that require CE. Additional License and Pre-license courses are planned for the future.

“RETUS Online courses provide quality education at lower costs for the consumer, as they don’t have to spend money for hotels, meals or travel, and they have the flexibility of working on their own timeframe. Even 15-20 minutes can be very worthwhile in studying important title concepts- and they can enter and exit courses as time allows.” 

The online courses have all been prepared by subject matter experts in the land title field, some being written or edited by Jeanine W. (Jeanne) Johnson. Courses coming soon include

  •  “A Settlement Agents Guide to Closing,” which will cover the full spectum of closing, including the newest changes to the HUD-1 Settlement Statement;
  •   “Introduction to Title Insurance and Land Titles,” that gives a history of title insurance and is a primer of key concepts in the title industry;
  •  “Real Property Ownership and Land Title Use,” which covers legal descriptions, platting, land use controls, rights of the government in planning. Especially helpful in dealing with new construction, land development and commercial properties.

Take a free test drive of the new title education courses for your state by clicking on your state, then the information button on the US MAP.

What Kind of Bones do You Have?

Someone once said that there are 4 kinds of bones in every organization.

• There are the “wishbones,” those who spend their time wishing someone else would do all the work.

• There are the “jawbones,” who do all the talking but very little else.

• There are the “knucklebones.” They knock everything anyone ever tries to do.

• And finally, there are the “backbones” who carry the load and quietly do the work.

In an environment where many title insurance abstractors, closers and title examiners are out of a job, it is easy to guess who will be kept on.

Who Has to Sign the Mortgage Documents?

One of the most common sources of confusion at closing seems to be who must sign the mortgage docs. It seems to befuddle even experienced closers of title companies and title agencies. Does the Deed have to match the Mortgage and does the Mortgage have to match the Note? Many are sure that when there is a husband and wife, the closer should prepare the Warranty Deed in both names in joint tenancy, and then prepare the mortgage to exactly match the names on the Warranty Deed. They are not quite sure about signatures on the Mortgage Note, however, because lenders sometimes require others to sign the Note as well.

Truth is, in Minnesota (not necessarily all states) it takes “one to buy and all to sell,” meaning a person can buy real estate without their spouse going into title. There may be good reason for that. Say one spouse has significant financial exposure due to the business she owns. The husband may want to go into title in his name alone, so that should a bad business climate come along and the wife has judgments filed against her, the judgments will not attach to the property.

Also, far as joint tenancy – that may not be the best solution for all spouses. For example, Harry and Mabel, both elderly, have lost their spouses. A winter romance comes along and they decide to be married. They pool their funds and buy a home together. Both wish for their children to inherit their respective halves upon their death. They want to take title not as joint tenants, but as tenants in common.

However, Minnesota, as many states do, has an automatic interest of the spouse in the homestead. Now how do we know if they are living in the property as their homestead? Answer is: we don’t. Therefore, to be prudent, we ask spouses to subordinate any interest they might have, by signing the mortgage. They don’t have to be in title to sign the mortgage. But by signing the mortgage, we have cleared the potential interest.

Best Practice: ALL parties who show in title must sign all mortgages, and rule of thumb is to get their spouses to sign as well. Yes, I recognize that some real estate is unlikely to be homestead, but to be safe, get your underwriter to sign off on not getting the spouse’s signature. After all, that apartment building could also contain the apartment that your client claims as home.

As far as the Mortgage Note, it is simply a personal pledge to repay the full amount of the debt. So if son and daughter-in law, for example, need a little assistance in buying their first home, Mom and Dad may help it happen by, in effect, guaranteeing the loan. Mom and Dad sign the Mortgage Note but do not have to go into title (unless the lender demands it.)

As a disclaimer, this is NOT intended as legal advice, and those who prepare legal documents should be careful to seek legal advise to fulfill the intentions of the title holders. This is merely information from a seasoned closer and title examiner who has seen problems crop up due to misunderstanding how it the documentation works.

What are Title Companies doing about the FACT Act

Lenders needing to comply with the Fair and Accurate Credit Transactions Act (FACT Act) have been given a six-month reprieve, until May 1, 2009.  What does that mean to title companies and closers?

While lenders are directly responsible for compliance with the FACT Act, title companies are also affected, because the FTC requires that lenders use “appropriate and effective” review of companies they use as service providers, such as title companies who have private information given to them by the lender. The Lender is responsible to see that title companies and and closers due diligence in handling that private information. Therefore title companies and closers who virtually always and have access to private information such as social security numbers, and other loan information provided by the lender, will likely be requested to sign a statement that they have the ability to detect specific red flags relevant to their closing activity and handling of private information.  They may also have to sign off that they will report those red flag items to the lender and to take steps to prevent or lessen the likelihood of identity theft.  So don’t be surprised if you are contacted by a lender asking for proof of compliance. 

While mortgage companies are required to have a specific identity theft prevention program in place under the FACT Act, compliance by the companies they use as service providers (i.e. title companies) are the responsibility of the lender providing the information.  The red flag guidelines suggest that the lender may “require the service provider by contract to have policies and procedures to detect relevant red flags that may arise in the performance of the service providers activities; and either report the red flags to the financial institution or creditor, or to take appropriate steps to prevent or mitigate identity theft.”

So what should title companies and closers be prepared to do?  If you are performing services for lenders and handling private information, educate your staff.  Know the red flags.  If you haven’t received a request yet, designate a person to be in charge of that area to review incoming FACT Act Service Agreements, and use due diligence by having staff who handle private information take classes about the FACT Act and the red flags set forth under the act. More detailed information can be found HERE at the FTC SITE

Info On Home Closing

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