HUD-1

Here Comes the Big Dog

The Consumer Financial Protection Bureau, the Big Dog of oversight for the Real Estate Industries including mortgage bankers, appraisers, real estate agents and title companies, will soon be put into practice. Under the new law, Tim Geithner will set a “transfer date” when key legal and regulatory authorities shift from such agencies as the FTC, HUD and the Fed to the new consumer protection bureau. In effect, that date sets the beginning of the bureau oversight (with initial funding projected at $500 million a year,) a staff and full set of teeth. By law it must be no later than Jan. 21, 2011. The new agency will assume control of a RESPA, the GFE, HUD-1 and appraisal management among other things. All daunting tasks.With the complications between state laws, federal laws and multiple multiple state and local bureaus, let’s hope this aligns the  process, making it more transparent and less complicated. Well we can hope anyway… I would settle for a Dog that can simply define where his yard ends and our yard starts…

Read More at Lexology.

Read more from Ken Harney at the Chicago Daily Herald.

First American Mortgage Fraud Review

A good article by Frank McKenna vice president of fraud strategy for First American CoreLogic in National Mortgage News.
Reasons why fraud risk is down but reported fraud is higher than ever.
(1) Fraud takes three to five years to fully recognize
(2) Fraud recognition and awareness is up
(3) Potential double counting due to new reporting procedures

HUD ISSUES RESPA UPDATE

In case you missed it, HUD updated their RESPA FAQs March 23rd because of problems and differences in interpretation.

HUD website:
http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs.pdf

Interpretatation of some of it:
http://www.klgates.com/newsstand/Detail.aspx?publication=6349

MN Dept Commerce Takes Action against Embezzeling Closer

Used with Permission of Robert Franco, Source of Title
The Minnesota Department of Commerce has summarily suspended the real estate closing license, resident insurance producer license and Notary Public commission of Kuntee Singramdoo and charged her with embezzling over $230,000 in real estate closing proceeds and using the money to pay off her own creditors or her family members’ creditors.

Singramdoo, a resident of Lakeville, was an independent closer hired by Walsh Title & Real Estate Services, where she provided real estate closing services, sold title insurance policies and notarized real estate documents. The Commerce Department complaint alleges that Singramdoo engaged in a pattern of misappropriating, converting and/or embezzling settlement proceeds by issuing Walsh Title checks for her own benefit or for the benefit of her family members.

The alleged embezzlement includes at least 184 checks issued between February 2004 and June 2007 to 24 different creditors including $68,109 to U.S. Bank, $48,863 to Wells Fargo, $800 to JC Penney, $4,764 to Macy’s, $6,286 to Goodman Jewelers, $800 to Bloomingdale’s, $6,866 to Honda, $2,734 to American Express and $2,323 to Discover.

Singramdoo admitted under questioning from Commerce Department investigators that she embezzled the funds but at this time has only paid back $10,000 to Walsh Title.

Singramdoo accomplished the embezzlement by entering her own creditors on the HUD-1 mortgage loan form as if the debts belonged to the buyer or seller and subsequently issued checks directly to the creditors in her name. She also changed HUD-1 mortgage loan documents after closings to reflect the fraudulent payments.

“This brazen embezzlement scheme is a warning to everyone to pay close attention to the loan documents you are signing during the closing of a mortgage,” said Glenn Wilson, the commissioner of Minnesota’s Department of Commerce.

Real Estate Titles US – Inexpensive Title Education

A new online education company, RealEstateTitles.us (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.

Are You Ready for the New RESPA HUD-1

Title Companies – All those line items for: Settlement or closing fee, Abstract or title search, Title examination, Title insurance binder, Document preparation, Notary fees, Title Insurance premiums, courier fees, Admin fees, fax fees, email fees, processing fees,  are going away… Fees will be either elimninated, or at the very least, reduced to cost under the new RESPA. No longer will the common mark-ups be acceptable, nor can they be hidden from the customer in a myriad of confusing fees.

Under the new RESPA law, courier fees, admin fees, closing fees and dozens of other charges cannot be hidden in those miscellaneous line items 1102-1199 on the HUD-1.  Title companies will now have to PRINT new all-inclusive rates. These will be filled in as a single item on ONE LINE – line1101. And title companies will have to hold to that number for the lender, because the lender is responsible for overages if settlement charges do not match the HUD-1. Title Companies will also have to legitimately back-up the numbers with specific reports as to their validity, and maintain those reports, so that HUD can audit their authenticity.

While this will make comparison shopping much easier for the consumer, and will force title companies to sharpen their pencils, it will be difficult for an industry that for a long time has used marked up fees for additional revenue. It would seem that no one is anxious to go to the new HUD-1 before he has to – it will cost title companies some serious revenue!

Are you ready for the change? This is NOT simply a matter of updating your software, it means a lot of planning and preparing detailed numbers for all those items on the closing statement. Actual out of pocket costs must be averaged and lumped into a single number for line 1101. (Other lines are intended for third party providers, for example, Line 1102 is only to be used when using a non-title company third party vendor for closing.) When the new numbers are available, schedules must be printed and distributed for your lenders to use on the new GFE, and for savvy consumers to see as well.

Watch for the complete gory details in my soon to be released online course: The new GFE Based HUD-1

RESPA – On Again, Off Again… Another Lawsuit Filed

According to Builder Online, HUD has delayed the implementation of RESPA that was to go into effect on Jan. 16th by 90 days. HUD agreed to the delay to assemble info it needs to defend against another lawsuit , this one brought  on by he National Association of Home Builders (NAHB) and other plaintiffs, including 13 large builders and their affiliated lenders and title companies.

HUD’s published final rule eliminates builders from offering home buyers incentives if the buyers are linked into using an affiliated title company, mortgage company, or other affiliated service provider. The NAHB suggests that dismantling these affiliations will not help the consumer and will additionally lead to job losses.  

HUD is also dealing with a lawsuit filed by the Mortgage Brokers Association (MBA) in December that is trying to block a rule requiring lenders and mortgage brokers to provide buyers with a “good faith estimate” that discloses loan terms and yield-spread premiums on the HUD-1 settlement statement.

Surprisingly, at this time, there seems to be no interest by the American Land Title Association (ALTA) to commence a lawsuit against the very unpopular required disclosure on the HUD-1 of the premium split between title agencies (that receive the vast majority of the premium) and title underwriters (who receive very little.) HUD has required the disclosure based on recommendations from the Government Accountability Office that has been critical of the industry practice.

Whats Good about the Good Faith Estimate?

I’m sure that much will be much written about the new good faith estimate. Personally, I think the RESPA folks did an excellent job. It’s not easy to reform in 1974 law, especially one has been abused so significantly in the last few years. But for those of us in the Title Insurance and Closing Industries who have dealt with a HUD-1 for many years, a mandatory,uniform GFE makes sense. Its outline matches nicely with the RESPA HUD-1 closing statement. I  especially like the “Summary of your loan” section, where it outlines the terms of the deal giving the initial loan amount, long-term, initial interest rate, if the rate can rise, prepayment penalties and whether or not the loan has a balloon. This is the gist of the deal. And I like the fact that it covers escrow accounts.

 

 As a longtime closer, the standard GFE makes sense to me. The obvious omission, I know, is that the annual percentage rate (APR) is not shown. I know many think that is a huge problem, but I disagree. It is a very difficult task to explain to people in any sort of terms that are relevant to them, what an APR is. After all, in the real world, few people keep their house, let alone their loan for a full 30 years. So to them,  that enormous dollar amount that you have to explain, saying how much they could potentially spend for the home over a period of 30 years including the original price, 30 years worth of interest, and various and sundry closing costs, is totally irrelevant to them. In reality, even for those of us killed in the industry, the good faith estimate is not an easy form. And I’m not sure that the consumer, even a very savvy one, will make good use of the form by obtaining and comparing it among several lenders. Americans tend to be rather lazy in that matter. Even though getting the right mortgage is the most important purchase of your life, (certainly more important that the price of the house) the task feels somewhat less exciting than watching paint dry on a wall.

 

But overall, I like the form and I think they did a good job. Now all we have to do is re- program all of those computers and regroup to explain the changes.

 

Audits and Title Insurance Fraud

Interestin article on the Grapevine Thread in Mortgage Compliance about what it’s like to go through title insurance Fraud investigation. You have to wonder why they are asking…

 There are many fraud scams in the Title Business these days, and auditing is one way of catching them. Most Underwriters will tell you exactly what they are going to audit if you ask. Primarily it runs to What info do you have in the file to back-up your title work -like an abstract or title search. Who did the work? Did you have an old title policy? Do you have payoff letters?

 Then they will look closely at the Documentation for the loan – Does the HUD match all the checks written? Does that match the title work. Red flags are checks written for even amounts. Checks written for items NOT shown on the title work, such as large checks written to individuals. Checks NOT written for mortgage payoffs is another.

They will be sure the HUD-1 balances. They will look to see policies have all been accounted for and paid to the underwriter. They will particularly watch related businesses where checks are written to the same parties over and over. They will contact your bank to see that the info you provide matches bank records.

Fraud has been a HUGE issue in the title industry recently, and with the downtun in business, it is rearing its ugly head. Every time a scheme is uncovered another rears up.

Have you been exposed to any audit issues.

Info On Home Closing

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