Money and Finance

Who is Responsible for Who Gets Paid?

Whos on FirstWho to pay?  It starts to feel a little like “Who’s on first, What’s on second and I-don’t-know is on third” when we start to look at complicated mortgage transactions these days. We have mortgages, deeds of trust, lenders, assignees, beneficiaries, lender’s servicing agents, trustees, securities, exchange securities, and more.  

Here, as happens, title companies are charged with collusion in a complicated Ponzi scheme. I question how we legitimately know who should be paid in some of these complicated transactions.  Should the check for a payoff go to the Lender holding the Mortgage or to the Servicing Agent, in hopes it will be properly credited? Did the title company know the scheme?

From Lexology Title Insurance Article by Carlton Fields, an interesting read:

Escrow Agent: Where payments are disbursed to lender’s servicer and escrow agent has not knowledge of servicer’s scheme to defraud lender, lender fails to state a cause of action against escrow agent — Fazeli v. Williamson, No. H036951 (Cal. App. March 27, 2014) (affirming escrow agents’ objections)

CFPB Issues Report on “Pain Points” at Closing

There were few surprises in the Report Issued by the CFPB  from those who elected to respond to the “Request for Information” about closings.  It’s too complicated, and becoming more complicated by the day.

The 69 page report reviewed information it received from its recent  public Survey-about the challenges consumers face when closing on a home. The Bureau identified several “pain points” consumers regularly experience during the closing process. Consumers reported being frustrated by (among other things)

  • The short amount of time to review a large number of closing documents
  •  Not understanding the documents and the legalese terms;
  • The lack of resources providing explanations about closing documents, which are full of technical jargon; and
  • Errors in the quantity of paperwork resulting in long delays.

Our legislators, while hoping to make things clearer for the consumer, continue to make the process more complicated. In my opinion, the average consumer does NOT want to know the maximum amount they could pay for a loan, including principle and interest, points and expenses if they keep the loan for thirty years as disclosed on a TIL.  How many people keep the same house for thirty years with the same mortgage? But that is a requirement under the TIL law.

In CFPB’s defense, it oversees just a small piece of the process and has been mandated to combine the HUD-1 and TIL – a difficult undertaking. And it has  made excellent strides in asking the stakeholders for advice.  Lenders, states, counties, title companies, attorneys and others all impact the process and have input that the CFPB is considering and taking seriously.  I hope that the results will be as good as the process involved.

Just a thought for e-closings – Why not make the detailed  information available to those who wish to review such information without requiring that all the information be covered.  It’s overwhelming to read 100 pages and if the consumer knows that a FNMA mortgage is a standard form for the state and CANNOT be modified, there should be some comfort in that.

But right now, it’s too much noise- like the mail I get from the bank almost daily.  Every mailing includes multiple pages of disclaimers from the bank. There is so much “noise” in all the mail, that we miss the point. Who reads all that jargon.  I think the average consumer wants to know the monthly outgo – i.e. what is the total monthly PITI?  After that, the mortgage Note and mortgage deed, and title deed need to be explained. But to spend an hour going over a hundred pages of disclosures is just too much – both for the closer and the consumer. I love the idea of the consumer being able to read the documents online and choose the level of understanding, with an explanation to clarify the point of each document BEFORE the table closing.

E-closing would make all our jobs easier and the consumer much more comfortable with the process.  What do you think?

 

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.”

FNMA Says Most Consumers Now Believe they can Qualify for a Mortgage

WASHINGTON – Feb. 12, 2014 – More Americans now believe it would be easy for them to get a mortgage, according to Fannie Mae’s January 2014 National Housing Survey results.  A FNMA  National Housing Survey polled 1,000 Americans via live telephone interview. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts.

Positive consumer attitudes regarding the ease of a mortgage application climbed 2 percentage points to an all-time survey high of 52 percent, while those who think it would be difficult dropped 3 points to 45 percent – an indication that consumers view mortgage credit as more accessible.

While Freddie Mac still predicts more moderate home price gains over the next 12 months, consumers’ view that mortgage credit is more available may allow for continued but measured improvement in the housing recovery.

Consumer attitudes about the economy also improved in January despite downbeat jobs data for the past two months. The share of consumers who believe the economy is on the right track climbed 8 percentage points to 39 percent, while the share who believe it’s on the wrong track declined to 54 percent. Additionally, the share who expect their personal financial situation to improve in the next year increased to 44 percent, continuing an upward trend since November 2013.

“For the first time in the National Housing Survey’s three-and-a-half-year history, the share of respondents who said it is easy to get a mortgage surpassed the 50-percent mark, exceeding those who said it would be difficult by 7 percentage points,” says Doug Duncan, senior vice president and chief economist at Fannie Mae.

“The gradual upward trend in this indicator during the last few months bodes well for the housing recovery and may be contributing to this month’s increase in consumers’ intention to buy rather than rent their next home,” he adds. “The dip in overall home price expectations, though notable, is consistent with our view of moderating home price gains this year from a robust pace last year, while positive trends in perceptions about the economy and personal finances over the next year support our view of stronger growth in the broader economy.”

Survey highlights

Homeownership and renting

  • The average 12-month home price change expectation decreased from last month to 2.0 percent.
  • The share of people who say home prices will stay the same in the next 12 months increased 7 percentage points to 45 percent, while the share who say home prices will go up in the next 12 months fell by 6 percentage points to 43 percent.
  • The share of respondents who say mortgage rates will go up in the next 12 months decreased by 2 percentage points to 55 percent.
  • Those who say it is a good time to buy a house decreased from last month, down 2 percentage points to 65 percent.
  • Those who say it is a good time to sell a house increased 5 percentage points from last month to 38 percent.
  • The average 12-month rental price change expectation decreased from last month to 2.8 percent, tying the all-time survey low.
  • Forty-eight percent of those surveyed said home rental prices will go up in the next 12 months, a decrease of 5 percentage points from last month.
  • The share of respondents who said they would buy if they were going to move hit an all-time survey high of 70 percent, and those who say they would rent is at an all-time low of 26 percent.

Some Loan Servicers Run a Scam

A great article by George Mantor at RisMedia points out problems with some loan servicers. It reads in part:
“Servicing, the collecting and distributing of mortgage payments, is the land of opportunity…Who is in a better position to exploit a defaulting borrower than a person posing as someone who wants to help? And, it’s all part of a scam…”

link to  RisMedia article here

What Happens When Your Title Underwriter is Defunct?

A statement in A.M.Best’s special report posted by the freelibrary reports:

Title insurer failures are more bad news for homeowners trying to sell or refinance property in the current down market; as such transactions can trigger a title search and a potential claim. Recourse for policyholders can be difficult and, at best, slow, as very few states cover title insurance under their guaranty funds.

 

With the recent bankruptcy of LandAmerica, Commonwealth Land Title, etal, I wonder what has become of the liability for their title policies? For those who have legitimate title claims written by those underwriters, including lenders in this messy foreclosure and short sale market, what happens? Clearly, the title commitments that are being closed today show many title issues, with judgments, foreclosures and under-water sales commonplace. It seems some of the title problems were missed because of poor search and examination procedures, and lessened searches during a busy market. Anyone care to speak up? 

 

Read the full report here.

What does Mortgage Modification mean to the Title Industry?

The Title Insurance industry has slowed to a crawl. Most of the business at the closing table is either a foreclosure or a short sales. And with Congress’ plan to modify existing mortgages, even that pittance will be drying up. 

Congress plans to modify existing mortgages to lower rates so borrowers can afford their monthly payments.  How does this affect the title industry you ask? In the past, when mortgages were modified, title policies were still in the picture, because intervening liens were a concern. For example, let’s say Sam Smith wanted to modify the terms of his loan by increasing the loan amount. You were the first mortgage lender. If you modified the loan, you had to worry about what that would do to your 1st lien position. If there was a second mortgage or a tax lien on the property, changing the terms of your loan might bump you into second place or third place. The title industry therefore stepped forward with updates to the policies. we checked for intervening liens, we got subordination agreements from the secondary lien holders, we recorded lots of documentation, and endorsed the policy with matching fees for our work.

So, how is this different? Think about it. Titles on all of these troubled loans have already been insured. But this time, they likely won’t need to be insured again. The new loan modification law will generally decrease the interest rate and that will be an advantage to any secondary lien holders, putting them in a stronger position. Therefore, the modification should stand on its face, and no endorsements should be needed. So, there won’t be any need for that title review, or an endorsement to the policy, or new title insurance premium fees. Their might be a pittance for sitting down with the consumer to sign the modification agreement and record it (and with the new RESPA law, title companies won’t even be able to mark up the recording fee.)

Loan modifications are good for the consumer, and good for the economy. They help neighborhoods. They keep banks out of the painful REO business. But they provide little role for title companies. Ouch – another big ding for an already hurting industry.

The Homeowner Affordability and Stability Plan

Moody’s Economy.com estimates nearly 13.8 million of the 52 million U.S. homeowners, almost 27 percent, owe more than their homes are worth after many months of declining prices. So what does the Obama plan say and how will that affect title insurers?

The Homeowner Affordability and Stability Plan anticipates slowing 7-9 million foreclosures. One part of the plan would be to refinance mortgages on primary residences insured by Freddie and Fannie whose values have sunk below the mortgage balance. The plan would make the lender responsible to lower interest rates so that a borrower’s monthly mortgage payment is no more than 38 percent of his income. The government would then pay to lower that even further, down to 31 percent of the borrower’s income for a period of five years. The rate would then progressively increase to the original respective loan rate. The program would not be available to real estate speculators, for second homes, investment properties or “flipped” houses.

 

Benefits For the Borrowers:

This would significantly reduce monthly payments. Under the plan, not only will the borrowers amortize their loans quicker, but they will also receive an incentive for making timely payments, receiving principal balance reductions up to $1,000 each year for 5 years for good credit habits.

 

Benefits For the Lenders/Servicers

·         Servicers could receive up-front fees of $1,000 for each eligible modification meeting guidelines

·         They would also receive “pay for success” fees — awarded so long as the borrower stays current on the loan — up to $1,000 each year for three years.

·         Another incentive offers mortgage holders $500 paid to servicers, and $1,500 to mortgage holders, if they modify at-risk loans before the borrower falls behind in  payments.

·         A $10 billion quasi-insurance plan will insure lenders against falling values on modified loans, linked with declines in the home price index, as an incentive for lenders not to jump the gun on foreclosures due to fear of the continuing drop in home values.

·         Clear guidelines and rules for loan modifications for all loans owned or guaranteed by the Feds, including Ginnie, Fannie, Freddie, FHA, VA, etc. would be established

 

Congress is also considering allowing bankruptcy judges to rewrite terms of mortgages so long as the homeowners commit to make payments and stay in their homes.

So what does that mean for a title insurer? My bet is the regulations will provide that mortgage modifications will not require any type of endorsement to existing loan policies, leaving title companies with either no role in the process, or simply that of a loan modification signing agent.

 

Source: White House Press Office

 

Info On Home Closing

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