Regulation

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

 

Title Industry and the Bailout

As Americans, we are always trying to fix everything.  Instead of doing something right the first time, we think we can just fix a terrible job. Every time there’s a problem- be it legal, technological, economic or moral, we just want a quick fix. 

Even when we clearly see serious problems with what is happening around us -things like insider trading, Enron, pushing bad mortgages on people, collusion within related businesses, we want to overlook the root cause and just fix it.  Well, here we are again at election time.  And I am sick about the fixing that Congress is doing and the lack of ethics among our highest elected officials.  My first thought is, throw the bums out.  All of them.  They’re not doing their jobs.

Our legislators pamper private interests instead of doing what they were hired to do – looking out for the public good. They take bid trips and trade favors. They take sides, one party against the other. What happened to a sense of the common good for the people? What happened to “of the people, by the people, and for the people? ” There’s a growing disparity between the rich and the poor in the U.S. and around the world, medical costs are out of control, the poor have no insurance, Social Security is in trouble, we’re having to rescue the banks.  These are not new problems.  These are old wounds that have not been doctored.  Our legislators have let us down.

And the response to lack of morality?  Let’s just fix it with a new code of ethics!  Politicians talk about ethics and pass legislation requiring students to take ethics classes.   Do we really think we can fix everything by having someone spends 60 minute in an ethics class?  Are we now trying to assign responsibility for morality to a gov’t agency? Professional groups follow suit – land title associations, mortgage banking associations and others form ethics committees, and write fancy new ethics codes.   Do we really think we can fix everything by having someone acknowledge a new ethics code?

We now talk about regulations for the mortgage and title industry and rules for consumer protection.  We talk about beefing up the regulators.  Yes, the regulators are guilty, but we would not need that regulation if everyone were ethical.  The root cause of our problem is greed and a lack of ethics.  All of us in the mortgage and title industries have seen this train wreck coming for a long time.  Too many mortgages written too fast. CEO’s who simply say they wrote bad loans because they were paid more for them.  Loans the consumer couldn’t possibly repay.  Where was the morality along the way? 

But we are guilty too, we have become a society in moral disorder.  Somewhere along the way, with easy credit and eyes bigger than our pocketbooks, we seem to have completely lost our way.  Many signed mortgages they could not afford, knowing those loan applications were fraudulent.  We borrowed money to seek affluence and material things, rather than focusing on the truly important things in life like family, friendship and goodwill.  This bailout, or rescue plan, whatever you want to call it, is merely a symptom of our greed. 

It will take much more than a bailout for our country to recover.  This will not be an easy fix.  The fix will come only when we recognize and deal with the fact that ethical behavior and living our lives in a moral fashion is everyone’s responsibility and can only be done over a very long time in a variety of ways.  Ethics is not a fix, it is a daily soul searching to do the right thing.  Only when we find our character will this country be healed.

Do Title Companies Need to Deal with the FACT Act?

As of Nov. 1, 2008, compliance with the Fair and Accurate Credit Transactions Act (FACT Act) will be mandatory. The legislation requires that banks develop policies and procedures consistent with Customer Information Program rules to identify potential instances of identity theft. Creditors and financial institutions are obligated to implement a written program that would satisfy the requirements to detect, prevent and mitigate identity theft. They need to know the suppliers and vendors assisting them due due diligence to comply.  But how does that afect you as a small title company or abstractor?

It would be in your best interest to take a FACT Act course so that your company can say “Yes, we are familiar with and compliant with the FACT Act.”Question by Jeanne Johnson to Fact Act Consultant:

 

 

 

 

 

 

Does the FACT Act apply to Title Companies and Closers of real estate transactions that handle private information such as SSN’s, DOB, and other private information?

Response:
Title and real estate closing companies would only be directly covered by the Red Flag regulations if they also engaged in activities that would make them “creditors” under the rule.

They would be indirectly affected, however, if they are service providers for creditors since the creditors are required to make sure that their service providers have identity theft prevention policies to protect their customers’ information. They may well be asked for a contractual agreement to that effect. 

Melanie Berg
Wolters Kluwer Financial Services
Product Manager

6815 Saukview Drive
P.O. Box 1457
St. Cloud, MN 56303
1-800-397-2341 ext. 105732
320-240-5732 tel
320-469-6365 cel
[email protected]
www.WoltersKluwerFS.com

 

New Legislation Imposes Stricter Guidelines on California Title Insurance Industry

by Jarrod Clabaugh,  Printed with permission from Source of Title
   
Governor Arnold Schwarzenegger signed Senate Bill 133 into law on September 25, 2008. The legislation implements greater controls over the practice of title insurance in California. Introduced by Senator Sam Aanestad in January 2007, the bill focuses on inducements offered by title marketing representatives to real estate agents and brokers in exchange for the steerage of business to their title insurance companies. The bill was supported by both the California Department of Insurance and the California Land Title Association.
The bill provides the department of insurance with significant new powers to regulate marketing practices in the title insurance industry. In particular, the bill creates the first program in the country to register and regulate title company sales representatives.

According to the bill, a person is prohibited from being employed as a title marketing representative unless he or she holds a valid certificate of registration issued by the commissioner for a three-year period. Should a person market title insurance without a valid certificate, the commissioner can issue a cease and desist order prohibiting that person from further marketing.

Additionally, under the legislation, title companies must notify the commissioner when a title marketing representative is hired or terminated. It also establishes an application process for the certificate of registration and allows the commissioner to set a fee to obtain or renew a certificate in an amount sufficient to defray the actual costs of processing it. The legislation states this cost cannot exceed $200.

The submitted application must contain several facts about the applicant, including the person’s residential address, principal business address, and the applicant’s mailing address. The applicant must also submit a statement, signed by an officer of the business by whom the applicant is or will be employed, certifying that the applicant will be provided training within 60 days of the hiring date or date of application. The applicant must submit another statement as to whether he or she has previously had a certificate of registration revoked, suspended or denied.

Should a marketing representative violate any terms of the state’s title insurance code, the legislation states that the department can revoke, suspend, restrict or decline to issue a certificate of registration if it determines at a hearing that the representative did violate the law. Additionally, any title marketing representative who has his or her certificate revoked by the department is not permitted to reapply for another certificate of registration with the department for five years from the date of revocation.

The legislation also establishes that it is unlawful for any title insurer, underwritten title company or controlled escrow company to pay, directly or indirectly, any commission, compensation, or other consideration to any person as an inducement for the placement or referral of title business. The actual placement or referral of title business is not a precondition to a violation of this section, whether the violation is or is not a per se violation pursuant to subdivision.

While the legislation sets many guidelines as to what is considered an inducement, one particular aspect that alarms title agents is they can no longer pay for anyone’s food, beverage or entertainment but their own.

“So no more free lunches for clients,” said Greg Knowles, an agent with Lawyers Title in Santa Barbara. “That is a huge change in our business. I am having a hard time thinking I can’t take a good customer to lunch. I can’t take one of them to a baseball game or local sporting event.”

“Competing specifically on the quality of the work we do and the price we charge probably isn’t the worst outcome in the world,” he added. “I do have many close friends in this business that my wife and I may invite over for dinner, is that illegal as well?”

The legislation mandates that representatives can continue to provide parties with promotional items with a permanently affixed company logo so long as each individual item’s value does not exceed $10. These gifts, however, cannot be gift certificates, gift cards or any other item that has a specific monetary value.

The legislation states that the provision or payment of any form of consideration as an inducement for the placement or referral of title business not specifically set forth in the bill will be considered unlawful and is, thus, prohibited.

“Restricting the illegal activities by title marketing representatives is a win for businesses and consumers,” said Steve Poizner, the department of insurance’s commissioner. “By curtailing the practice of real estate agents and brokers recommending a specific title insurer to their clients due to incentives provided by title marketing representatives, competition and transparency are fostered in the insurance marketplace.”

The legislation was the culmination of several years of effort by the department of insurance to address the growing problem of inducements. While such practices are illegal, the department had no enforcement authority over the individuals who used them before this legislation was signed. Now, the department is provided with regulatory oversight of title marketing representatives.

“Senate Bill 133 enhances consumer protection while maintaining the healthy, competitive title insurance marketplace in California,” said Craig Page, the executive president of the CLTA. “The legislation is just the latest example of the industry’s effort to promote consumer choice in the title insurance market. The competitive market in California has led to title insurance rates that are below the national average according to Bankrate.com.”

“Senate Bill 133 is win-win legislation for California,” Aanestad said. “It is pro-business and it is pro-consumer. By curtailing the practice of some real estate agents and brokers who recommend a specified title insurer to clients due to the use of incentives offered by some title marketing representatives, it promotes real competition in the title insurance marketplace. Competition among insurers can transfer into lower rates and a better deal for homebuyers.”

 

 

Laws Change to Protect Consumer When Recording Deeds

A Philidelphia online Newspaper, RoxReview has a must read story about title theft and how they plan to combat the bad guys. Here is an excerpt about the ploy:

…thieves find houses that are vacant and obviously have not been looked after.

They use public records to learn when taxes and water bills have last been paid to make sure the properties’ owners have had little involvement or have not been paying any attention to them…
(then) a house thief simply gets some legal stationery, types up a deed and gets the property transfer notarized … He then presents that paperwork to the city’s Records Department, pays some fees and in a matter days becomes listed as the owner of record.

The article suggests title insurance as a protection from the problem, but it wants the government to do more. Learn what laws or regulations Philadelphia is considering to curb the growing problem.

Buy a New Home, Bail on the Old

Situation: An acquaintance of yours plans to walk away from her four-bedroom house in a close by subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby. She comes to you for advice. She can find the same exact house now for half the price she claims. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300, and she doesn’t want to continue to own a home that is now worth $200,000 less than what she paid for it just a couple of years ago. What to do?
Across the country with falling home prices and rising foreclosures, lenders are discovering this new trend – borrowers with good credit, who buy a second home at a much lower price than the one they have, then default on the mortgage for their first home. We are not talking sub-prime mortgages here, we are talking market fluctuation.
Homeowners are even being coached through the process by unethical real estate agents. A few unethical agents, looking to obtain a commission encourage clients to run, not walk away from their mortgages. They are told to make payments only until they close on the new house. Rarely are they told the downside of significantly damaged credit. The agents quip it is not the buyers fault. The lender appraised it too high! The lender is unreasonable. The lender is refusing to forgive the debt or restructure the loan. The agent does not mention the fact that in order to legitimately qualify for the new loan, the borrower will likely have to dishonestly hide the liability on the existing loan application and can be subject to serious legal penalties for fraud.
Notwithstanding the mortgage industry’s frenzy as it tries to restructure billions of dollars in mortgages, it appears fraudsters have been able to “buy ‘n bail” with ease. The lending industry is just catching up to the latest scam.
The End Result?
Lenders and government agencies are once again forced to draft more and tougher regulations so that homeowners cannot qualify for new mortgages as they bail on old loans that going into foreclosure. Accordingly, Fannie Mae is making changes that will likely take effect in July, so that borrowers with a mortgaged first home have to produce signed leases to prove that they can pay both mortgages, property taxes and insurance on both residences, or they will have to provide proof of sale for the first residence to qualify for the new loan.

Title Insurance Abstractors and Examiners – Who is in the Drivers seat?

I struggle, I believe the world is flat. With computerization, the world has become one. I know that we can and are significantly cutting the cost of posting title plants outside of the US. I know that with a solid education system for title plant personnel, outsourcing of title plants to other countries can produce an excellent product at an excellent value.

I also know that with 50 states, 3143 Counties, Parishes or Independent Cities and tens of thousands of taxing authorities in the USA, a “thorough” title search can only be compiled at the local level. There are just too many nuances. Did you know that a parking ticket is a lien on the land in some jurisdictions? Ever heard of an airport lien? How about sidewalk liens, ditch liens, impact fees? Every jurisdiction – federal, state, county, township, city, village jurisdiction has its own rules and regulations. Every jurisdiction – federal, state, county, township, city, village has its own politics that will not allow complete sharing of information. The shear quantity of information (at this point in time) together with local politics (possibly forever) does not allow the possibility of a complete, thorough and accurate title search without local intervention.

We still need a competent local title abstractor and a competent local title examiner to do the traditional solid title work that used to be the norm. The key here is used to be. What I think does not matter. Abstractors and title examiners are just passengers in the car. The title insurance underwriters are driving. We are just going along for the ride.

The title insurance underwriters decide HOW they want to insure real estate. The title insurance underwriters decide if they can best make a profit by becoming risk underwriters. The underwriters decide if outsourcing of title plants will occur because it is cheaper and their duty is ultimately to their shareholders. The underwriters decide if outsourcing of title examinations, commitments and title policies will occur because it is cheaper and their duty is ultimately to their shareholders.

A serious discussion needs to take place as to the future of the industry. But what about today? What do we do?

New Orleans NALTEA Conference was Worthwhile

A group of about 40 interested abstract and title professionals from at least 18 states gathered in New Orleans for the 5th annual NALTEA conference January 18-20. The group discussed serious concerns about privacy issues relating to land records, and the outlook for the smaller title players the future.

Two particularly interesting speakers went through Louisiana history and land records. Debbie and Chuck Thibodeaux, of TENSTAR Corporation shared many interesting facts about Louisiana and the influences exerted upon the state’s people due to the various cultures that called this area home over the years.
LA was primarily settled by black slaves and by French prisoners, who were evicted from France and sent to Louisiana to settle New Orleans when the King was unable to get people to move to the “new world.” Debbie told me she was born and raised in Martinsville, LA an hour or so away from New Orleans in an area refered to as Le Petit Paris, where everyone spoke French on a day to day basis. She said that in the 1970’s, when she was in public school, all her textbooks, newspapers and other reading materials were in French. One day they were told that some new teachers were being brought in to teach them English. They called the teachers Mlles. Americaines. I had no idea that there were parts of the country so different in the 1970’s. But then again, we still had segregation in the 1960’s.
While Louisiana is different from the other 49 states, because its law is based on French Napoleonic Code, and its rules and regulations remain different from those maintained and followed in other states, as Debbie and Chuck also went through a number of documents used in LA, that were not familiar in name, they were variations of a theme for documents familiar to us all, with Parishes in place of counties, etc.
Another outstanding speaker was Matthew Monson, an attorney who defended an abstractor, who according to custom left off a couple of parcels from a search that were clearly not intended to be searched, but which lead to a law suit against him. The case was fascinating, and reminded us all to be sure to review our professional liability insurance!

Blaine Ardoin from the LA Land Title Association said that he felt the conference was very good, and especially enjoyed the education, saying how hard it is to get excellent speakers for title abstractors and examiners. Many of the persons who took the prep session for the NALTEA Certified Examiner Designation said they were pleased with the review. The test itself was deemed difficult, but fair.

In addition to working sessions, there was an amazing Ghost Tour of New Orleans, led by an author of paranormal activities who has been seen on BBC, PBS, and many other TV programs. She did an excellent and scary job of leading us through the haunts of the city. Along with Bourban Street Jazz, outstanding Cajun restaurants, and a preliminary mardi gras parade, it was an event to be remembered.

Just Another Bad-News day for the Title Industry

It’s hard to believe an esoteric industry like ours can be so maligned. Are there really that many BAD title agents? Are the Title Underwriters so GREEDY they are willing to sign anyone who can bring in a title policy? Will it take NATIONAL legislation for the industry to become moral? Just today, in Boston, Kansas City, Hartford, San Diego, Bismark, Denver… and elsewhere, here is just a sampling of what the media says about title insurance:

Title insurance and me
Boston Globe – United States
They’re mad because I didn’t buy homeowner’s title insurance and, they say, because other people may not buy a policy as a result. …

State goes after licenses of Guaranty Title managers
Springfield,MO,USA
Matt Blunt signed extensive title insurance reform legislation. Senate Bill 66 clarifies a duty to fully disclose to consumers separate price information …

AG, DCP, Insurance Dept. announce $700000 settlement in kickback …
Hartford Business – USA
In an October lawsuit filed on behalf of DCP and the Insurance Department, Blumenthal alleged that Reiner, which also sells title insurance, used sham …

Lawsuit against title company won’t be a class action
Kansas City Star – MO,USA
In fact, May and his law firm have already filed similar suits against title insurance companies in other jurisdictions. Pending in Jackson County Circuit …

Legal tangles surround hidden cemetery
Kansas City Star – MO,USA
Stewart Title Guaranty Co., his title insurance company, said the mistake did not hurt the land’s value at all. They offered him $10000 in damages. …

The art of the double deal
Denver Post – Denver,CO,USA
In a double closing, buy-sell transactions are staged in succession, often in separate rooms of the same title insurance company. …

YOUR PLACE TO CALL HOME: Realtors can help you find answers
Suburban Journals – Town and Country,MO,USA
What will be the total cost of the title insurance or loan you are securing for your new house? Can the company you hire meet the deadlines that you have in …

Watch who leads through crisis
TheReporter.com – Vacaville,CA,USA
Real estate brokers, mortgage brokers, mortgage lenders, title insurance companies, fire insurance companies, real estate appraisers, and attorneys – are …

Want to Find Treasure in the Sierra Madres?OpEdNews – Newtown,PA,USA
They include financing, title insurance, bank trust regulations, and other tools to provide security to the foreign investor. All Mexican land within 100 km …

Official wants to keep program but halt abusesRocky Mountain News – Denver,CO,USA
Earlier, as the state’s deputy insurance commissioner, she cleaned up a national mess involving kickbacks in the title insurance agency, which included her …
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This once a day alert just gives a sampling…

First American cuts loose 84 Affiliates under State Settlement Agreement

Florida’s Chief Financial Officer has announced that First American Title Insurance Co. must sever its business relationship with 84 limited partnership title-agencies in Florida and have its business activities closely monitored for one year.The agreement also requires First Am. to pay $5 million in penalties and costs to settle charges that it paid kickbacks to builders, bankers, real estate agents and brokers for referral business.

The settlement agreement follows a yearlong investigation by federal and state agencies — the U.S. Department of Housing and Urban Development, the state Department of Financial Services and the Office of Insurance Regulation. They found First American in violation of the Florida Insurance Code and federal law.

Future of the 87 affiliates is unknown.

Info On Home Closing

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