Archive | October, 2015

Here’s how TRID is reshaping title companies

29 Oct

HousingWire   October 26, 2015

Disclosure, accuracy requirements present challenges

It’s now almost a month since the TILA-RESPA Integrated Disclosure rule went live, and the effects are being felt up and down the pipeline across a variety of services and specialties in the mortgage finance industry.

This week, HousingWire asked Erin Sheckler, president of NexTitle, a title company based in Washington state, to discuss how the TRID rule from the Consumer Financial Protection Bureau will affect real estate transactions in the title space.

HousingWire: How has the TILA-RESPA Integrated Disclosure rule affected the transaction process from the title perspective?

Erin Sheckler: It’s a little early to tell since we’re really in the infancy of implementation. Currently, we are supplying quotes for the Loan Estimate but preparation and disclosure of the Loan Estimate resides with the lender. Early accuracy and communication are critical. If the information provided by the settlement service provider or title insurer is incomplete or changes, the initial Loan Estimate will have deficiencies, potentially requiring re-disclosure. We are all slowing down to check and double check the information being provided.

HW: Now that it’s been a couple of weeks, where are title companies finding the biggest challenges in dealing with TRID, whether it’s happening in their own space or up or down the pipeline?

ES: One of the biggest obstacles is disclosing title premiums under the rules of the CFPB. Since the Loan Estimate is intended to mirror the Closing Disclosure Form (CDF), title and settlement service providers must be mindful of how rates and fees are initially conveyed to the Lender – accuracy is critical. Rate calculators and other quoting services need to be updated to ensure that rates are disclosed as required under the rule. The single biggest challenge so far has been the calculation method required by the CFPB. It creates the necessity to disclose inaccurate title premiums in states where the lender’s title insurance premium is reduced when purchased simultaneously with owner’s title insurance. In areas where it is common for the seller to pay for the owner’s title insurance, the “cash to close” disclosed on both the Loan Estimate and the CDF may require manipulation, as well as the “cash from/to the seller” amount on the Seller’s CDF. This has been an incredibly difficult concept to impart to both the settlement agents and the lender. It’s created confusion and inaccuracy despite the stated goal of the CFPB of increased transparency.

HW: Based on the experience so far, do you think title companies and the rest of the industry will be ready when the official or unofficial grace period for TRID closes?

ES: I think it would be unwise for anyone to delay readiness due to any official or unofficial grace period offered by the CFPB. The grace period does not protect lenders from lawsuits and investors. TILA provides borrowers with a private cause of action. The regulatory grace period also does little to insulate lenders from liability during this transition. If an investor rejects a loan as unsalable, it will hardly matter that the lender escaped a fine from the CFPB. Without broad-based relief, lenders still face liability during the restrained enforcement period and are proceeding accordingly. Likewise, settlement service providers and title insurers should follow suit.

It is still very early to speculate on how widespread and to what extent the industry will be affected by TRID. As we get through the next few months and we begin to sit down at the closing table with consumers and the new Closing Disclosure Form we will have a much better view into what a post-TRID world looks like.

Trick or Treat!

26 Oct

hap hal

This month’s treat is a donation in honor of Breast Cancer Awareness Month to The Breast Cancer Research Foundation.

TITLE INSURANCE Protecting Your Home Investment Against Unknown Title Defects

22 Oct
Most first-time home buyers are familiar with various types of insurance (e.g., auto, life), but are unaware of what title insurance is, and the role it plays in real estate transactions. In the rush to close such transactions as quickly as possible, title insurance is typically an area that consumers commonly overlook in the home buying process.

If you borrow money to finance the purchase of a home or property, a lending institution will likely require you to buy a title insurance policy to protect its interest. As a consumer, it is in your best interest to be well-informed about title insurance, how title insurance works and key areas to be addressed when purchasing title insurance.
What is Title Insurance?

Title insurance can help provide the home buyer and/or the mortgage lender necessary protection against losses resulting from unknown defects in the title to your property that occur prior to the closing of a real estate transaction.

Unknown defects in a title, such as any outstanding liens on the property (e.g., unpaid real estate taxes by a prior owner) or encumbrances (anything that might hinder the owner’s right of ownership; e.g., errors or omissions in deeds, undisclosed errors, fraud, forgery, mistakes in examining records), can result in additional costs in the future or even invalidate a home buyer’s right of ownership in the property, and might also invalidate the lender’s security interest in the policy. Title insurance policies will cover the insured party for any covered losses and legal fees that might arise out of such problems.

What Do Title Insurance Agents/Companies Do?

Title insurance agents/companies search public records to develop and document the chain of ownership of a property. If any liens or encumbrances are found, the title company might require that the home buyer take steps to eliminate them before issuing a title policy. Title insurance agents might also hold money in escrow and perform closing services for an additional fee.

How Does Title Insurance Work?

Title insurance policies are indemnity policies — typically, they protect against losses arising from events that occurprior to the date of the policy, which is the date of closing. This is unlike other types of insurance policies, such as auto or life insurance, which protect against losses resulting from accidents or events that occur after the policy is issued. A title policy is usually paid for with a one-time premium that is handled at the closing of the real estate transaction.

Who Needs Title Insurance?

Lenders — If a mortgage is obtained in order to purchase property, nearly all lenders require that the home buyer purchase the lender’s title insurance policy for an amount equal to the loan. A lender’s policy is issued to a mortgage lender. The policy provides the lender protection from covered losses arising from any previously unknown defects in the title that have become known only after the insured property has been financed. The lender’s insurance policy will remain in effect until the amount financed has been repaid, the property is resold or until refinancing has occurred.

Owners — Either the home seller or the home buyer may buy an owner’s policy. In many areas, sellers pay for owner title policies as part of their obligation in the transfer of title to the home buyer. The party paying for the owner’s policy can be negotiated during the purchasing process. An owner’s policy is issued to a home buyer, and provides the home buyer protection from covered losses arising from any previously unknown defects in the title that existed at the time of purchase, and became known only after ownership of the property was acquired. An owner’s policy remains in effect as long as you own or maintain an ownership interest in the insured property.

 Marketing and Sales Practices

Although home buyers are free to shop around for a title agent or a title insurer, many home buyers do not do so. Because of unfamiliarity with title insurance, home buyers tend to defer such decisions to lenders and/or real estate professionals who are parties to the home buying transaction. As a result, conflicts of interest can occur if the entities making such decisions have a financial interest in a title agency/title company.

Section 8 of the federal Real Estate Settlement Procedures Act (RESPA) prohibits the giving or accepting of kickbacks and referral fees among persons involved in the real estate settlement process.

Key Points to Remember

  • Although a title insurance company will most likely be provided for you during the mortgage transaction process, be aware that you are not obligated to use the suggested title company.
  • Be sure to inquire about the services and fees included in the title insurance premium and any fees (e.g., cost of search and examination, closing services, etc.) that may be charged to you separately.
  • A lender policy only covers a lender’s loss; that is, it does not protect the home buyer from losses arising from defects in title. Consult with a local, reputable real estate attorney not involved in the real estate transaction to find out if it is in your best interest to purchase an owner’s title insurance policy.
  • Make sure to inquire about any discounts available on title insurance policies. Premium discounts might be available if both owner’s and lender’s policies are purchased from the same title insurance company or if you are refinancing your loan.
  • Read all title insurance documents provided at closing, including the fine print. Ask questions if any items are unclear; or if any terms, conditions or amounts are not in line with those provided in previous discussions.
  • If you believe that the title agent or title company in a real estate transaction is not following standard business practices (e.g., unexpected or undocumented fees), you can report the activity to your state’s insurance department. A map linking to state insurance department Web sites is provided at www.naic.org. Contact information regarding the reporting of consumer complaints is provided on these Web sites.

For more information about title insurance in your state, please contact your state’s insurance department. Access the U.S. Government Accountability Office’s April 2007 report on title insurance at http://www.gao.gov/new.items/d07401.pdf. The U.S. Department of Housing and Urban Development Web page http://www.hud.gov/ is also a good source of information about title insurance.

 
The National Association of Insurance Commissioners Headquartered in Kansas City, Missouri, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and the five U.S. territories. The NAIC’s overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, the NAIC is the oldest association of state officials. For more than 135 years, state-based insurance supervision has served the needs of consumers, industry and the business of insurance at-large by ensuring hands-on, frontline protection for consumers, while providing insurers the uniform platforms and coordinated systems they need to compete effectively in an ever-changing marketplace. For more consumer information visit InsureUonline.org.

Power of Attorney FAQ

12 Oct
7 Oct

ALTA Reports Membership Surge

Wednesday, October 7, 2015  from the National Mortgage Professional

The American Land Title Association (ALTA) celebrated its sixth consecutive year of all-time record membership. With more than 6,000 member companies, ALTA has surpassed its 2014 membership record by more than 600 companies.

“Our sustained record membership growth is a tribute to the high level of professionalism and standards that companies in the title insurance and settlement services industries strive to provide consumers, Realtors, lenders and others involved in real estate transactions,” said Michelle Korsmo, ALTA’s chief executive officer. “As the protectors of property rights, ALTA members seek high standards of accuracy and have access to an assortment of resources to help them provide quality service and differentiate themselves in the marketplace. We are excited to work with our new and current members. As the industry adjusts to the new real estate closing process due to new regulations from the Consumer Financial Protection Bureau, we look forward to continuing to be an educational resource for our members. From our Best Practices framework that helps protect lenders, consumers and the integrity of the real estate transaction to our tools to educate consumers about how owner’s title insurance protects their investment, we listen to our members and deliver needed products.”

ALTA’s membership includes title insurance companies, title and settlement agents, abstracters and real estate attorneys. The majority of these members are small business owners that rely on the variety of services and benefits that ALTA provides.

Economic benefits of the land title industry:

►Collects $4.75 billion each year in back income taxes
►Recovers $325 million each year in unpaid child support
►Employs more than 107,000 people supporting nearly 223,000 jobs
►Produces $26 billion in goods and services each year
►Pays almost $8 billion in wages each year

Of Interest…..

5 Oct
If a Land Trust May Be Your Borrower, Take Note
In Financial Freedom Acquisition, LLC v. Standard Bank & Trust Co., the Supreme Court of Illinois recently held that in a reverse mortgage transaction in which the property is held in a land trust, the mortgagor and the trustee must both receive the TILA disclosures, including the 3-Day Right of Rescission Disclosure.

The court ruled that since the TILA disclosures were not provided to the trustee on a timely basis, the trustee could rescind the transaction and proceed with its claim for statutory damages against the mortgagee.  Note that the Supreme Court of Illinois filed its opinion on September 24, 2015, but the opinion is not considered “final” until after the 21-day period in which rehearing may be granted expires.

Although mortgagees should consult with counsel for additional guidance on this issue, based on the ruling in the Financial Freedom Acquisition case it appears that mortgagees originating reverse mortgages in a state (in Illinois in particular, but in others to the extent they similarly are situated) in which a land trust is used to hold title for the benefit of the mortgagor may wish to provide the TILA disclosures to both the mortgagor and the trustee of the land trust.
Addendum to the Uniform Residential Loan Application (Form 92900-A) and  the HECM Reverse Mortgage Application

Form 92900-A is required in FHA loan packages, both forward and reverse, but much of the language is tailored to forward mortgages. In comments submitted to HUD this week, NRMLA highlighted sections of the proposed Addendum that do not apply to HECM mortgagees and consumers, and noted that there is currently no signature line for non-borrowing spouses.

HUD published a Notice in the Federal Register on May 15 requesting public feedback on its proposed revisions, which it said were necessary to:

  • Differentiate between the initial and final Uniform Residential Loan Application (URLA);
  • Revise mortgagee certification on debarment and suspension to be loan-level specific;
  • Remove references to HUD Handbooks no longer in use by the Office of Single Family Housing;
  • Update language regarding acceptable sources of funds;
  • Provide updated non-discrimination language; and
  • Update terminology to reflect new Single Family Housing Handbook 4000.1