follow the link to an article worth reading if you are a lender or title insurer

It is this holding that resulted in most of the substantial increase in the disgorgement amount ordered by the Director. The ALJ had held that the RESPA violations occurred at the time of the closing of the underlying loans, and thus limited disgorgement to those loans that had closed after July 21, 2008 (three years prior to the CFPB’s gaining its authority to bring administrative enforcement actions). Director Cordray instead included all payments made by the mortgage insurers to Atrium after July 21, 2008, regardless of when the underlying loans closed. This substantially expanded the number of payments subject to disgorgement.

http://www.jdsupra.com/legalnews/cfpb-issues-final-decision-in-in-re-phh-54552/

3 day rule

CFPB is seeking consumer feedback about the closing process

https://s3.amazonaws.com/public-inspection.federalregister.gov/2013-31436.pdf

glory hallelujah....notary signing agents will have standards!!

During the MBA Annual, a special committee of major lenders and title companies known as the Signing Professionals Workgroup announced the creation of best practice standards for notaries handling loan signings. These recommendations were the result of a year-long investigation and discussion for new notary standards within the mortgage process.

“After the Consumer Financial Protection Bureau issued the ‘Service Providers Bulletin in April 2012, financial institutions have been held accountable for verifying the credentials of their third-party service providers,” said Thomas Heymann, president and chief executive officer of the National Notary Association. “Until now, there were no consistent or broadly acceptable standards for the notaries who represent lenders at the signing table.”

In said CFPB Bulletin, lenders were told to verify that their service providers complied with federal law and maintained “appropriate training and oversight of employees or agents.” In addition, lenders are expected to establish ongoing monitoring programs, and put in place enforceable consequences for providers who fell short and failed to quickly address their shortcomings. For these reasons, the NNA and the members of the SPW committee felt compelled to act and shore up this end of the process.

http://www.thetitlereport.com/TTR/Articles/New-mortgage-signing-standards-announced-by-group-59381.aspx

Nine title companies run by one employee in one office?

A Kentucky law firm is in the crosshairs of the Consumer Financial Protection Bureau for its operation of nine title insurance companies.

The bureau sued the six-lawyer Louisville firm, Borders & Borders, on Thursday, claiming the title companies were used to pay kickbacks for work referrals, report the Wall Street Journal Developments Blog, the Louisville Courier-Journal, and the National Law Journal.

The suit (PDF) alleges the law firm paid for referrals by operating nine joint-venture title insurance companies with local real-estate agents and mortgage brokers. The nine companies didn’t have separate office space and were operated by one law firm worker, the suit says. The CFPB claims the split profits for title work were illegal kickbacks that violated the Real Estate Settlement Procedures Act.

http://www.abajournal.com/news/article/did_title_companies_disguise_kickbacks_law_firm_sued_by_consumer_agency_den/

But principals at the firm publicly disagreed with the CFPB's findings.

"This case concerns a number of title agencies that were affiliated with our firm several years ago," Borders & Borders said in a statement. The firm calls the title agencies 'affiliated business arrangements,' and says they are "expressly allowed by RESPA."

"There were disclosures to every consumer, as required by the statute, and in every instance in which title insurance was issued through the agencies, the consumer approved," the law firm said. "We note that the CFPB does not allege that there was any consumer harm, or that any consumer paid a penny more for title insurance issued through the agencies in question. Instead, the CFPB is trying to enforce its own version of rules that are not only not in the statute but which have been declared unconstitutional by a United States District Court. We are very disappointed by the CFPB’s conduct, and we will certainly defend the case vigorously."

The Department of Housing and Urban Development kicked off the initial investigation, prompting Borders to shut down its joint ventures. The case was then moved to the CFPB in July 2011 when the bureau obtained RESPA enforcement authority.

http://www.housingwire.com/articles/27619-cfpb-hits-kentucky-law-firm-with-respa-suit

title company wants to change borrower net proceeds after the rescission period has expired

HI!

  I just refinanced my house, We signed all the FINAL HUD FORMS! The title co sent us a check for the amount that we are getting from the lender, This was the final hud settlement forms . Now the title co wants me to hold the check and says they will stop payment on it if we deposit it. Everything was notorized and witnessed. After waiting the required 3 day resition period everybody was funded. Now he says I have to wait! Is this legal after closing and can he change the amount of our proceeds? Something seems to be fraudulent!

If the figures are being changed, you should be eligible for another 3 day rescission period.  Contact your lender immediately and tell them what is going on.  Tell them you insist that they inform the title company that it is too late or that they redo the closing statement and give you another 3 day right to cancel. Tell them you will contact the Consumer Finance Protection Bureau and the state banking department if they refuse to grant another right to cancel period. If you still don't get help, in addition to contacting these agencies you might want to talk with an attorney about sending in the cancellation form and rescinding the transaction anyway.

The entire purpose of the federal right to rescind on a refinance of a primary residence is to give the consumer a period of time to review the terms and the dollars involved in the refinance.  You have to have REAL figures to consider before you waive your right to cancel.  If these figures were wrong - and they might be legitimately in error - then you need to have good figures back in front of you with the right to cancel.

If the reality is that you would have cancelled if you had correct figures, then I believe you still have that right.  If the reality is that you would not have cancelled if you had the correct figures, then you might want to just go along with the correction.  There is a difference between a legitimate error and a bait and switch situation.

Hope this information is helpful.

Diane

CFPB throwing the book at Castle & Cooke for violating originator compensation rules

“We are taking action against the type of practices that precipitated the financial crisis,” said CFPB Director Richard Cordray. “Consumers should be able to get a mortgage without worrying about how the financial incentives of their loan officers may cause them to pay higher rates than they actually qualify for.”

The CFPB also said Castle & Cooke failed to adhere to certain recordkeeping requirements set forth under Regulation Z (Truth in Lending Act) and Title X of the Dodd-Frank Act. Specifically, the bureau said Castle & Cooke violated laws that require companies to retain their compliance records for a certain period of time. Creditors are required to retain evidence of compliance with the rule. The complaint alleges that Castle & Cooke did not record what portion of each loan officer’s quarterly bonus was attributable to a particular loan and did not reference its quarterly bonus program in each loan originator’s compensation agreement, in violation of federal consumer financial law.

http://www.doddfrankupdate.com/DFU/ArticlesDFU/CFPB-sues-mortgage-company-for-alleged-steering-vi-58561.aspx?utm_source=vwDFget&utm_medium=email&utm_campaign=DFU_Weds_Enews

mistake in refinance not discovered until after rescission period

Hello Diane,

I noticed your blog online back in 2007 regarding Title/Escrow questions.  

My husband and I refinanced our home a couple of months ago.  We told the lender that we did not want the loan balance to increase.  When all of the documents were prepared and we were shown the HUD-1 for approval, our loan balance went up by $5000.  We were not happy with this and decided that we didn't want the loan.  But our lender assured us that we were going to get $3000 back to borrower that we could then apply to principle.  We felt better about this because then our new loan would only be increasing by $2000.  So we decided to go forward with the loan.  The next day we signed all of the documents and the HUD-1 stating that our new loan was $398,000 (up from $393,000) and we were going to receive a check for $3000.  

About 10 days later we received a check in the mail for $1500 instead of $3000.  There was no explanation as to why the check was short by $1500.  When we talked to the lender about this, she asked the title company to explain why the check was short.  At first there was no response from the title company.  Finally, after several attempts to get their response, the title company said there was an error and that $1500 was credited twice and should have only been credited once. 

My question is this:  

I understand that mistakes can be made in preparing documents, but we based the whole purchase of our loan on the fact that we were getting $3000 back.  We would not have purchased this loan had we known that we were only getting $1500 back.  Also, if there was an error, shouldn't the title company have notified us within the 3 day rescission period so that we could have the opportunity to back out of the loan based on accurate calculations?  If the title company didn't know of the mistake until after the 3 day rescission period, shouldn't they have then given us another 3 days to rescind based on the accurate information?  Was it right for them to go ahead and fund the loan without notifying us of the error?  Did they just assume that we wouldn't care and would buy the loan anyway?  Basically, we were sold a loan and signed documents based on false pretenses.  They had a price tag on their loan and we bought it at that price.  If they put the wrong price tag on their loan shouldn't they be held responsible for what the price tag stated?  They are telling us now that they put the wrong price tag on the loan but are now forcing us to buy it at the higher price.  We never would have bought this loan based on their new calculations and they never gave us a chance to rescind based on accurate calculations. 

Any clarification on this would be much appreciated!

Sincerely,

Amy

Hi, Amy:  I would make a giant stink out of this.  I would immediately send a certified letter to the lender - Attn:  Compliance Officer. Copy the letter to the title company, the loan officer, the Consumer Finance Protection Bureau, the state insurance department, the state banking department.  Insist that you want to be made whole. If you have copies of email conversations  with the lender and the title company send them with the letter.

The HUD-1 Settlement Statement is to have a comparison of the Good Faith Estimate versus the HUD-1.  I find it very hard to believe that the error did not come to the attention of the mortgage lender when they did their pre-closing approval of the HUD-1.  They are supposed to check this comparison which is on page 3 of the HUD-1.

The other mistake is that the title company did not check to make certain the transaction balanced before they did the closing.  If an amount was credited twice this would have been revealed in the balancing stage.

Good luck and let me know how it works out for you.

Diane

on the evolution of our industry

Diane,
I am the branch manager of a title insurance office. I've enjoyed your blog for the last year or so and I am wondering what your thoughts are on the CFPB proposed changes to the Truth in Lending and RESPA act disclosures and their effect on our industry. I understand and applaud the goal of protecting consumers but I am concerned that these proposed changes will hurt small title offices. 
Your thoughts?

Hi, T:

Thanks for your kind words about the blog. I take a long view of this business. I've been in and around it since 1973.  It's always been in a state of constant change.  Interestingly, though, the community of people just keep playing musical chairs and manage to find places in the ever changing evolution.  So, I don't worry too much about the possibility that small agencies such as mine might be effected.  We've always tried to roll with the punches, stay honest, and serve the needs of consumers, lenders, and real estate agents.  Somehow, doing that we've been able to find niches in large and small markets that have allowed us to survive.

I have already discussed with my staff that it is possible that the evolution of the industry might eliminate or severely change the role of a title agency.  If we can't find a way to get rid ourselves of the lousy agents and maintain professional integrity, then like mortgage brokers before us, the business model may be considered too risky and the good guys will be tossed out with the bad.  I have assured my staff that they ought not to worry because no matter what, the work of moving real estate will march on.  It is a necessary function and there will always be a place for well trained people who know how it works.  We'll just move into some other position.  Some of us will use our skills to create new businesses that function within a new workplace model.

We need not to be buggy whip makers trying to protect the way we make our living.  We can evolve.  Don't be afraid.  ;)

Diane