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Source of Title Blog : RESPA

It's Time For Honest Competition
by Robert Franco | 2009/08/19

Hardly a week goes by without a news article on the evils of title insurance. They usually allude to the fact that title insurance is over-priced. Some call the fees "mysterious," others cite to the lack of "transparency," and Scott Woolley at Forbes calls title insurance premiums "dubious charges." Lately, they point out that title insurance is a $10 billion dollar industry.  Despite ALTA's CEO Kurt Pfotenhauer's statement that "nobody's getting rich" selling title insurance, the media, and the public, aren't buying it.

There is talk about federal regulation and many states have begun taking a hard look at addressing the issue before it comes to that. Maybe something does need to be done, but what is clear is that nobody seems to understand the nature of title insurance or the problems with the current regulations.

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Categories: Competition, RESPA, Small Agents, Title Industry, Title Standards

Source of Title Blog :: 3 comments ::

It's Now Easier To Sue A Sham AfBA In Ohio
by Robert Franco | 2009/01/30

The 6th Circuit recently ruled on an important case that will make it much easier to sue sham Affiliated Business Arrangements ("AfBA") for RESPA violations.  This may clear the way for private actions that will clean up the title industry - something the HUD and state regulators have been unable, or unwilling to do.  The court directly addressed the issue of whether a plaintiff must allege a concrete injury, such as an overcharge, in order to have standing to sue over a RESPA violation.  The answer - NO, an overcharge is not necessary for the plaintiff to have standing to bring the suit. 

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Categories: Consumer Advocacy, RESPA, Title Industry

Source of Title Blog :: 0 comments ::

The Seller's Concessions Ruse
by Robert Franco | 2008/05/29

I think HUD needs to address the abuse of seller's concessions.  It has become nothing more than a joke.  Why don't they just call it what it really is... borrower financed closing costs.  In many of these transactions, the seller really isn't giving any concessions, it's merely a game of showing the seller paying the borrower's fees and adding more money to the loan amount. 

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Categories: Escrow/Funding, RESPA

Source of Title Blog :: 1 comments ::

Make More Money!
by Robert Franco | 2008/05/20

I figured out the key to making more money in this business.  I could launch a new Web site and sell this information for a profit, but I won't.  Instead, I am going to share it with all of you for free.  This is a very simple system - it will not take you any additional time and you won't have to do any additional work.  Just follow these simple steps and start making more money today!

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Categories: RESPA, Title Industry

Source of Title Blog :: 2 comments ::

Here Comes The Bus
by Robert Franco | 2008/04/24

Small title agents should be paying attention to the abstractors' experiences with volume discounts... because HUD is about to throw them under the same bus that ran over the abstractors.  To briefly summarize the impact of volume discounts on abstractors - many large companies set up vendor management companies (VMC) to work with their abstractors.  As these large companies grew and began to control more work, they demanded that abstractors give them a volume discount.  But, when things slowed down and the volume wasn't there anymore, do you suppose the abstractors were able to get their previous fees reinstated? No - the VMCs notified their abstractors that because work had slowed down and they needed to reduce costs, the abstractors would have to take further fee reductions!  (see The Evolution Of The VMC).

RESPA has always protected title agents from similar pressures from their clients by prohibiting "a person from giving or accepting any thing of value for referrals of settlement service business." It has always been interpreted that "discounts" are "things of value" for purposes of Section 8 of RESPA.  But, the newly proposed rules seek to change that by changing the definition of "thing of value" to clarify that "it is permissible for settlement service providers to negotiate discounts in the prices for settlement services, so long as the borrower is not charged more than the discounted price."

Thus.... here comes the bus.

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Categories: Competition, RESPA, Small Agents

Source of Title Blog :: 5 comments ::

Re/Max Sues First American
by Robert Franco | 2008/04/21

According to a Denver Post article, Re/Max Suit Sparked State Probe, Re/Max is suing First American for $1.35 million for violating the terms of a marketing contract.  First American made the first payment of $660,000, then terminated the contract citing a clause that allows it to be cancelled if "legal or regulatory action alleging a violation of the Real Estate Settlement Procedures Act is taken." The lawsuit alleges that no RESPA violation had been alleged when First American decided to terminate the contract... but that could be coming.  Erin Toll, the director of the Colorado Division of Real Estate, was anonymously sent a copy of the lawsuit.  Toll was formerly the Colorado deputy insurance commissioner who's similar investigation resulted in at least a dozen kickback cases settled by the Department of Housing and Urban Development in 2005. 

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Categories: RESPA

Source of Title Blog :: 1 comments ::

RESPA Reform And Abstracting Fees
by Robert Franco | 2008/04/07

Today I am reading through HUD's proposed changes to the settlement statement. If one of the goals is to make the charges more transparent so that consumers can better understand the costs associated with their mortgage loans, why not include the "true" abstracting fees? I think some consumers, and probably even some of the regulators, would be surprised to know exactly what the title searches cost compared to what is charged on the settlement statement.

This is what HUD has to say about itemizing the title services fees:
In general, the HUD-1 must separately identify each service provider that is performing title services, along with the total amount received. If a party other than the title company listed on line 1101 of the HUD-1 provides services that are separate from providing title insurance, such as attorney and settlement or escrow agent services, the title company should separately itemize those services with the total amount paid to that provider, to the left of the columns. However, charges for services defined as "primary title services" such as abstract, binder, copying, document handling, or notary fees, should not be separately itemized on the HUD-1, even if a party other than the title company listed on line 1101 of the HUD-1 provides those services.

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Categories: Abstractors, RESPA

Source of Title Blog :: 5 comments ::

Oh, It Is Painful
by Robert Franco | 2008/03/19

I have been trying to get through HUD's Proposed Rule To Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs. At one point, I thought that I'd rather volunteer to test the latest CIA water boarding techniques. The summary of the proposed rule contains a rather long one-sentence paragraph that was particularly painful reading. (please put down any sharp objects you may be holding before you continue on)

HUD’s objective in proposing these revisions is to protect consumers from unnecessarily high settlement costs by taking steps to: Improve and standardize the Good Faith Estimate (GFE) form, to make it easier to use for shopping among settlement service providers; ensure that page one of the GFE provides a clear summary of the loan terms and total settlement charges so that borrowers will be able to use the GFE to comparison shop among loan originators for a mortgage loan; provide more accurate estimates of costs of settlement services shown on the GFE; improve disclosure of yield spread premiums to help borrowers understand how they can affect their settlement charges; facilitate comparison of the GFE and the HUD–1/HUD–1A Settlement Statements (HUD–1 settlement statement or HUD–1); ensure that at settlement borrowers are made aware of final loan terms and settlement costs, by reading and providing a copy of a ‘‘closing script’’ to borrowers; clarify HUD–1 instructions; clarify HUD’s current regulations concerning discounts; and expressly state when RESPA permits certain pricing mechanisms that benefit consumers, including average cost pricing and discounts, including volume based discounts.

So, you can understand why it is so painful to read. But, I must say that it isn't all bad. Some of HUD's work here is interesting and worthwhile. There are, however, a few concepts which I find questionable.

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Categories: Abstractors, RESPA

Source of Title Blog :: 4 comments ::

When RESPA Doesn't Protect The Consumer
by Robert Franco | 2008/02/21

I recently got wind of a RESPA violation that just blew into my office yesterday. It really bothers me, but I know that it happens all the time in this industry and nobody seems to care.

A buyer had his attorney draw up a sales contract on a $600,000 home he is buying; there are no Realtors involved. He told his attorney that he wanted my office to handle his closing. The attorney, a partner at the firm, told him that they own a title agency and if he closed there they would do it for premium only; they would waive his exam and closing fees. The buyer still insisted that the closing be held at my office, and he called to let me know that I would be getting the order.

I was very appreciative, but I told him that I cannot do it for premium only and I explained that waiving those fees to induce the referral of the order was a RESPA violation. I told him that if they were willing to close it for premium only, there would be no hard feelings if he took them up on their offer. He still insisted that we close the transaction for him.

Then I thought, I should call and ask our underwriters if I could do it for premium only - knowing the answer already. Of course not. But, it brought up a couple of interesting questions. First, RESPA is a consumer protection statute. How is the consumer "protected" if he has to pay more to close at my office than with a competitor who is willing to violate RESPA? It would seem that a discount given directly to the consumer is actually in his best interest and RESPA is doing him more harm than good.

Second, this customer had already referred the order to my office with no expectation that he would get a discount and, in fact, I had told him that I could not waive the fees. At that point, the order had already been referred. Thus, if I were to waive his exam and closing fees it could not be an inducement for the "referral" of settlement services because the referral had already taken place. It was actually the competitor who made the offer to close the transaction for premium only that was attempting to "induce the referral" when the buyer had previously stated that he wanted to close elsewhere.

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Categories: RESPA

Source of Title Blog :: 10 comments ::

The Punchline
by Robert Franco | 2008/02/20

I have long thought that RESPA has become a joke - now, HUD Secretary Alphonso Jackson has provided the punchline. Attorney Howard Lax recently wrote an article for RESPA News, HUD Violating RESPA?, that pointed out a clear Section 8 violation in a HUD sponsored program.

It is Oscar time. The award for Best Performance Sticking a Foot in Mouth goes to HUD Secretary Alphonso Jackson for his portrayal of a bona fide Cabinet Member.

According to a HUD press release:
First, individuals will be able to purchase a HUD Home with a $100 downpayment when they utilize an FHA-insured mortgage. Second, homebuyers can obtain a $2,500 sales allowance at closing when they use FHA financing, or a $1,000 sales allowance using other financing types. This incentive can be put towards closing costs, to make home repairs, or to pay down the mortgage. The $1,000 allowance for non-FHA financing must be used to pay closing costs. Finally, real estate brokers can obtain a $500 bonus when borrowers utilize FHA financing and a $250 bonus if borrowers use other financing options. The incentives are available through September 30, 2008.

As attorney Lax pointed out in the article, mortgage insurance is a settlement service, and HUD is not exempt from Section 8 of RESPA. For anyone who may not be familiar with RESPA, HUD explains Section 8 on their Web site quite clearly:

Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or any thing of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.

Hmmm... HUD's offer seems to provide an extra $250 bonus [kickback] for real estate brokers who direct their borrowers [referral of settlement service] to FHA financing [federally related mortgage loan]. I heard that the going rate for a referral in Florida was $300... I guess HUD is in the ball park.

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Categories: Ethics, RESPA

Source of Title Blog :: 2 comments ::

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Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco



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