Wyatt Bell's Blog

CFPB Proposed Rule - July 9th, 2012

Wyatt Bell — Mon, 09 Jul 2012 16:16:15 EST

Nearly 1,100 pages contained in the proposed CFPB rule regarding the new Settlement Disclosure Forms.

This PDF file is over 9mb in size so it may take a bit to download into your browser. You may save it locally for better performance.

Proposed CFPB Rule of July 9th, 2012

Notarization via Web Cam

Wyatt Bell — Thu, 14 Jun 2012 11:47:11 EST

You turn on FaceTime in your iPhone. On the other end of the connection is a notary public who does the same. You're in North Carolina and the notary is in California but authorized to act in North Carolina. The signature is done in real time and the notary watches the act. The entire session is recorded in QuickTime.

March, 2011 - With a single physical signature, Virginia Governor Bob McDonnell has signed a landmark bill into law, making the Commonwealth of Virginia the first state in the Union to explicitly allow notarizations to be conducted online over a webcam.
The Act takes effect July, 2012.
Bill HB 2318 – now the law of Virginia – was created as a way to counteract notary fraud such as that most recently seen in the “robo-signing” frauds conducted during the foreclosure crisis.

State of New Jersey - Department of Treasury -

NOTICE CONCERNING ONLINE NOTARY SERVICES UTILIZING A WEB CAM OR OTHER VIDEO EQUIPMENT

The Division of Revenue requested legal guidance concerning the practice of online notarization services utilizing a webcam or other video in lieu of a personal appearance in front of a valid New Jersey Notary. It has been determined that New Jersey’s statutes do not allow for this type of notarization.

Until such a time, all citizens and Notaries Public alike are STRONGLY URGED not to take part in these services.

North Carolina introduced a bill to eliminate its “personal appearance” requirement in its notary law several years ago. The "personal appearance" requirement remained. Can "personal appearance" be satisfied electronically?

New Radar Detection Needed for Title Industry - Clever Frauds and Scams

Wyatt Bell — Wed, 13 Jun 2012 14:44:55 EST

A new title agent is licensed and registered with the state and has signed a bona fide agency agreement with a national underwriter. But there lurks one undetectable flaw.

The newly licensed and registered title agent writes a small percentage of business on the unsuspecting underwriter pursuant to a real and legitimate agency relationship.

However, a majority of business is written on what appears to be legitimate agency relationship with another underwriter, which in fact, does not exist and which is totally fraudulent.

Phony and crooked CPL's, title commitments and title policies are issued.

Agent keeps all the fees and remittances that would be due the underwriter under honest dealing. If a claim arises a policy switch can be done quickly.

Beware of Fraud Scheme - Hijacking Title Agent Corporate Name!

Wyatt Bell — Fri, 01 Jun 2012 17:59:55 EST

The Florida Land Title Association (FLTA) and the American Land Title Association (ALTA) have issued an alert from a Stewart Title bulletin that schemers are filing corporation articles with names similar to registered and bona-fide title insurance agents.

According to reports of the fraud these phony entities are creating title insurance commitments and providing lenders with insured closing letters.

The names of the corporations in the filings are almost identical to the registered agent name adding such suffixes as "services", "group" or "corporation".

This identity theft is done by those with no physical locations and use cell phones for communications.

Stewart Title lists the signs to look for:

1. Be aware of communications received from buyers, sellers, vendors, lenders, brokers or any other parties relating to a closing that you have not been asked to handle. This may seem like an innocuous request since many times a closing simply has not yet been referred to you, or your office was the proposed recipient of the closing and the file has been moved to another closing agency. However, these calls are also the primary method to catch this type of identity theft.

2. Many times a party to the imposter's closing will try to contact the imposter, but find your contact information in a phone book or in a vendor's or lender's database, and call you relating to the imposter's closing. You will need to train your staff to be cognizant of this specific type of phone call and if one is received, you will need to gather as much information from the person as possible relating to the imposter agency. It is imperative the parties are made aware your office is not handling the closing.

3. The use of positive pay, strict guidelines as to who is authorized to make withdrawals and continual diligence/oversight with respect to the transactions occurring in your escrow account.

4. Regular review of records maintained by the Secretary of State relating to your corporate name may be appropriate.

SAFE Act of 2008 - Feds Are Coming to a State Near You!

Wyatt Bell — Thu, 05 Apr 2012 11:43:50 EST

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”), was passed on July 30, 2008. The federal law provided states a one year window to pass legislation requiring the licensing of mortgage loan originators according to national standards. State agencies would hook into the Nationwide Mortgage Licensing System and Registry (NMLS).

The federal government is on the march and it appears from recent developments that licensing, testing and a number of former state level functions are beginning to give way to a giant federal net that will cover most all commerce.

This was highlighted by a headline, "NMLS is Being Outfitted for Non-Mortgage Industries". This article states the purpose is to "enhance the use of the NMLS to accommodate state use of the System for non-mortgage, non-depository financial services industries. This will give states the ability to use NMLS to license or register entities in a number of financial services industries, including consumer lending, money services businesses and debt collection. A dozen states are scheduled to start transitioning existing licenses and registrations onto NMLS as soon as this April, with more to follow in 2013".

Two entities of which I've never heard popped out - the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators - who are responsible for the Nationwide Mortgage Licensing System & Registry (NMLS).

If NMLS&R doesn't do its job Sec. 1509 states this:

Backup authority to establish a nationwide mortgage licensing and registry system. If HUD determines that the NMLSR is failing to meet the requirements of the legislation, HUD will develop and maintain system for registration and regulation of mortgage originators.

Also, those falling under its (SAFE) jurisdiction must pass a written test developed by the NMLSR (at least 75% correct answers out of minimum 100 questions) and administered by an NMLSR approved test provider. I would imagine the test development would apply to all commerce which would eventually come under SAFE.

But the larger issue is how this federal creep is bringing federal registries into dominance over state systems. Inasmuch as this articles refers to "non-depository and non-mortgage financial services industries" I can only assume it is a matter of time before title insurance licensing and regulation move to the federal level, especially with the fiduciary responsibilities regarding trust accounts.

The SAFE act is to establish a minimum net worth or surety bonding requirement that reflects the dollar amount of loans originated by a residential mortgage loan originator, or has established a recovery fund paid into by the loan originators

I'm curious how Closing Protection Letters will develop as these implementations unfold. Do you suppose the SAFE legislation could be expanded by agency interpretation to include a fund for title company defalcations?

SAFE Mortgage Licensing Act of 2008

The Amount of Information -- Abundance

Wyatt Bell — Wed, 22 Feb 2012 17:56:22 EST

In today's Wall Street Journal a review by Michael Shermer of a new book entitled, "Abundance, The Future is Better Than You Think", by Peter H. Diamandis and Steven Kotler gives a glimpse of the information being generated by the human race.

"If every image made and every word written from the earliest stirring of civilization to the year 2003 were converted to digital information, the total would come to five exabytes. An exabyte is one quintillion bytes, or one billion gigabytes—or just think of it as the number one followed by 18 zeros."

"That's a lot of digital data, but it's nothing compared with what happened from 2003 through 2010: We created five exabytes of digital information every two days. Get ready for what's coming: By next year, we'll be producing five exabytes every 10 minutes."

"How much information is that? The total for 2010 of 912 exabytes is the equivalent of 18 times the amount of information contained in all the books ever written. The world is not just changing, and the change is not just accelerating; the rate of the acceleration of change is itself accelerating."

"Technology has the potential not only to spread ever more information but to solve some of humanity's most vexing problems"

This sounds like a pretty interesting read. Of course, the other side of the argument is that such vast amounts of data leads to entropy or an eventual chaotic state.

The debate will go on as we build towards whichever eventual outcome.

CFPB - The Last Dance .... or Is It?

Wyatt Bell — Wed, 22 Feb 2012 07:33:17 EST

The Consumer Financial Protection Bureau has issued the final round of the proposed Settlement Disclosure Form which will replace the GFE HUD 1/1A. This round is being tested in Austin, TX.

Here're the latest proposed Settlement Disclosures from CFPB (Consumer Financial Protection Bureau):

The Tupelo Example appears to replace the current GFE (Good Faith Estimate)

Tupelo Example

The Basswood Example appears to replace the current GFE/HUD 1. No HUD 1A as of this release.

Basswood Example

More information is available at the CFPB web site.

New CFPB Settlement Disclosure Form (HUD 1/1A) - Round 3

Wyatt Bell — Thu, 26 Jan 2012 16:41:00 EST

The Consumer Financial Protection Bureau has issued the 3rd round of the proposed Settlement Disclosure Form which will replace the GFE HUD 1/1A.

Here're the latest proposed Settlement Disclosures from CFPB (Consumer Financial Protection Bureau):

Butternut

Hemlock

Title Insurance Employment Keeps Taking It On the Chin!

Wyatt Bell — Sat, 07 Jan 2012 10:55:01 EST

The latest jobs report shows the insurance sector created 3,300 jobs. But title insurance lost jobs and wages decreased.

Friday's US Job Report disclosed there are 64,900 jobs in the title insurance sector. That is a -4.1% decrease according to the figures redone for November 2011. In other words title insurance jobs are continuing to disappear.

The average wages are now $790.83 weekly. That reflects a double-digit decline of -15.7% according to the BLS numbers.

I would speculate that any argument regarding job loss and the redefinition of the title insurance industry doesn't have the job numbers to be persuasive.

HSBC, the banking giant, laid off 25,000 workers. Borders, when it closed, laid off 10,000 workers. Cisco laid off 6,500 workers.

We're a very small industry!

Insurance News

New CFPB Settlement Disclosure Form (HUD 1/1A) - Round 2

Wyatt Bell — Wed, 14 Dec 2011 10:01:29 EST

The Consumer Financial Protection Bureau has issued the 2nd round of the proposed Settlement Disclosure Form which will replace the GFE HUD 1/1A.

You may vote your preference at KNOW BEFORE YOU OWE.

Mimosa Example

Sassafras Example

I haven't had a chance to do the math on these. I'll post later with any irregularities.

New CFPB Settlement Disclosure Form (HUD 1/1A)

Wyatt Bell — Tue, 08 Nov 2011 20:16:07 EST

The Consumer Financial Protection Bureau has issued the 1st proposed Settlement Disclosure Form which will replace the GFE HUD 1/1A.

As many of you know these prototypes have been a roller-coaster ride regarding whether itemization has returned. Based on a quick view of the new CFPB Settlement Disclosure Statement it appears we may be headed back towards more resemblance to the original HUD 1/1A.

Hornbeam example (pdf file)

Ironwood example (pdf file)

You may vote your preference at KNOW BEFORE YOU OWE.

The tolerance section has been redesigned. There's a "total" 10% tolerance whereas the current GFE HUD 1/1A has 3 sections for tolerances.

We will obviously have to wait for further clarification and rule pronouncements to know the details.

CFPB - Round 5 - New TIL/GFE Form Prototypes

Wyatt Bell — Wed, 19 Oct 2011 10:16:53 EST

The CFPB has issued the 5th round of proposed changes to the TIL/GFE combined format. These may be viewed at CFPB website: Know Before You Owe

The new prototypes compare a fixed-rate (Pinyon Bank) and an adjustable-rate (Yucca Bank) loan:

Pinyon Bank - Fixed Rate

Yucca Bank - Adjustable Rate

These samples appear to have some itemization. This has been a real roller coaster! Earlier samples from CFPB show itemization and some don't! One can only wonder - what gives?

Could it be that CFPB will allow itemization based upon jurisdictional differences? This angle might also come into play considering loan types such as VA where the Administrator ruled that certain itemizations must appear.

The description "optional" has returned regarding the Owner(s) Title Insurance Premium. It may be that the word "optional" will be shown on refinance transactions as opposed to sales/transfers where the estate is being created in new parties.

According to a press report from the ALTA the CFPB will have a new proposed HUD-1/1A before Thanksgiving, 2011.

New HUD-1 By Year's End According to CFPB

Wyatt Bell — Wed, 12 Oct 2011 08:47:30 EST

According to reports from the ALTA RESPA Task force the CFPB will issue one more round of loan disclosure forms prior to working on integration with the HUD-1/1A.

A conference call was held between the ALTA RESPA Task Force and the Consumer Financial Protection Bureau. The timetable for introduction of the new loan disclosure forms and HUD-1 integration would be by year's end 2011.

According to the Task Force CFPB would not confirm whether tolerances will be part of the new HUD-1. The Task Force also reiterated the desire for title insurance disclosures which would meet jurisdiction differences.

The CFPB evidently didn't play any cards with regards to "itemization". The Task Force stressed the clarity and importance of itemization but in Round 4 of the proposed loan disclosure forms itemization was eliminated.

The CFPB expects to release one more round (round 5) of proposed mortgage disclosures before turning to the HUD-1 Settlement Statement.

Comments may be made at the CFPB website:

"Know Before You Owe"

CFPB - Round 4 - New TIL/GFE Form Prototypes

Wyatt Bell — Tue, 13 Sep 2011 09:25:17 EST

The CFPB has issued the 4^th round of proposed changes to the TIL/GFE combined format. These may be viewed at CFPB website: Know Before You Owe

Any thoughts that "itemization" may reappear for title fees and policies have ended in the latest revisions to the proposed GFE forms.

Round4-jasmine

Round4-nandina

Notice that items A through F have been discontinued in this version of the forms. Items A through F, which appeared in previous versions, would have corresponded with the GFE# numbering system currently in use.

It may be that the CFPB understands the enormous cost of implementing new HUD calculations and forms and is dovetailing into the current HUD 1/1A forms for minimal changes. I would expect the Department of Housing and Urban Development (HUD) to begin entering the picture with new HUD 1/1A forms which will still need revision to fit with the proposed changes.

After all the energy expended in explaining the difficulties with "non-itemization" it appears the "non-itemization" proponents have won!

Keep in mind the forms are the same. The differences are in the loan quote information. The Nandina has the lower "Estimated Cash to Close" while the Jasmine has the lower APR. If one is looking at out-of-pocket they may be tempted towards the higher cost loan which is counter-intuitive. This example has a mere $88.00 difference in "Estimated Cash to Close".

However, in the real world as the "Estimated Cash to Close" vs. the loan terms becomes wider it will be more difficult to choose. Does one pay more at settlement for less payments??

That's the problem with these prototypes. The terms are framed very simply - there's no empirical evidence that these forms will result in prospective borrower(s) choosing the most favorable loan terms! Many other factors are at play, especially since "non-itemization" hides potential advantages!

And it must also be considered that even though the Nandina APR is higher it may, indeed, turn out to be lower! The adjustment begins at the 4th year which means the interest rate could actually be lower from years 4, 5 and 6 whereas the Jasmine is stuck at 3.75% for the full 7 years. Just look at the bond market for the last 30 years - interest rates have been on a downtrend the whole way! And with The Fed stating they are holding rates at or near 0% into 2013 one could arguably go for the higher loan APR.

The APR adjustment is based upon the assumption that the initial rate will increase which is not always the case. How much refi business has been generated over the last 2 decades because rates decrease?

Beware Smart Phone Check Deposit Apps

Wyatt Bell — Fri, 19 Aug 2011 09:05:28 EST

A incident reported by The Florida Land Title Association demonstrates how clever some can be in using technology to ensnare the title agent in a fraud. Smart phones are wonderful but beware!!

The settlement went off without a hitch. The checks were issued and the parties left.

Several hours later the couple who had been issued a check for the settlement proceeds returned with the check and asked the title agent to instead wire the funds as the bank would take 24-48 hours to clear the check.

Unbeknownst to the title agent the couple had used a "smart phone" app to take a picture of the front and back of the check to make an immediate deposit. When the couple gave the check back to the title agent there were no marks or other indicators that the check had entered the system. The title agent, wanting to accommodate its customer, put the check in the file and proceeded to make the wire transfer!

It would seem prudent practice that once a check has been placed in a party's hand, and certainly if its left the settlement room, there can be no exchange until a satisfactory period has passed. The settlement officer conducting the closing should make it known that once the check is given there is no alternative allowing the parties the chance to alter the payment method prior to any check being released.

Many of the larger institutions are pushing the idea of the Smart Phone App which allows a snap-shot of the instrument to be presented for payment or deposit electronically. As marvelous and efficient as this Smart Phone process may be the settlement agent needs to guard against chicanery!!