December 12, 2012
California Says Third-Party Vetting Firms May Lead to Violations in the Law
California's Commissioner of Corporations recently issued a bulletin warning that the business models of some third-party vetting companies could lead lenders and escrow agents to inadvertently violate the law.
As we've previously reported, some third-party vetting companies are requiring that potential service providers pay a fee in order to be prescreened by the companies and to appear on a list of "approved" service providers. The California bulletin reminds escrow agents about laws against the payment of referral fees for soliciting escrow accounts, such as the RESPA prohibition that prohibits the giving or receiving of any fee, kickback or thing of value for the referral of settlement business. The bulletin defers to the Consumer Financial Protection Bureau to determine whether third-party vetting companies are violating this provision. You may view the entire bulletin here.
More Warehouse Banks Delay Vetting Requirements
Following announcements by First Tennessee Warehouse Group and Texas Capital Bank last month, two more warehouse banks, Amerisave Mortgage Corp. and Generation Mortgage Co., have announced they are also postponing requirements that title and settlement agents obtain certification from third-party vetting companies by January 1, 2013. Amerisave indicated that its decision is due in part to the fact that the vetting company it is using has not been able "to vet a sufficient number of settlement agents to support a smooth implementation of the initiative." Both Amerisave and Generation Mortgage indicated they will continue to use their existing in-house settlement agent approval processes.
TLTA responded early to this issue by raising concerns with TDI, and their staff is continuing to review the issue. We will continue to monitor this issue, and in the meantime, if you receive a solicitation from a vetting company or a demand by a lender that you use such a company as a condition of doing business, you are encouraged to ask questions about the necessity and safety of such a measure and seek guidance from your legal counsel and underwriters.
Bill Extending Bank-Account Guarantees Passes Key Senate Test
MarketWatch | December 12, 2012
Small banks won a small victory late Tuesday. The Senate, in a 76-to-20 vote, approved a procedural motion on a bill that would extend an unlimited guarantee program for certain non-interest-bearing transaction accounts through to 2014. The program, which is set to expire Dec. 31, was created in October 2008 during the height of the financial crisis for bank accounts used mostly by small businesses. This will likely clear the way for another procedural vote and a final vote in the Senate by as early as Thursday but it is unclear whether House lawmakers would back it as well. Read More ยป
New Payoff Statement Not Being Widely Used
Earlier this month, we asked you whether the new Payoff Statement was being used and working properly. The new statement was created to provide efficiencies in the payoff process and also help ensure that title agents would not be forced to pay shortages in payoffs due to reliance on earlier calculations of payoffs by lenders.
Our survey indicates that the new statutorily required payoff statement does not appear to be widely used in the market place. Of those who said the payoff statement is not working well, the majority cited the lack of participation by large national lenders. Others indicated that the inability to request the form's use by phone and the long turn-around make it a less practical option. It was also noted that the form can be improved with added information such as the loan number. The survey does demonstrate, however, that regional, community, and state banks do seem to be using the form, and when it is used, it has been helpful to the process. In at least one instance, a member was able to point to the rule and form to get more necessary detail for a payoff.
If you haven't taken the survey yet, you may still take it here.
Next Steps on CFPB's Proposed Mortgage Disclosures Rule Not Likely Until Summer
American Land Title Association
Last week, the American Land Title Association (ALTA) hosted a meeting with staff from a variety of real estate and mortgage finance trade associations to discuss public policy priorities, including the Consumer Financial Protection Bureau's (CFPB) pending rulemaking on mortgage disclosures. Staff from trade associations such as the National Association of Realtors, the Mortgage Bankers Association, the Independent Community Bankers Association and the Credit Union National Association agreed that additional action on the mortgage disclosures was not likely until this summer. Participants agreed that this issue will likely be on hold until after the CFPB has finalized other key Dodd-Frank rulemakings, such as the ability to repay, risk retention and high cost loan rules. Most of these rules are under a statutory deadline to be completed by January 21, 2013. The group did agree to keep in close contact on the mortgage disclosures and to look for good opportunities to discuss the issue with Congress and the CFPB.