Beware! Wire Fraud is at an All Time High.

WireFraudSQYou’ve done it!  You took a Buyer from shopping for a house, to a contract on a house, to the closing table and you couldn’t be more ecstatic for them.  Then… in total shock you find out your Buyers have wired thousands of dollars to a thief!  You discover the “I could never be a victim to wire fraud, it’d never happen to me” has actually happened to you!  It’s becoming more and more common in our industry and way more sneaky and sophisticated than you may think.

Unfortunately, we are seeing attempts to divert wires to imposters’ accounts on a weekly basis, leaving the Buyer, Seller, Realtor and Title Company at risk.  More often than not, the fraudster hacks into the Realtor’s email account (yes YOUR email account) or creates a close duplicate email account along with your exact signature, and then posing as the Realtor gives bogus instructions trying to divert the funds of one of the parties involved.  It’s happening and it could very well happen to you!  As a Realtor, the video below is a great tool to send to your Buyers & Sellers warning them of the risk.  NAR’s General Counsel, Katie Johnson, has made this video to help you educate your clients on how to avoid being in a wire fraud scam.

Here at Independence Title, we have put many policies and procedures in place to combat this growing issue.  This document is a great tool to send to clients during the contract process.  We send this out to all parties with a commitment and/or contract.  It is critical that you take the time to educate your Buyers and Sellers and warn them of this risk.

How can TRID Regulations affect your commissions?

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It is important to remember that the new closing disclosure forms, created by the CFPB, are federal loan forms and these promulgated forms are used in all 50 states.  This allows for consistency when consumers are buying or selling real estate.  Since each state has their own set of regulations, regarding real estate, they may have their own disclosures that will need to be executed at closing in addition to the federal forms.  In Texas, the Texas Department of Insurance created the Texas Disclosure (Form T-64) to adhere to Texas regulations.

The Texas Disclosure:

  • Explains and breaks out simultaneous title policy premium rates.
  • Itemizes title company fees and recording fees if combined on CD.
  • Specifies all agents receiving a portion of the commission.
  • Allows the consumer/seller to authorize the title company to fund and disburse.

Per the Texas Department of Insurance, anyone that receives funds from a real estate transaction must be disclosed at closing.  The Texas Disclosure does allow all the payees on the Commission Disbursement Authorization (DA) to be listed on the disclosure. This section of the document is on the page that is signed by the consumer and seller at closing, unlike page 2 of the 2010 HUD. If the title company does not have an agent’s DA prior to the consumer or seller executing this document, one check will be cut at funding directly to their broker. This will have no affect the other agent in the transaction as long as their DA is received in a timely manner.

How are you going to see your figures for closing?

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As we near the end of 2015 I think we should focus on one detail of the new Consumer Financial Protection Bureau (CFPB) regulations, which is the American Land Title Association (ALTA) Settlement Statement. For most residential transactions the ALTA Settlement Statement is a Realtor’s new best friend. This form is quickly becoming the golden ticket among title companies as a solution for navigating new privacy rules that limit which closing documents can be shared from a real estate transaction.

New lending practices mandated by the CFPB, effective Oct. 3rd, in conjunction with existing privacy laws, prevent title companies from sharing the Borrower’s Closing Disclosure with the seller or with Realtors. The Closing Disclosure, or “CD,” combines the HUD-1 and Truth in Lending form and is prepared in most cases by the lender. There are promulgated authorizations from TREC (last paragraph of the new Third Party Financing Addendum) and TAR (“Authorization to Furnish TILA/RESPA Integrated Disclosures”), but it is unknown if lenders’ compliance departments will accept these authorizations. The Closing Disclosure contains non-public information like the term of the loan, interest rate, payment amount, and so forth.

The ALTA Settlement Statement shows all fees from the contract and the Closing Disclosure It also allows Realtors to confirm that all provisions of the contract have been honored and all agreements between parties are satisfied, without specific authorizations for the lender to release the Borrower’s CD. The ALTA form does not contain non-public information, and can be shared with all parties. Most importantly, Realtors requesting a preliminary closing statement will likely be receiving the fees on the ALTA Settlement Statement.

If your title company is unaware of this solution, feel free to refer them to the “ALTA Combined Settlement Statement”.

For more information, visit the Independence Title Blog, and our Austin Education page.

Should you have coffee with your lender?

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CFPB & TRID regulations are now upon us! As of October 3rd any loan applications submitted will fall under TRID (TILA RESPA Integrated Disclosures) regulations. If you have a lender that you refer business to Independence Title Co encourages you to have coffee or lunch with them to find out how your lender will be conducting business with the new rules & regulations.

Over the last 10 months we have spoken with numerous loan officers, processors, attorneys, and compliance departments and each lender may interpret TRID regulations differently from one another. Here is a list of questions to get the conversation started with your favorite lender.
Q: Who prepares your Closing Disclosure?
ITC Perspective:
• Most lenders are taking on this responsibility
• They are responsible for the accuracy of the Closing Disclosure
• They are also responsible for adhering to the strict timeline for delivery
Q: How will you deliver the Closing Disclosure to the consumer?
ITC Perspective:
Delivery method can impact closing date
• USPS mail may require up to 7 days
• Overnight delivery may require up to 4 days
• Hand delivery or electronic delivery may require 3 days
Q: Do you require a signature on the Closing Disclosure to start the 3-day review period?
ITC Perspective:
• It is not in the regulations that the consumer must sign the Closing Disclosure
• Lenders may or may not want a signed copy returned
Q: Can I get a copy of the Closing Disclosure from the lender?
ITC Perspective:
• The regulations state that the Closing Disclosure to the consumer
• The Texas Association of Realtors created an Authorization Form for consumers to give authorization for their Realtor to receive a copy of the Closing Disclosure
• Some lenders may not accept this form but they might have a similar form to allow the Realtor to receive copies of the disclosures
Q: What is your contract to close turn around time?
ITC Perspective:
• Most lending professionals agree that a 45 day turn around time is realistic
• By early 2016 we might see a 30 day contract to close timeline
Q: Tell me about your pre-qualification/pre-approval process?
ITC Perspective:
• Prior to the CFPB there was a regulation in regards to pre-qualification/pre-approval process in existence but it was mostly overlooked
• The rule stated that a lender cannot require upfront documentation prior to a bone-a-fide loan application
• With CFPB audits right around the corner some lenders may be changing their pre-approval process
• Consumers may voluntarily provide upfront documentation for pre-approval
• See our Consumer’s Guide Brochure

For more information on CFPB check out our related blog post

Our Online Calculators ready for the New Regulations

New Regulations Are Around The Corner

Are you unsure how to best prepare your clients for closing in light of the new rules set out by the Consumer Financial Protection Bureau(CFPB)? We’ve got you covered!

Below are seven tips to help you and your client prepare for the changes effective October 3rd, 2015.

  1. Encourage your buyer to remit financial documents to the lender voluntarily for pre-approval
  2. When considering an offer on a listing that includes a pre-approval letter, confirm the following with the lender:
    1. pre-approval was based on more than a credit score
    2. proper verification documents were obtained
  3. Set realistic expectations with your clients regarding the timeline to close and emphasize items now required earlier in the closing process such as the buyer’s choice for the home warranty company
  4. When writing a contract or considering multiple offers, confirm a realistic closing time-frame with the lender.
  5. Become familiar with the new closing documents; Independence Title will be utilizing the following documents for TRID transactions:
    1. Borrower’s Closing Disclosure
    2. Seller’s Closing Disclosure
    3. ALTA Settlement Statement
    4. Texas Disclosure
  6. To ensure proper commission disbursements due to the new Texas Disclosure, remit your disbursement authorization form to the title company well in advance of closing
  7. Mark your calendar to keep track of the closing disclosure timelines for each transaction

 You’re not alone in preparing for the new regulations, we’re ready at Independence Title! 

Below are seven ways we’ve worked to ensure continued smooth closings for your clients.  We have:

  1. the largest education & training department in our industry in Central Texas
  2. taught over one thousand classes on the new regulations and implementation to the REALTOR and lender community
  3. updated our online calculators to comply with CFPB and TRID regulations and provide accurate estimates 
  4. completed software updates to our closing systems that integrate with lender portals allowing for back and forth communication of fees, documents and instructions
  5. trained all Escrow staff to prepare and are ready for your next transaction
  6. proudly become the first title company to implement a Best Practice Policy Guide to comply with CFPB requirements
  7. continued to provide resources for the real estate and lending community to communicate with clients such as A Consumer’s Guide to Buying or Selling After October, 3, 2015 and Why You Need Title Insurance

 

Keep Calm Independence TItle

Our Online Calculators are Ready for the New Regulations

As many of you now know the implementation date for the new TILA RESPA Integrated Disclosures (TRID) regulations set out by the Consumer Financial Protection Bureau (CFPB) is October 3rd. Most residential transactions with a loan applications dated on or after October 3rd, 2015 will be affected by these new regulations. This summer we released a brochure, The Consumer’s Guide to Buying or Selling After October 3rd, to aid in your conversations with clients.

If your clients have bought or sold a home in the past, the new forms will look different so even seasoned buyers and sellers may have questions. One change on the forms is how title insurance is disclosed; the loan policy will be disclosed as if it’s the only policy being purchased (called single issue) and the owner’s title policy is marked as an optional purchase on most literature from the CFPB. We’ve prepared a brochure for your clients, Why You Need Title Insurance to help them understand what they’re paying for.

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We pride ourselves on providing some of the best online tools in the real estate community, and our calculators are no exception. If you need to know the title insurance premium; how much a seller may net from the sale of property; how much a list price needs to be in order to net a certain amount; or the closing costs and estimated payments on a particular loan, you can plug in some numbers and receive an instant estimate. To keep these figures accurate and assist with the process of gathering fees for the new disclosures we’ve been working hard with developers to update the calculators. Below are the updates you’ll find available:

Our Premium Calculator calculates the promulgated rate set by the Texas Department of Insurance of the Owner’s Title Policy, Lender’s Policy and endorsements. The update now shows the cost difference between a Loan Policy being issued alone (single issue) and  an Owners Title Policy and Loan Title Policy being issued at the same time in one fee (called simultaneous issue).

Premium Calculators: Austin | DFW | Houston | San Antonio

The Loan Estimate Worksheet is completely revamped for the new CFPB Loan Disclosure. This calculator provides lenders with all the fees needed to complete their loan estimate including:

  • title insurance premiums
  • recording fees
  • courier fees
  • escrow/closing fees
  • tax certificate fees

The Loan Estimate Worksheet prints to a PDF revealing exactly where the fees need to appear on the loan estimate.

Loan Estimate Worksheets: Austin | DFW | Houston | San Antonio

In addition to updating our calculators, preparing educational literature on these changes, and updating our software systems we have created and taught over one thousand classes to the real estate community. Our goal is to be a resource to the real estate community during this transition, if you haven’t attended one of our classes contact a Business Development Representative today.

Do You have Survey-a-phobia?

Anyone working in this industry for a few years has a scary survey story or two to tell. I heard one recently from a local REALTOR; she had what you might call a “challenging client,” who needed a good deal.  They finally found a house and although the contract negotiations were very tough, the buyer’s agent prevailed! During the contract negotiations she assumed the existing survey was acceptable.  Unfortunately during negotiations regarding the inspection, the title company had to reject the survey. Instead of paying for a new survey, those buyer’s have opted out. 

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We all see surveys on almost every transaction we close, but do you know what all the little marks and symbols mean?  Do you have survey-a-phobia?

They didn’t teach us to read a survey in real estate school.  Most of us learn it as we go, or unfortunately generally when a survey problem arises.

Most lenders require a land survey before lending money on any type of real estate transaction. A survey provides an overhead view of the property and reflects all the structures built on the property, any and all easements, building setback line requirements, and boundary/property lines.  A survey can be used in many situations outside of buying and selling a home. Any time you plan to dig on your property it’s important to know where the underground easements are! If you’re building a fence, the survey will tell you the exact locations of your boundary lines. Having a survey can often end a dispute with a neighbor about the property line.

Wouldn’t it be nice, as a REALTOR, to know the ins and outs of a survey, and have the confidence to tell your clients their survey contains the key items needed for closing approval? We have good news; You can! We now offer a new MCE approved class called “Surveys at a Glance.”  In the class you’ll learn the different types of surveys and how they function.  You’ll also receive a survey checklist and the ability to recognize key items within the survey. Contact a Business Development Representative today to find out about our next class or schedule one for your office.

Now who picks the title company?

This question returns as the hot topic of the day every few years, revived by changes in promulgated contracts and tweaks to federal and state regulations. Several respected legal minds have weighed in, and the details matter in getting from federal law to day-to-day business practice in Texas.
The most common regulatory citation in this discussion is Section 9 of the federal RESPA law (Real Estate Settlement Procedures Act), which states that sellers may not “require” a buyer to use a particular title company as a “condition of the sale,” where the buyer is purchasing with a “federally related mortgage loan.” Phillip Schulman, formerly counsel for the Department of HUD and now with the DC firm of K&L Gates, is considered one of the most reliable interpreters of RESPA. His article in the March issue of Realtor Magazine made some important distinctions, and points the way for how we apply the rule in Texas. Schulman explains that “required use” in the context of RESPA means a buyer must use a particular service provider AND is paying the charges related to this service. This is an important consideration in other states where the buyer typically pays for the title policy. In Texas, more often than not, the seller pays for the cost of the owner’s title policy, pointing the way for the choice of title company to remain a negotiable item in Texas.

Schulman also acknowledges that there are typically two policies issued – an Owner’s Title Policy and a Loan Policy. The Texas Department of Insurance promulgates a “simultaneous issue” rate for the lender’s policy of $100, plus the cost of lender-required endorsements. Schulman states that the buyer can pay for the Loan Policy without the seller being in violation of RESPA as long as that buyer is free to purchase the policy anywhere. In Texas, a buyer would pay the full rate if they purchased a Loan Policy separately, but theoretically a buyer is free to make that choice. Schulman says as long as the seller pays for the owner’s policy, the seller may negotiate to use their preferred title provider.

Schulman also makes a distinction between the choice of settlement agent (the transaction management and closing arm of the process) and the title insurance company (the underwriting entity issuing the title policy). In theory, a seller could require the use of a particular title services provider as long as that provider can issue a policy from the buyer’s preferred title insurer. In this scenario, an independent title agent who has a choice of underwriters would be able to accommodate the preferences of both the seller and the buyer.

Here in Texas, the Hancock McGill firm is a regular contributor to this discussion. Here’s their take: “Since Texas sets rates and no negotiation is allowed, there is little reason to apply RESPA Section 9 to Texas transactions. However, HUD has not been willing to state unequivocally that Section 9 does not apply to regulated title premium states such as Texas.” The firm advocates a conservative position on the issue, suggesting that a seller who wants to control where the transaction closes would be prudent to pay both the Owner’s Title Policy and the $100 Loan Policy on behalf of the buyer.
The clearest statement on the application of the RESPA rule in Texas comes from the Texas Association of Realtors: “If the seller pays for the owner policy, the choice of a title company is a matter that can be negotiated in any contract. The only law governing this issue is under the Real Estate Settlement and Procedures Act (RESPA), which provides that if the buyer pays for the owner policy, the buyer is entitled to select the title company.”

One small wrinkle in this discussion comes from the Department of HUD. HUD has recently implemented a “Buyer’s Choice Program,” which allows buyers of foreclosed properties to choose the title company – if the buyer pays the fees. HUD has historically required the use of specific providers specializing in the unique requirements of these transactions. HUD will still bear the cost of title fees if the buyer agrees to use one of these preferred providers.

So, who picks? Based on legal opinion, it seems safe to say that the choice is a negotiable item in Texas, with that negotiation being tied closely to who pays for the cost of the service. In the day-to-day, market forces affect the balance of power in these negotiations. With inventory low in many Texas metro areas and a steady stream of new residents moving to the state, sellers have some advantages in all areas of negotiation. Just bear in mind that a seller who tries to both dictate the choice of title company and negotiate for the buyer to pay the costs is violating RESPA if there’s a loan involved.

Kara McGregor
Sr. Vice President of Business Development
Independence Title Company

WIRED UP: Moving Money in Real Estate Transactions

The big moment in a real estate transaction is at the finish line, when all parties receive the benefits outlined in the contract. For the seller, the benefit may be proceeds from the sale, allowing them to buy another home, fund their retirement, or just close a chapter and move on. The benefit to the buyer is keys to the property, pride of homeownership, an investment for the future. From there, Realtors receive commissions, contractors are paid for their work on the property, etc. Click here to read more.