2012 Year in Review: New Lender Demands, CFPB Mortgage Disclosures Among Top Advocacy Efforts
December 27, 2012
For much of 2012, ALTA’s top advocacy priority was the Consumer Financial Protection Bureau (CFPB)’s proposal to replace the current TIL, GFE and HUD-1 Settlement Statement with integrated disclosures required under RESPA and TILA.
While ALTA was able to achieve some victories in the proposed rule, there’s still plenty of work to do protect the industry’s current role in the transaction.
ALTA, with input from its RESPA Task Force, submitted a letter to the CFPB with its concerns and suggestions. Additionally, ALTA has held several webinars to educate members on the proposal and help provide information on how to comment directly to the CFPB on how the proposed forms will impact business and consumers.
Part of the process surrounding the work of the CFPB also gave rise to an opportunity for Chris Abbinante, ALTA’s 2011-12 president, to testify in June before Congress. In his testimony before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity, Abbinante provided Congress with the industry’s six principles to help ensure that the CFPB avoids unintended consequences for consumers, the industry and the entire real estate market.
Over the summer, ALTA’s advocacy efforts turned to new lender demands and the emergence of settlement agent vetting companies. Since the housing bust, regulators are holding lenders accountable for the actions of the service providers. Lenders have been reassessing their operations, looking for areas that could lead to losses. Lenders have put a focus on settlement services because of the potential for significant losses due to escrow theft and the significant regulatory penalties written into federal laws, including TILA and RESPA.
An outcome of this has been the creation of settlement agent vetting companies. Settlement agents are receiving letters from warehouse lenders indicating they must be vetted by these third-party companies in order to continue closing loans for them. ALTA’s Board of Governors, along with input from the Abstracters and Title Insurance Agents Executive Committee and the Title Insurance Underwriters Executive Committee, has developed best practices to satisfy lenders’ need to comply with their regulatory requirements.
“The best practices serve as a benchmark for the real estate settlement and mortgage lending industries and illuminate the high level of professionalism that ALTA members follow to protect consumers and businesses,” said Michelle Korsmo, ALTA’s chief executive officer. “Providing professional service to consumers and safeguarding funds is the cornerstone of this industry, and ALTA will work to ensure title and escrow agents continue in their role of facilitating the safe, efficient and compliant transfer of real estate.”
Short Sale Affidavits
Through the combined efforts of ALTA and its engaged members, Freddie Mac changed a requirement that mortgage servicers force closing and escrow agents to sign arm’s length affidavits when conducting a short sale. In its new guidance, Freddie’s affidavit includes “the best of each signatory’s knowledge and belief” language. This improvement addresses ALTA’s concern that closing agents were being asked to certify information that they did not and could not know. In addition, due to the encouragement of ALTA members, Freddie Mac dropped the requirement that the affidavit be notarized. This was a great win for the title industry.
National Flood Insurance Program
In July, the National Flood Insurance Program was extended for five years. ALTA pushed for a long-term solution to ensure that closings in flood-prone areas were not delayed because of consumers’ inability to get affordable flood insurance.
Reform of Freddie Mac and Fannie Mae stalled in 2012, but the Federal Housing Finance Agency (FHFA) has been quietly laying a foundation for the future of housing finance by forcing the GSEs to standardize their operations. The FHFA issued a white paper detailing plans for building a new, single platform for securitizing mortgages before the end of the year. This effort will continue to harmonize the back office functions of the GSEs while making ongoing investments in the people and the infrastructure to support the future mortgage market. This is good, because if this platform becomes the starting point for a legislative solution on GSE reform, it should make it easier for ALTA to include a statutory requirement for the purchase of title insurance when Congress finally begins to move a bill. ALTA has successfully included language requiring title insurance in three significant GSE reform proposals. ALTA will continue to lobby to ensure that any reform takes into consideration the importance of title insurance to housing finance.
National Association of Insurance Commissioners
ALTA’s advocacy staff spends a significant amount of time working on behalf of the industry before the National Association of Insurance Commissioners’ (NAIC) Title Insurance Task Force, where financial oversight has become a priority. This affects agents and underwriters as regulators want to prevent insolvencies and defalcations. These items represent some of our largest regulatory risks and are very harmful to the industry’s reputation. The NAIC also is drafting a white paper on escrow theft. A final version of the paper is expected in the first quarter of 2013.