What’s in Store for Dodd-Frank and Seller Financing?

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The Washington Post and The New York Times are both reporting on potential restructuring of the financial system when the new administration takes over in January.

We all heard President-Elect Donald Trump call the Dodd-Frank Act a “disaster” during his campaign. The Washington Post article reports his transition team has a stated goal, “to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.” What, exactly, does this mean?  At this point, we don’t know.

But The New York Times article states Representative Jeb Hensarling, a Texas Republican who chairs the House Financial Services Committee, has long been an opponent of Dodd-Frank and has introduced his idea for reform, the Financial Choice Act. “Choice”, according to the article, stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs.

financial-systemIt seems clear that the Republican controlled Congress will work hard to make sweeping changes to this legislation that has basically rocked our collective worlds with the implementation of new forms and rules for closings. We promise to keep everyone up to date as this drama unfolds. We can only hope that, from a closing standpoint, the changes won’t be as sweeping as those we have just tackled!

In other CFPB news, the Bureau is investigating seller financing situations involving National Asset Advisors LLC, National Asset Mortgage LLC and Harbour Portfolio LLC. Orders involved in these investigations can be read on CFPB’s website.

We should pay attention to these enforcement proceedings because seller financing for residential owner-occupied residences has become a concern in South Carolina as a result of the interplay of the federal and state SAFE Acts, HUD’s final rule, released in 2011, and Dodd Frank’s Consumer Financial Protection laws.

The interplay between these laws appears to require licensing and registration of mortgage loan originators for mortgages of owner-occupied residences other than the sale of the seller’s residence. Clients who fail to become licensed as loan originators or fall into an exemption may find they are unable to close, and may, along with the attorneys who closed the transactions, be subject to claims and litigation.

The CFPB has broad enforcement powers, including the power to impose civil monetary penalties ranging from $5,000 to $1 million per day. South Carolina’s legislature could improve this situation greatly by addressing certain inconsistencies between our version of the SAFE Act and the federal version. Again, we will attempt to keep everyone up to speed on this issue as it develops.

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Cyber Incident Preparedness for Closing Attorneys

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And what to do if you suspect a compromise

With the increase in wire fraud that is happening in closing offices around the country, our company recently shared two documents that I thought would be beneficial to pass along to all South Carolina dirt lawyers .

The first document is a Public Service Announcement from the FBI dated August 27, 2015 concerning Business Email Compromise (BEC). BEC is defined as a sophisticated scam targeting businesses working with foreign suppliers and businesses that regularly perform wire transfers. Legitimate e-mail accounts are compromised through social engineering and computer intrusion to conduct unauthorized wire transfers.

We have seen this happen in more than one law firm in South Carolina!

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This PSA states that the total number of victims from October 2013 through August 2015 was 8,179 and the total exposed dollar loss was $798,897,959!

The second document was prepared by Linda Grahovec, the Director of Education and Marketing for our company. This document provides two cyber incident checklists, one for use in preparing, and the other for use if your office is attacked.

Here are three pieces of advice for all closing attorneys:

  1. Use an e-mail system that requires two-factor authentication;
  2. Never wire funds based on the content of an e-mail. Always assume e-mail has been compromised, and validate the information by phone. A good practice would be to refrain from sending wiring instructions by e-mail.
  3. If you suspect fraud, contact the bank immediately.

Please remain vigilant! Read everything you can on this topic, and continue to update and guard your systems. One incident could easily put a law firm out of business. Title insurance companies are excellent sources of information and training on these topics! Call on them!

What’s Happening with Our Nation’s Malls?

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Three recent Realtor® Magazine articles explore the rise and fall of our nation’s malls. I highly recommend that you read the interesting articles entitled “Dying Suburbia Malls Become Housing Mecca” (October 7); “Will the Death of Malls Save the Suburbs?” (October 6); and “The Nation’s Malls are Getting Major Redo” (July 19) for the full story. The October 6 article, the most comprehensive, was written by Clare Trapasso.

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Northland Center, largest mall in the world when it opened in 1954, is now closed.

Summarizing, enclosed malls are basically a post-World War II American phenomenon. These hulking projects vary in size but may be as large as 1.2 million square feet of shopping, dining, movie and other recreation space. In 1970, there were around 300 enclosed malls across the country. By 1996, this number had increased to around 1,040.  Now major stores are closing, and many malls are going dark.

The October 7 article quotes Ellen Dunham-Jones, an urban design professor at Georgia Tech, with the statistic that around 200 malls have closed down in the past two years.

What happened to our malls? It’s a simple answer: the internet.

More and more shoppers are skipping brick-and-mortar retailers to shop online. The malls that are surviving appear to be those with high-end shops that provide luxury experiences shoppers can’t get online. Dunham-Jones pointed to valet parking and chic boutiques with fitting rooms that can take pictures from different angles.

Landlords who once courted department store anchors are now looking for funky boutiques and innovative restaurants. The prediction is that more and more enclosed malls will close, and the question becomes, what will happen to the underlying real estate?

These articles, targeting Realtors®, indicate readers may be renting and selling these properties for mixed-use purposes, including housing! Some malls are being converted into public parks, office space, medical complexes, sports facilities, micro-apartments and condominiums. The theory is that a person can live in an apartment or condo in one of these retrofitted malls and walk to shopping, movie theaters and doctors’ offices.

Some developers like the idea of transforming these acres of flat real estate with existing infrastructure. Malls often contain 50 to 100 acres, including the massive parking lots, and that’s the size of many planned communities and subdivisions. In some areas desperate for housing space, malls may provide a sensible solution.

In one California location, a 30-acre “green roof” is being considered, which would include almost 4 stay tunedmiles of public trails, vineyards and a wine bar.

It sounds as if future potential uses of our dying malls may only be limited by the imagination of developers. The developers I know and love have great imaginations, so stay tuned!