Phishing scam of the week

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I have subscribed to “CyberheistNews” at knowbe4.com and highly recommend this brief newsletter as an excellent source for current information on the latest scams that may hit your office and personal computers.

The news this morning was striking because it involves current events. Social engineering follows seasonal patterns, as we know. We have noticed in our business, that long weekends lead to attacks because of the extra day that we may not be sitting at our desks to keep computer systems and our wires safe. The newsletter cites holiday-themed phishing attacks between Thanksgiving and New Year’s Day.

email fish hook

The news today involves implementation of the European data privacy regulation going into effect on May 25. It’s called General Data Protection Regulation (GDPR) and the scam email looks as if it is from Apple and claims that if you do not take action, your account will be “restricted”. But in fact, as usual, the scammers will attempt to steal your identity and credit card information.

In addition to looking legitimate, according to CyberheistNews, the bogus website is more sophisticated than most phishing sites because the fraudsters correctly set the web directory permissions and encrypted the spoofed site using Advanced Encryption Standard (AES) in order to successfully bypass some anti-phishing tools used in antivirus solutions.

The victim is asked to “update payment details” in order to see their accounts return to normal. Taking this action sends the victim’s payment information to the scammers.

According to the newsletter, companies worldwide are, in fact, working on becoming GDPR compliant and trying to make sure the people whose data they have collected have consented to give them information. Criminals are aware of this and are using this turn of events to their advantage.

And, then, there is the royal wedding. CyberheistNews’ advice about that is that the wedding is a scammer’s dream, and computer users should be advised to seek news about it only from trusted websites.

Don’t click links in emails or social media links related to the royal wedding or open suspicious attachments that claim any kind of problem with GDPR. Delete these emails or forward them to you IT experts.

And subscribe to this newsletter!

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SC Supreme Court publishes new commentary on social media

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Real estate lawyers are involved in two disciplinary cases

Two disciplinary cases* were published by the South Carolina Supreme Court on April 19 concerning lawyers involved in multi-state mortgage modification practices. Stay tuned for a blog on the mortgage modification issues because Palmetto State dirt lawyers should steer clear of the unauthorized practice of law and other prickly issues these practices may trigger.

But ostensibly even more pressing, the Court provided ample guidance on lawyer marketing in the context of social media. Using websites and social media in marketing effort is common in 2017 for most lawyers.

The lawyers in these cases failed to adequately monitor the individuals (staff members and third parties) who handled these marketing efforts for their practices.  Failure to properly supervise these effort resulted in running afoul of the Rules of Professional Responsibility.

Dirt lawyers, here are some practices you should avoid taking in your marketing efforts:

  • You should not “cut and paste” from other lawyers’ websites without scrutinizing the materials.
  • If you are a sole practitioner, your website and other marketing materials should not indicate your practice includes “attorneys” or “lawyers”.
  • You should not exaggerate your years of experience.
  • You should not use the word “expert” except in those areas where you are certified as a specialist by the Supreme Court.
  • You should not advertise practice areas where you have no experience in those areas and where you do not intend to take cases in those areas.
  • You should not congratulate clients on their closings without obtaining the clients’ permission to post their names and other information about their legal matters on social media. I see (and “like”) lots of these congratulatory messages on Facebook, and these messages are not objectionable if the lawyer has obtained the clients’ consent.
  • Your marketing materials should not refer to your legal services as “best”.
  • You should not advertise special discounted rates for legal services without disclosing whether or not these rates include anticipated costs.
  • You should not compare your services to other attorneys in ways that cannot be factually substantiated.
  • You should not allow third party vendors to identify themselves as employees of your firm when communicating with prospective clients.

Not many of us are “experts” in the area of attorney advertising, but I strongly recommend that you pay close attention to the Rules in all aspects of website development and social media use. Unlike most areas of the law, the Rules of Professional Responsibility that control advertising appear to be somewhat “black and white”. And failure to follow these Rules will anger your fellow lawyers and will likely to land you in the Advance Sheets. Be careful out there!

 

In the Matter of Bacon, S.C. Supreme Court Opinion 27710, April 19, 2017; In the Matter of Emery, S.C. Supreme Court Opinion 27712, April 19, 2017.

Dirt lawyers: guard your clients and your offices against sloppy title search practices

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Our Supreme Court has made it crystal clear that searching titles is the practice of law. For every real estate closing, the closing attorney should perform or supervise the title examination. Theoretically, all title insurance and malpractice claims caused by title search errors can be prevented. Having safe title examination practices in real estate closing offices would go a long way toward minimizing claims and protecting clients and their properties!

The following are some dangerous practices that lead to claims:

  • Hiring title examiners who are inexperienced, who cut corners and who are not covered by errors and omissions insurance coverage.
  • Failing to properly instruct title examiners as to how titles should be searched. Whether law firm employees or outside abstractors are used, the closing attorney should develop and use his or her own set of title examining procedures.
  • Failing to require title examiners to pull documents. It is not sufficient to search titles using indexes. Doing so puts the lawyer and client at the mercy of the county employee who typed the index.
  • Failing to review chain documents. The attorney should review chain documents. Attorneys spot issues that are missed by abstractors. If a link in the chain of title is a foreclosure or an estate, the foreclosure file or the estate file should be reviewed.
  • Failing to use proper search periods. The long-standing search period standard in South Carolina is sixty years. Title insurance companies have shortened this standard to forty years, particularly for residential transactions. But some title insurance companies and sloppy practitioners are allowing for much shorter periods of time, like ten years, or “up from the developer” or “up from the deed into the borrower” without informing the client that the title has not been examined. Title examinations are the practice of law in South Carolina, and  title companies do not have the power to permit a lawyer to shorten search periods without the informed consent of the attorney’s client.
  • Relying on prior title insurance policies that are not worthy of reliance. In “tacking on” to prior policies, closing attorneys should use common sense and good judgment. Determine who issued the prior policy and decide whether that person’s work should be substituted for your own. Review the prior policy to determine whether it looks normal on its face. Some title insurance companies are issuing products that are not backed by title examinations or are backed by very short title examinations. Those policies are not worthy of reliance in an atmosphere where title examinations are the practice of law. As in the case of other short searches, informed consent confirmed in writing from clients should be obtained for employing a short search based on a prior policy.
  • Failing to pull back title notes where a short search is used. It does not help that the attorney’s office has closed properties in the same chain of title if that prior title work is not used. Exceptions and requirements from the prior title work should be used in the current title insurance commitment and policy.
  • Failing to search for a longer period of time where the shorter search does not reveal normal easements and restrictions for the type of property being searched. A search involving a residential subdivision created in the 1950’s should not stop in the 1960’s.

At least two sets of eyes should review every title examination. And one of those sets of eyes should belong to an attorney who was taught in law school to spot issues!

Accountants Develop ALTA Best Practices Guidelines

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Dirt lawyers: Your CPA should be able to assist!

accountant guyThe American Land Title Association announced on April 28 that the American Institute of Certified Public Accountants (AICPA) has issued guidelines for CPAs to verify whether closing attorneys comply with ALTA’s Best Practices.

The guidelines provide a uniform framework to ensure CPAs will perform ALTA Best Practices compliance testing and reporting in the same manner and in accordance with AICPA standards. By engaging a CPA who will use the new guidelines, closing attorneys should be confident about the quality of the assessment process.

We are not aware of any lenders doing business in South Carolina who have indicated at this point that they will require third party certifications. However, Mississippi based regional BancorpSouth announced in early March that its approved closing agents must comply with Best Practices through a certification from an independent third party vendor acceptable to the bank. The deadline for obtaining the certification was stated to be July 31.

Wells Fargo announced it supports ALTA’s Best Practices as sound business practices that should already be in place. Wells stated in a memorandum to its closing agents that completing a certification by August 1 will not be a requirement, but the bank hopes closing agents will, at minimum, have already completed a self-assessment and addressed any identified gaps by that date.

SunTrust Mortgage announced that it will require closing agents to complete an ALTA Self-Assessment no later than July 1, 2015.

Lenders will likely refine their requirements as we get deeper into implementation. It would not be surprising to hear that any lender who does business in South Carolina will require third party certifications, particularly since CPAs are now “in the loop” and able to make assessments.

The bottom line at this point is that all residential closing attorneys who plan to remain in the business should become Best Practices compliant as soon as possible so they will be able to meet any requirements along these lines that their lenders may impose.

If you need help with Best Practices compliance, call your title insurance company! They are able, willing and ready to assist!

Lenders Announce They Will Control More of the Residential Closing Process

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Regional bank will require third-party BP certifications on a short time frame!

work in progressLet’s take the big bank first. Bank of America recently shared more details about changes in its closing processes after August 1, 2015.  In addition to delivering Closing Disclosures, BofA will take the responsibility for complying with the three-business day waiting period. It will not require closing attorneys to monitor the timing of the delivery of the initial CD or any required re-disclosures.

BofA stated that close collaboration will be needed with closing attorneys for requests of information and notices of all loan and fee changes through its selected platform, RealEC® Technologies Closing Insight™. Closing attorneys will be notified of re-disclosure requirements and new closing dates through Closing Insight™.

BofA said it expects to engage closing attorneys to begin fee collaboration a minimum of ten calendar days prior to closing, and it intends to generate and send the CD six business days prior to closing.*

Now let’s look at an interesting announcement from a small bank, and please pay attention to the short time frame.

Mississippi based regional BancorpSouth announced in early March that its approved closing must comply with ALTA’s Best Practices through a certification from an independent third party vendor acceptable to the bank. Self-certifications will not be accepted.certified - blue (small)

The announcement stated that Memphis Consumer Credit Association and many of the large accounting firms have agreed to provide the certification. The bank asked closing attorneys to advise by March 23 whether they intend to obtain the certification. And the deadline for obtaining the certification was stated to be July 31.

*In almost all South Carolina transactions, we expect the “consummation date” to be the same as the closing date and the same as the date BofA refers to in this memorandum as the signing date.

Don’t Expect Uniform Closing Procedures in 2015

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And … Bank of America makes a big announcement.

changes comingLenders will not collaborate on a standard and consistent process for closings under the new CFPB rules effective August 1, 2015, at least not according to Wells Fargo.

Wells Fargo’s December 10, 2014 Settlement Agent Communication answered nine FAQs from settlement agents, the first of which sought confirmation on whether to expect standard closing procedures from lenders. Wells responded with a “no,” and stated that each lender is accountable and must determine its own method for achieving compliance.

This mega lender had announced on September 24 that it will control the generation and delivery of the buyer/borrower Closing Disclosure (“CD”), the form that will replace the HUD-1 Settlement Statement. The stated rationale was that the new CD is governed by the Truth-in-Lending Act (“TILA”), not the Real Estate Settlement Procedures Act (RESPA), and the risks and penalties for lenders are more severe under TILA.

Bank of America announced on December 17 that it will follow suit by generating and delivering the buyer/borrower CD.  Both banks have indicated settlement agents will generate the seller’s CD. Other lenders have not announced whether they will follow this procedure. It is entirely possible that settlement agents (closing attorneys in South Carolina) will prepare the CDs for other lenders.

The December 10 memo did state that Wells will work closely with settlement agents to determine fees, prorations, and other content required for the CD and, importantly, Wells will not assume the responsibility for disbursing loans. This quote from the Communication provides some comfort with regard to Wells’ attitude about keeping local settlement agents involved in the closing process:

“The settlement agent is critical and continues to be responsible for executing the closing including document signing, notarization, disbursement of funds, document recordation and delivery of final documents post-closing.”

Also comforting was the promise of training plans for settlement agents in collaboration with American Land Title Association, title underwriters and other service providers. The plans are said to include many educational communications and an information guide.

Bank of America stated that it will use Closing Insight™, an industry tool developed by Real EC Technologies®. All documents, date and information will be exchanged through Closing Insight™, discontinuing the use of e-mail, fax and other document delivery methods.

Bank of America also indicated that the requirement for the buyer/borrower to receive the CD three business days prior to closing will intensify the need for the bank to work very closely with the settlement agent to schedule the details of the closing.

stay tunedFor more information about Real EC ® Technologies and Closing Insight™, Bank of America invited settlement agents to visit their website at www.bkfs.com/realec.  The December 17 memo indicated that many title and escrow production systems are working with RealEC® Technologies to enhance current integrations in support of Closing Insight™. The bank suggested that settlement agents reach out to their title and escrow production system provider directly.

Stay tuned!

Lions, and Tigers and Seller Financing, Oh My!

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If you are closing seller financed transactions on primary residences including contracts for deed (hereafter referred to as seller financing), or if you have clients who are accepting seller financing, you should take the time to educate yourself and your clients on the current pitfalls.  Please refer to Martha McConnell’s excellent article entitled Seller Financing – the New ‘Jabberwocky’!” in the Summer 2014 issue of Chicago Record Title for a detailed report on what has led to this serious concern.

lions1 Because it is a complicated issue, I am not sure I can express a bottom line in any kind of succinct manner, but I will attempt to do so here.

The CFPB has been given the power to supervise and regulate laws that impact seller financing, including the SAFE Act, TILA, the Ability to Repay and Qualified Mortgage Rule, HOEPA and the Loan Originator Rule.

Under the applicable federal rules, it is possible that sellers engaging in seller financing may have to become licensed as “loan originators” or “mortgage brokers”.  The loans may have to be fully amortized, and it is possible that these seller/lenders may have to make determinations and disclosures that have not previously been required. Certain exclusions are available, but the rules are complex and detailed, and should be handled with care.

Inconsistencies between the federal and state versions of the SAFE Act, both of which require licensing and registration of loan originators, is another area of concern.

Clients who fail to become licensed or to fall into an exclusion may find they are unable to foreclose, and may, along with the attorneys who closed the transactions and the title policies that insured them, be subject to claims and litigation. In addition, the CFPB has broad enforcement powers including the power to impose civil monetary penalties ranging from $5,000 to $1 million per day.

This is an area of the law that is going to require monitoring and thought in the coming months. Legislation in South Carolina to address the inconsistencies in our version of the SAFE Act may be one avenue for improvement. In the meantime, please take great care if you or your clients venture into seller financing.