Chicago Title

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!

Mobile Home Claims Continue

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What do a hurricane, a tornado and a redneck divorce have in common?
Somebody’s fixin’ to lose a mobile home!

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That joke may be attributable to Jeff Foxworthy, Lewis Grizzard or some other Southern comedian.  Regardless, a large number of South Carolinians lost mobile homes during the economic downturn, most often as a result of foreclosures rather than the disasters in the joke. Foreclosures uncover title issues that lead to title insurance policy claims. Because our office continues to see mobile home claims on almost a weekly basis, this reminder might be in order for residential real estate practitioners.

When sales and mortgages of real estate including mobile homes are closed, titles to the mobile homes should be retired, and ALTA 7 series endorsements should be issued.

If a title examination reveals a recorded Manufactured Home Affidavit for Retirement of Title Certificate, it is advisable to request from the Department of Motor Vehicles a letter confirming that the title has been placed on the DMV’s list of retired vehicles.

If no Manufactured Home Affidavit has been filed locally, then follow our statutory process to retire the title. The Affidavit requires the owner to:

  • install the home on the real property;
  • remove the wheels, axles and towing hitch;
  • attach proof of ownership (the deed);
  • attach a copy of the certificate of occupancy; and
  • pay the recording fee.

Surrendering the certificate of title to the DMV requires:

  • a filed copy of the Manufactured Home Affidavit from the ROD;trailer duck
  • the original certificate of title with either releases of liens or consents of secured parties;
  • a copy of the most recent tax receipt for the manufactured home; and
  • payment of the DMV fee.

When the title is retired, it is safe to issue an ALTA 7 series endorsement. Your title company will appreciate compliance with these guidelines.

And here’s a practice tip. Our former boss, Nancy Booco, always said, “If it looks like a mobile home, it probably is one.”

The Keys to the Parsonage

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Ever handled a church closing? Oy vey! Never assume church properties make for simple closings. I grew up Baptist, where the congregation votes on real estate matters, but happily married a Methodist preacher’s kid and attend churches where real estate matters are usually handled more methodically.

churchMany transactional lawyers across the country were asked to handle closings of the Episcopal Church while those properties were in dispute, beginning in 2006 when Anglicans left the fold and sought title to church properties. The resulting litigation brought global attention and wound its way through the courts, until the Supreme Court ended the controversy in March of 2014 by declining to take up an appeal by the last remaining plaintiff. We had a dramatic case of our own in South Carolina involving All Saints Parish, Waccamaw in Georgetown County.* And I understand from talking to some lawyers in Myrtle Beach this week, that at least one of these cases is pending in lower court in South Carolina.

When handling church transactions in South Carolina, the first step is to determine the church’s form of governance. South Carolina has cases on point* which discuss two general forms of religious organization. The congregational church is an independent organization, governed solely within itself, either by a majority of members or by another local organism. The hierarchical church is organized as a body with other churches having similar faith and doctrine with a common ruling convocation or ecclesiastical head. The Baptist churches of my youth are congregational churches. The Methodist churches of my adult life are hierarchical.

Sales and mortgages of church properties must be properly authorized. A congregational church authorizes its own transactions, following its own formalities. The level of formality varies greatly. Some churches are incorporated and governed like a business corporation. The closing attorney will typically request a resolution passed in a business meeting, held pursuant to the bylaws of the corporation, authorizing the transaction and designating the appropriate church officers to sign the documents. Congregational churches may have other governing organizations. The closing attorney should pay careful attention to the governing documents and obtain written authorization.

If an independent church has no documented form of government, the closing attorney should assume the entire congregation must act. The typical title insurance old sheldoncommitment will require a resolution by the congregation passed at a special meeting convened after reasonable notice from the pulpit, authorizing the sale or mortgage. The documents will typically be signed by the trustees and the pastor pursuant to the resolution.

A transaction involving a hierarchical church will require written authorization from the ruling convocation. The United Methodist church must receive consent from the District Superintendent and the Conference.

Title insurance companies are familiar with most churches and will be able to assist in these transactions.

Be skeptical of anyone (pastor included) who says he or she can act alone in any church transaction. We have seen numerous claims where church transactions are not properly authorized.

*I’ll be glad to e-mail the citations to anyone who asks.

Who Will Get On the Wells Fargo Wagon?

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Wells Fargo announces it will generate and deliver the Closing Disclosure

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Wells Fargo announced on September 24, 2014 that it will generate and deliver the borrower’s Closing Disclosure when the TILA-RESPA Integrated Disclosure Rule becomes effective on August 1, 2015.

Software companies, title insurance companies and closing attorneys have been speculating about this for many months. Now we have an answer, at least as to this mega-lender. Whether other lenders will fall in line remains to be seen.  The stated rationale is that the process will allow Wells Fargo to consistently meet compliance and regulator expectations.

The announcement stated that Wells will continue to collaborate with closing attorneys to determine fees and other content required for the Closing Disclosure and to ensure that the lender has accurate information.

For purchase transactions, the closing attorney will continue to be responsible for the seller’s information and will prepare and deliver the seller’s Closing Disclosure. A copy must be provided to Wells Fargo.

The Closing Disclosure must be delivered three business days prior to the closing, and Wells Fargo anticipates this requirement will require that all the parties work together more than ever on scheduling closings.

Conducting closings will continue to be the responsibility of closing attorneys, but with increasing focus on compliance with the lender’s closing instructions, according to this announcement.

This announcement has a huge impact on the closing process. The closing attorney will continue to be responsible for gathering information required to generate the document that replaces the HUD-1 Settlement Statement, but Wells Fargo, not the closing attorney’s office, will actually generate and deliver the form.

Please recall that Wells Fargo is the lender that endorsed ALTA’s Best Practices. My best advice for residential closing attorneys in South Carolina who want to remain in the game after August, 2015?  Get your office in compliance with Best Practices now so you will be prepared to implement the hardware/software changes this announced “collaborating” with lenders will require.

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Embrace ALTA’s Best Practices

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 BestPractices2Some real estate practitioners are furiously bringing themselves into compliance with ALTA’s Best Practices, while others are furiously ignoring the entire topic or, at best, waiting until they hear marching orders from lenders. I propose that we all step to the plate and embrace Best Practices.

Residential practitioners can and should use compliance as a marketing tool. Some commercial practitioners are assuming that when lenders become educated and begin demanding compliance from residential practitioners, they will naturally ask for the same or similar compliance from commercial practitioners. Striving for compliance is an opportunity for all practitioners to demonstrate to their clients, to real estate agents and to lenders their value in real estate transactions.

ALTA is now encouraging practitioners to conduct a self-assessment of their adoption of Best Practices by September of 2014. Time may be of the essence because a practitioner may first hear marching orders from a lender in connection with a specific real estate closing. If it is impossible to demonstrate compliance quickly, that closing will likely be lost to someone who is better prepared.Best-Practice-processes

I am convinced that the numbers of residential real estate practitioners in South Carolina will be drastically reduced in the next year or two. Attorneys approaching retirement age may decide to retire rather than to learn how to use the new forms. Large law firms  who handle commercial transactions may decide that residential transactions are no longer worth the effort. Left standing will be the practitioners who embrace this change and tackle it now. There is opportunity for growth for those who act wisely in the face of change.

Title insurance companies are willing and able to help and have resources that can ease the pain. But no outsider can do the actual work. Each pillar requires careful consideration from a management standpoint, and only the closing attorneys themselves can make the necessary decisions for implementation. Each pillar will require on-going demonstration of compliance. Files must be papered. Calendars must be tickled. Software and hardware must be kept current. Compliance will not be a matter of establishing written procedures and continuing business as usual. We should establish a culture of compliance and make it the responsibility of all employees.

I can’t say this strongly enough: At some point, practitioners will either have to embrace compliance or get out of the game. The time to act is now.

If you want to continue to handle residential real estate transactions, call your title insurance company today and ask for assistance in nailing down each pillar.

Tell it to Grandma!

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DSC_1879aWhen my friend and mentor Chris Abbinante was President of American Land Title Association, he encouraged real estate professionals to explain what we do in terms our grandmothers can understand. He said when we can explain the value of our profession to our grandmothers; we will be able to be to enlighten our clients. Knowledgeable clients who recognize our value are more satisfied, more willing to pay our fees and more likely to return for future transactions.

  Our jobs are important and honorable! We assist consumers in realizing the American dream. We hold their hands during their most significant purchases. We examine the titles to identify and eliminate risks. We draft documents to protect their interests. We explain documents to confirm clients understand their obligations.

We are entrusted with and carefully handle closing funds. We vigilantly maintain our trust accounts so client funds will be safe. We protect our clients’ private, sensitive information. We are mortgage fraud watch dogs. We provide clients with the best title insurance products available so that the title to their investment will be protected from third parties by reputable and solvent companies. When they leave our offices, they hold keys to the home where their family will live. There is a reason we call the scheduled event a “closing”. It is the end, the culmination of the process of dreaming about, finding, and obtaining a home.

Commercial practitioners assist clients in procuring properties for their business activities or for investment purposes using the skills that no other professional can provide. We form their business entities. We assist with accumulating multiple properties for a single endeavor. We assist clients in satisfying the requirements of their lenders. We know when to call on other professionals…surveyors, inspectors, appraisers, environmental engineers, attorneys and bankruptcy attorneys. We protect clients’ equity and assist in their business pursuits. After their closings, they can begin to build their office buildings, shopping centers and residential subdivisions. Commercial practitioners also assist clients in achieving the American dream.

Learn to articulate your story. Own your story! Tell your story, like you would tell Grandma, to real estate agents, builders, lenders, developers, service organizations and others. This is Marketing for Dirt Lawyers 101. You will see results!