real estate

Feds Extend Footprint of Shell Game

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Will this obligation eventually extend to South Carolina?

Secretly purchasing expensive real estate continues to be a popular method for criminals to launder dirty money. Setting up shell entities allows these criminals to hide their identities. When the real estate is later sold, the money has been miraculously cleaned.

Early this year, the Financial Crimes Enforcement Network (FinCEN) of the United States Department of the Treasurer issued an order that required the four largest title insurance companies to identify the natural persons or “beneficial owners” behind the legal entities that purchase some expensive residential properties.

shell game

At that time, the reach of the project extended to the Borough of Manhattan in New York City, and Dade County, Florida, where Miami is located. In those two locations, the designated title insurance companies were required to disclose to the government the names of buyers who paid cash for properties over $1 million in Miami and over $3 million in Manhattan. The natural persons behind the legal entities had to be reported for any ownership of at least 25 percent in an affected property.

Now, all title insurance underwriters, in addition to their affiliates and agents, will be involved, and the footprint of the project is being extended effective August 28.

The targeted areas and their price thresholds will be:

  • Borough of Manhattan, New York; $3 million;
  • Boroughs of Brooklyn, Queens and Bronx, New York; $1.5 million;
  • Borough of Staten Island, New York; $1.5 million;
  • Miami-Dade, Broward and Palm Beach Counties, Florida; $1 million;
  • Los Angeles, San Francisco, San Mateo, Santa Clara and San Diego Counties, California; $2 million; and
  • Bexar County (San Antonio), Texas; $500,000.

Although the initial project was termed temporary and exploratory, FinCEN has indicated that the project is helping law enforcement identify possible illicit activity and is also informing future regulatory approaches.

We have no way of knowing whether or when this program may be expanded to South Carolina, but it is entirely likely that expensive properties along our coast are being used in money laundering schemes. We will keep a close watch on this program for possible expansion!

The SC-NC Boundary Legislation Passed!

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SC law “clarifying” the boundary will be effective at the beginning of the year.

The long awaited and much debated legislation defining the boundary line between The Palmetto State and the Tar Heel State was signed by Governor Nikki Haley on June 10.  The effective date of the law is January 1, 2017.

The purpose of the law is “clarifying the original location of the boundary” with North Carolina along Horry, Dillon, Marlboro, Chesterfield, Lancaster, York, Cherokee and Spartanburg Counties and providing additional information about the plats describing the location along Greenville, Pickens and Oconee counties.  In other words, our legislature doesn’t believe the law establishes a new boundary line.

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As expected, much of the legislation deals with tax issues. The legislative intent is set out specifically, and includes the thought that no business or residence owner should be liable for back taxes to South Carolina nor refunds from South Carolina as a result of a change from one state to the other. And the Department of Revenue is given the authority to compromise taxes in cases that result in taxation in both states.

Several issues are of particular interest to dirt lawyers. For example, no deed recording fees or county filing fees may be charged for deeds recorded as a result of the boundary clarification.

On the effective date of the legislation, Registers of Deeds (and Clerks of Court in those affected counties that do not have ROD offices) will be required to file a Notice of State Boundary Clarification for each affected piece of property. The form is described specifically in the legislation and requires the legal description, tax map number, derivation (if available), the names of the owners of record and the “muniments of title”, a defined term meaning “documents of record setting forth a legal or equitable real property interest or incorporeal hereditament in affected lands of an owner”.

I’m a dirt lawyer of more years than I like to divulge, but I admit I had to investigate the meaning of that word. The learned source, Wikipedia, indicates a muniment of title is the written evidence a landowner can use to defend title, such as a deed, will, judgment or death certificate.

Apparently, lawyers in states with marketable title legislation may be familiar with this term. South Carolinians have neither the benefit of tidy legislation to correct our title problems nor the knowledge and widespread use of this nifty term, until now.  We will all need to use and pronounce the word, muniment, next year. A North Carolina colleague asked me where the RODs and Clerks of Court will obtain the information to supply the  muniments of title. My best guess is that somebody is going to have to do a lot of title work!

(Note to Professor Spitz:  I apologize if you taught me that term in law school. It’s been a long, long time!)

Also of interest to dirt lawyers are provisions relating to foreclosures. A foreclosing attorney will have to file and serve the summons and complaint along with the aforesaid Notice of Boundary Clarification and an attorneys’ certification “that title to the subject real property has been searched in the affected counties and the affected jurisdictions” on all parties having interest in the real property pursuant to the muniments of title.  Whew! The foreclosure can then proceed after thirty days. I’m not sure how all that will be sorted out. I assume South Carolina foreclosure lawyers will be hiring counterparts across the state line to assist in these title examinations.

How will dirt lawyers and title insurance companies deal with sales and mortgages for properties that change states?  I think we are going to take these issues on a case-by-case basis and work together to sort out the various issues that are surely to arise. Be sure to involve your title insurance underwriter in these decisions rather than going out on a limb alone!

Old McDonald Had a Farm

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South Carolina Court of Appeals says partition actions in probate court require an open estate; sends action back to circuit court.

The South Carolina Court of Appeals held last week that probate courts in South Carolina have subject matter jurisdiction over partition actions only where open estates are involved.*

The dispute involved a farm in Darlington County originally owned by S.W. Byrd. Mr. Byrd died in 1923, and his estate was probated in Darlington County and finally closed in 1948. The estates of several of Mr. Byrd’s heirs were not subsequently probated, and in April of 2012, E. Butler McDonald filed an action for partition and the determination of heirs in the Darlington County Probate Court.

At that time, more than ten years had passed since the deaths of Mr. Byrd’s original heirs. Since §62-3-108 of the South Carolina Code establishes a time limitation of ten years after death for the administration of an estate, these estates could not be probated at the time Mr. McDonald filed his action.

farmlandThe Probate Court determined the heirs of S.K Byrd and their percentages of ownership. The Probate Court also found that no interested party had expressed a desire to purchase the property and that physical partition of the farm was impractical. The farm was ordered to be sold at a public auction, and Mr. McDonald’s reasonable attorneys’ fees were ordered to be paid.

On appeal by the other heirs, the Circuit Court affirmed. On appeal to the Court of Appeals, the appellants made several arguments, but the Court of Appeals focused on subject matter jurisdiction. Section 62-3-911 of the South Carolina Code establishes the jurisdiction for probate courts and specifically states that an heir may petition the probate court for partition prior to the closing of an estate. Since it was clearly established at trial that S.K. Byrd’s estate was closed in 1948, an action to partition his farm should have been brought in the circuit court, according to the Court of Appeals. The probate court’s determination of heirs and their percentages of ownership was affirmed, but the order was vacated as to the remaining issues.

*Byrd v. McDonald, S.C. Court of Appeals Case 5409 (June, 8, 2016)

Upscale Mt. Pleasant Condo Project Subject of Arbitration Clause Dispute

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Court of Appeals sides with roofing supplier

The South Carolina Court of Appeals handed down a decision on June 1 that will delight the drafters of corporate contracts who imbed arbitration clauses within their warranty provisions.  Whether the South Carolina Supreme Court will approve remains to be seen.

The dispute arises over the construction of One Belle Hall, an upscale condominium community in Mt. Pleasant. Tamko Building Products, Inc. was the supplier of the asphalt shingles for the community’s four buildings, and placed a mandatory binding arbitration clause within its warranty provision. The warranty purported to exclude all express and implied warranties and to disclaim liability for all incidental and consequential damages.

roof shingles

At some point after construction was completed, the owners’ association determined that the buildings were affected by moisture damage, water intrusion and termite damage, all resulting from various alleged construction defects. The developer contacted Tamko to report a warranty claim on the roof shingles, contending they were blistering and defective.  Tamko sent the developer a “warranty kit”, requiring the claimant to provide proof of purchase, samples of the allegedly defective shingles and photographs. The developer failed to respond.

Two years later, the owners’ association filed a proposed class action lawsuit on behalf of all owners, alleging defective construction against the community’s various developers and contractors. Tamko filed for a motion to dismiss and compel arbitration.

Circuit Court Judge J. C. Nicholson, Jr. denied the motion and ruled that Tamko’s sale of shingles was based on a contract of adhesion and that the condominium owners lacked any meaningful choice in negotiating the warranty and arbitration terms. The trial court held the arbitration clause to be unconscionable and unenforceable because of the cumulative effect of several oppressive and one-sided terms in the warranty.

The Court of Appeals begged to differ. It held that the circuit court erred in finding the arbitration clause in the warranty was unconscionable. It stated that our supreme court has made it clear that adhesion contracts are not per se unconscionable. The underlying sale of Tamko’s shingles was stated to be a typical modern transaction for goods in which the buyer never has direct contact with the manufacturer to negotiate warranty terms.

The court found it significant that the packaging contained a notation: “Important: Read Carefully Before Opening” providing that if the purchaser is not satisfied with the terms of the warranty, then all unopened boxes should be returned. The court pointed to the standard warranty in the marketplace that gives buyers the choice of keeping the goods or rejecting them by returning them for a refund.

The appellate court also found it significant that the arbitration clause did facilitate an unbiased decision by a neutral decision maker and that the arbitration clause was separable from the warranty.

Consider the exact opposite approach of the CFPB’s recently-announced proposed rule that would ban financial companies from using mandatory pre-dispute arbitration clauses to deny consumers the right to join class action lawsuits. That proposed rule can be read here and is the subject of a May 12 blog entitled “CFPB’s proposed rule would allow consumers to sue banks”.

It’s interesting to see such different approaches by two authorities on an issue affecting consumers in the housing arena. I wouldn’t be surprised to see more to come from either ruling.

* One Belle Hall Property Owners Association, Inc. vs. Trammell Crow Residential Company, S.C. Ct. App. Opinion 5407 (June 1,2016)

Who You Gonna Call?

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Even five months into TRID implementation, there is still confusion about
who is allowed to receive the CD and Closing Statement

paperwork confusionWe’re all crystal clear that the borrower must be provided with the new CFPB compliant Closing Disclosure. We’re clear that there are very specific rules about when that document must be delivered to facilitate the scheduled closing. We know that most of the large national lenders are preparing and delivering the Closing Disclosure themselves while many of the local and regional lenders are still relying on closing attorneys to prepare and deliver this document.

What remains uncertain in some areas is how to deliver the necessary closing numbers to real estate agents, sellers and, when it comes to seller numbers, to lenders.

Real Estate Agents: There is no doubt that real estate agents need the numbers. They typically provide valuable guidance to their buyer clients on the accuracy of the numbers in advance of and during closings. They are also required to retain copies of closing statements in their files. But the Closing Disclosure now contains much more information than the HUD-1 Settlement Statement, and it is a common belief that delivery by a lender or closing agent to a real estate agent violates the buyer’s right to protection of personal information.

What is the solution?  There are two lines of thought. Some believe the buyer should sign a waiver allowing the lender and settlement agent to provide the Closing Disclosure to the buyer’s real estate agent. Several lenders, however, have stated that they will not act on waivers of this type.

The other line of thought is that the real estate agents (both the buyer’s agent and the seller’s agent) can be provided with a closing statement without violating anyone’s privacy. All of the closing software programs have closing statements available for this purpose. American Land Title Association has created forms for this reason, and most lawyers also have versions they have previously used for commercial and residential cash transactions.

Real estate lawyers in South Carolina need to prepare separate closing statements regardless of this dilemma. Our Supreme Court has made it clear that all the numbers in a closing must be properly disclosed to the parties. It took many of us months to wrap our brains around the fact that a Closing Disclosure does not contain all the numbers. It is not a closing statement and it is not a replacement for the HUD-1. It is also not a document from which we can disburse. We need a settlement statement that balances to a disbursement analysis to assure that our numbers are correct.

Sellers: The seller should be provided with the seller’s Closing Disclosure, which is prepared by the settlement agent and not the lender. But, again, this document does not reveal all of the numbers relevant to the closing, so the seller should also be provided with a settlement statement.

Lenders (as to Seller’s numbers): We have heard that lenders are having difficulty obtaining seller information from closing attorneys, but under TRID, settlement agents are obligated to provide the seller’s information to the lender. Lenders need this information to test the accuracy of the buyer’s information, for audit purposes and to be able to provide proper information to investors.hang in there

Five months out, we are all still working our way through TRID, and we will continue to work our way through the various issues as they arise. South Carolina lawyers can rely on friendly real estate lawyers on the Bar’s Real Estate Practices Section ListServ, which can be found here. And title insurance companies continue to obtain and disseminate information as issues arise. We’ll get through it!

E-mail Hacking Scams Hitting Buyers in SC

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Please get the word out to your clients!

hacker

As closing attorneys, title insurance agents and business men and women, we receive daily warnings about a myriad of e-mail hacking scams. Many of these schemes involve wiring instructions and attempts to divert escrow funds to remote accounts. Piecing together the two words “wiring” and “instructions” in the subject line of an e-mail seems to entice the worst kinds of fraudsters.

Our own office was hit a year or so ago. We were escrowing funds for an agent’s large commercial transaction, and the agent received a bogus e-mail purportedly but not actually from us telling him to send the money in a different direction. Thankfully, our very astute agent had attended sufficient seminars and read enough fraud alerts to take the simple step of calling us.  Fraud averted!

American Land Title Association and others have written that fraudsters are now attacking buyers, not just businesses who hold escrow funds. And it is happening here!

Within the last few weeks we have heard of three email securityattempts of this nature in Charleston, at least one of which was successful. A buyer wired $150,000 to the wrong account on a Friday afternoon based on a bogus e-mail, spoofed to appear as if it came from the closing attorney. The e-mail said the firm was busy, and advised the recipient not to call but to respond by e-mail if there were questions. That should have been the first clue. The buyer and the banker both said they thought the e-mail and wiring instructions looked funny. But they sent the money out anyway.

Buyers have not attended the seminars nor read the fraud bulletins that have inundated all of us in the last few years. Closing attorneys and real estate agents may be the best line of defense in this situation.

Please communicate with your clients and let them know that a simple telephone call can prevent the diversion of their savings to criminals!

Minimum Standards Revised for ALTA/NSPS Surveys

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Celebrating the festival of Terminalia?

surveyorAmerican Land Title Association and National Society of Professional Surveyors have spent two years working on a new set of minimum standards for surveys. Their efforts resulted in the adoption of new 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys which go into effect on February 23.  The standards can be found here.

A notable change is the title which acknowledges the merger of ASMC with NSPS. The list of atypical interests in real estate has been expanded to clearly include easements. And a surveyor should now be provided with the most recent title commitment. The term “record documents” has been abandoned in favor of referencing documents that are “to be provided to the surveyor”.

A significant change is the new duty of the surveyor to show “the location of each edge of the traveled way”, including divided streets and highways. The 2011 standards required showing the “width and location of the traveled way”. The change will require surveyors to show the width of the dedicated road in addition to the width of the asphalt.

The requirement to show water features has beefed up. Previously, surveyors were required to show springs, ponds, lakes, streams and rivers bordering or running through the property. Now surveyors must also show canals, ditches, marshes and swamps if any are “running through, or outside but within five feet of the perimeter boundary of the surveyed property.”

If a new legal description is prepared, the surveyor must include a note stating that the new description describes the same real estate as the record description, or if it does not, then the surveyor has to explain how the new description differs from the record description.

The surveyor must now show all observable evidence of both easements and utilities on his plat. Previously, there was some confusion as to whether both had to be shown.terminus 2

There are other modifications, most of which will assist surveyors while not diminishing the value of their surveyors to commercial practitioners and title insurers.

What’s the significance of the date? The Roman god Terminus protected boundary markers. The name “Terminus” was the Latin word for boundary marker. On February 23, Roman landowners celebrated a festival called Terminalia in honor of Terminus. Let’s throw a party!

The Big Short: Required Reading (and watching) for Dirt Lawyers

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Super Bowl 50 was the big entertainment news of the weekend, but coming in at a personal close second were the book and movie The Big Short. I rushed to finish the former before dragging my husband to a Saturday matinee of the latter. Then, a friend pointed me to an NPR special “The Giant Pool of Money”, which provided a fascinating diversion for my Saturday afternoon walk.  (I confess to being easily entertained by all matters involving real estate.)

I encourage everyone involved with “dirt” to read the book, watch the movie and listen to the podcast. All relate to the 2008 financial crisis. At the center of the book (and movie) were several eccentric investors/money managers, who predicted the fall and brilliantly crafted a method to cash in on it. At the center of the podcast was the “giant pool of money”, the trillions of dollars in the economy that constantly need a place to be invested.

Locally, we heard the stories about real estate investors who lost properties and funds in the crash. In our office, we compared the crash to a game of musical chairs. The investors who sat in the chairs when the music stopped (the ones who held titles to the properties) were the ones who lost.

All areas of South Carolina were affected, but our coastal areas were hardest hit. Property values were phenomenal!  A contract on a yet-to-be-constructed residence might change hands several times at increasing prices before the final purchase. And loans were easy to procure at all income levels. No one thought property values would ever soften, and it didn’t matter if adjustable rate loans would reset in two years at staggeringly high fixed interest rates because refinances were readily available. Properties and mortgages churned like butter. There was apparently no end in sight.

The book’s author, Michael Lewis, who also wrote Moneyball and The Blind Side (back to football, which really is the center of the universe), said in explaining the mindset of the people who would borrow again and again, “How do you make poor people feel wealthy when wages are stagnate? You give them cheap loans”.

One of the money managers in The Big Short had his eyes opened by a story from his own household. His babysitter revealed she and her sister owned five townhouses in Queens. When he questioned asked how that possibly could have happened, she responded that after they bought the first townhouse, the value increased, and lenders suggested they refinance and take out $250,000, which they used to buy another townhouse. And so on….

The “giant pool of money” that at one time had been invested safely in boring assets like Treasury bonds, needed a place to land with higher interest rates. With mortgage rates being at 3.5% and higher, no better place could be found.

How did the money managers cash in?  They looked at pools of mortgages that were being sold on the secondary market, saw that the interest rates would collectively begin to reset in early 2007, and bet against the housing market.

They created a “credit default swap” market that bet against collateralized debt obligations. Huh?

One of the points of the book is that the financial markets created fancy terms that average individuals could not possibly understand. In this particular case, it turned out that that the big Wall Street firms, the people who ran them as well as their regulators, did not understand what was happening either.

“Credit default swap” is a confusing term because it is not a swap at all. It is an insurance policy, typically on a corporate bond, with semiannual payments and a fixed term. The money managers who predicted the subprime lending crisis bought credit default swaps that paid off, like insurance policies, when the market crashed.  These eccentric money men were able to predict that there would be a crash of the subprime mortgage market even if housing prices only stalled because borrowers would not be able to refinance or make payments.  When prices dropped, the money men were able to cash in at astonishing levels.

The most horrifying point of the book was that the government’s response to the crisis, the so-called bailout, will not prevent the crisis from happening again. We can only hope that we are all better educated the next time around. As I opened Outlook this morning, though, the first article that caught my eye was from Housingwire entitled “Risky home lending really on the comeback?”  Let’s collectively hope not!

SC Supreme Court Assesses “Sick” Pawleys Island Condo Project

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A 30+-year saga of leaky buildings continues to be litigated

watery apartmentFisher v. Shipyard Village Council of Co-Owners, Inc.,* involves a four-building condominium project in Pawleys Island that experienced leaks as early as 1983. The leaks began around the windows and sliding glass doors, which were defined as a part of each “unit” by the master deed, making the respective owners responsible for repairs rather than the owners’ association.

The bylaws require the Board to act if an owner fails to maintain a unit and that failure adversely affects other units or the common areas. Reducing the facts in this case to one sentence, the issue is whether the owners of units in all four buildings must be responsible for extensive repairs required in two of the buildings.

The cause of the water intrusion is still in question, but the evidence indicates the Board may have known about the leaks for years before it took action.

In 1999, the Board notified owners that they should waterproof balcony thresholds and window frames. In 2002, the Board hired a consultant who found safety issues with the windows and told the Board to pursue legal action. In 2003, the Board hired a construction company that concluded water was leaking through stucco, not windows.

In 2004, Ben and Katie Morrow, owners of a unit in Building B, replaced their windows but continued to experience water intrusion. They engaged an engineer who identified stucco cracks as the source of the problem and stated that Building B was “sick and about to become cancerous” because of the severe moisture intrusion.

And the saga continued.

In 2006, the Board received a $2.4 million proposal to replace windows in Buildings A and B and attempted to amend the Bylaws to designate the windows as common elements, which would have placed the responsibility on the Board. After two attempts to pass the amendment, the Board crafted a letter stating the amendment had passed. The letter did not address the voting procedure and, in fact, incorrectly said a special meeting had been held. The amendment did not address the sliding glass doors.

In 2007, the Board hired a consultant who identified an “open joint” directly under the doors’ thresholds which allowed water to leak to units below.  In 2008, the Board said Buildings A and B required repairs to the tune of $12 – 13 million. The Board hired yet another consultant who identified two primary problems in Buildings A and B: (1) failures in the structural concrete, including corrosion of the reinforcing steel; and (2) the building envelope was not “weather tight”. Another inspection revealed this startling list of defects in Buildings A and B:  roof, façade, edge beam, soffit, concrete, expansion joint, horizontal surface and HVAC anchorage failures, and poor to non-existent flashing in the windows and doors.

In 2008, the owners of units in Buildings C and D hired an attorney, who sent a letter to the Board asserting that a proposed special assessment was invalid because the amendment had not been property adopted, and the cost of repairs should be the responsibility of the owners in Buildings A and B. In 2009, a majority of the owners of units in Buildings C and D brought suit challenging the validity of the amendment. Later that year, the Board notified the owners that the windows and doors in Buildings A and B would be replaced through a special assessment of up to $88,398 per unit. The owners voted against the special assessment, and the Board incorporated the repair costs into the 2010 and 2011 operating budgets.

Later in 2009, the Petitioners (50 owners in Building C and D) filed a new suit, alleging negligence, gross negligence, negligent and gross negligent misrepresentation, breach of fiduciary duty and breach of the master deed and bylaws. This two suits were consolidated, and in May of 2012, the Petitioners moved for summary judgment on their negligence and breach of fiduciary duty causes of action.

The trial court granted summary judgment on the issues of duty and breach, finding the bylaws and master deed imposed affirmative duties on the Board to enforce, investigate and correct known violations, and to investigate evidence of the owners’ neglect of maintenance responsibilities. The trial court also found that the Board was precluded from asserting the business judgment rule because of its ultra vires conduct, as well as its lack of good faith and failure to use reasonable care in discharging its duties.

The Court of Appeals affirmed the trial court’s grant of summary judgment on the existence of a duty to investigate but reversed on the business judgment rule and the issue of breach. The case was remanded for trial, but the Supreme Court granted Certiorari.

The Supreme Court stated that the business judgment rule applies only to intra vires acts. In other words, the rule protects a board that exercises its best judgment within the scope of its authority. The Court held that a corporation that acts within its authority, without corrupt motives and in good faith, is protected by the rule, and remanded the case for jury consideration of whether the Board violated its obligations.

warren buffet quote

As to the issue of summary judgment on breach of duty, the Court found that the record contains at least a scintilla of evidence that the Board did not breach its duty to investigate. The Court stated that the record contains some evidence to support a conclusion that the water leaks occurred because of water intrusion through the common elements.  Thus, the trial court should not have decided the question of whether the Board breached its duty to investigate as a matter of law.

The parties are now free to litigate for years to come!

* S.C. Supreme Court Opinion 27603, January 27, 2016

Feds Play Shell Game in Manhattan And Miami

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Title companies obligated to ID true owners behind shell entities.

Will this obligation migrate closer to home?

money launderingSecretly purchasing expensive residential real estate is evidently a popular way for criminals to launder dirty money. Setting up shell entities allows these criminals to hide their identities. When the real estate is later sold, the money has been miraculously cleaned.

The Federal government is seeking to stop this practice.

The Financial Crimes Enforcement Network (FinCEN) of the United States Department of the Treasury issued orders on January 13 that will require the four largest title insurance companies to identify the natural persons or “beneficial owners” behind the legal entities that purchase some expensive residential properties.

This is a temporary measure (effective March 1 to August 27) and is limited to at this point to the Borough of Manhattan in New York City, and Dade County, Florida, where Miami is located. In those two locations, the designated title insurance companies must disclose to the government the names of buyers who pay cash for properties over $1 million in Miami and over $3 million in Manhattan. FinCEN will require that the natural persons behind legal entities be reported if their ownership in the property is at least 25 percent.

FinCEN’s official mission is to safeguard the financial system of the United States from illicit use, to combat money laundering, and to promote national security through the collection, analysis and dissemination of financial intelligence.

FinancialCrimesEnforcementNetwork-Seal.svgThese orders are a continuation of FinCEN’s focus on anti-money laundering protections for the real estate sector. Previously, the focus was only on transactions involving lending. The new orders expand that focus to include the complex gap of cash purchases.

FinCEN’s Director, Jennifer Shasky Calvery, was quoted in the agency’s press release: “We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money.”

American Land Title Association officials met with FinCEN to confirm the details of the orders. Michelle Korsmo, Executive Direction of ALTA, indicated that ALTA is supportive of the effort but is concerned that the program must be implemented in order to determine whether it will work. She said it will be difficult for a title insurance company to figure out a transaction involving a major drug kingpin who buys a mansion through a string of shell corporations all over the world.

This phase of the new program is being called temporary and exploratory, meaning that it may or may not work, and if it does work, it may or may not be expanded to other locations. (Query:  why won’t a money launderer who seeks to purchase residential real estate during the initial phase of this program, simply change locations to Chicago, Houston, San Francisco or Los Angeles?)

We have no way of knowing whether or when this program might be expanded to South Carolina, but it is entirely likely that expensive properties along our coast are being used in similar money laundering schemes. Will South Carolina closing attorneys enjoy ferreting out this sort of information for the Government? We will keep a close watch on what occurs in New York and Florida during the first 180 days of this program.