News from Wells Fargo

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Lender issues settlement communication on June 1

Wells Fargo continues to update its settlement agents on a quarterly basis. South Carolina closing attorneys should pay close attention to these newsletters, which may highlight changes in closing processes and documentation. You can read the latest version here.

Significantly, the latest newsletter provides the following updated information:

  • Closing Insight™ training has been completed within Wells Fargo internally, and use of this portal method for communicating about closing files will continue to expand in all geographic areas. Closing attorneys should expect to receive requests to use Closing Insight™.
  • The numbers of “findings” are being reduced by RealEC, meaning some technicalities that were previously reported as closing file irregularities will now be eliminated. This change is good news for closing agents and applies not only to Wells Fargo, but to other lenders as well. An example is that file numbers will no longer trigger a “data mismatch” for dashes (-) if the rest of the file number matches. Another example is that differences in capitalization, formatting, common abbreviations and punctuation will no longer trigger findings.
  • The Service Provider Verification of Identity (SPVI) form has been updated and will now allow all document signers to use one form. Also, the revised form no longer requires details on the method of identification, such as drivers’ license numbers of borrowers.
  • The SPVI form for FHA loans must be send to the lender prior to disbursement. For all other loans, this form may be provided to the lender with the other executed loan documents.
  • Settlement agents are not authorized to sign any documents on Wells Fargo’s behalf. Any documents requiring the lender’s signature should be sent to the loan processor or closer.
  • Wells Fargo Tax Services will no longer provide services as an affiliate. Instead, the tax services will be provided by Wells Fargo Bank, N.A. The tax service fees previously disclosed in Section B or C of the Closing Disclosure will now be disclosed in Section A.

This blog will continue to attempt to keep closing attorneys updated on lender communications as they are distributed.

Wells Fargo distributes new settlement agent communication

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Note: Settlement agents are scheduled to be re-evaluated

Wells Fargo delivered a memo entitled “News for Wells Fargo Settlement Agents” on March 23. The first paragraph cryptically announced that future communications will detail the Uniform Closing Dataset (UCD) that will become effective for lenders in 2018.

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For insight into the UCD, review Fannie Mae’s or Freddie Mac’s websites. Briefly, the UCD is going to be a common industry dataset to allow information on the Closing Disclosure to be communicated electronically. Fannie Mae and Freddie Mac have developed the UCD at the direction of the Federal Housing Finance Agency in an effort to enhance loan quality and consistency through uniform loan date standards. Stay tuned for more information on this topic and lenders gear up to comply.

The Wells Fargo memo also touted continued expansion of settlement agents who are using Closing Insight™.  Settlement agents who are just getting started were asked to take advantage of the support available at RealEC’s Closing Insight Resource Center at http://www.closinginsightresourcecenter.com or to contact the company at CISupport@realec.com or 800.893.3241. I encourage all South Carolina closing attorneys to get up to speed on this system as soon as possible.

The serious news from Wells Fargo, however, relates to a new effort to evaluate settlement agents.

The memo warned that Wells Fargo will evaluate the population of settlement agents who have closed loans within the past twelve months for problems such as missing documents, execution errors and other frequent problems that require curative work. As a result, settlement agents may receive letters indicating they are being removed from Wells’ list of approved settlement agents.

Processes are in place, however, to accommodate the customer’s choice for a settlement agent who is not on the approved list. Apparently, a new approval process will be instituted, but no detail on this process is provided.

house made of cashThe memo further indicates that attorneys’ ability to act as counsel for customers will not be impacted.  I don’t read this last directive to mean that attorneys who are not on the approved list will be in a position to close loans. They will only be in a position to dispense legal advice, if I am interpreting this correctly.

Settlement agents with questions are encouraged to communicate with Wells at WellsFargoSEttlementAgentCommunicatons@wellsfargo.com. I urge anyone who is interested in continuing to close Wells Fargo loans to hang onto this information.

Finally, the memo is requesting acknowledgement of Master Closing Instructions from all active and approved settlement agencies. Requests for this acknowledgement are coming from Wells Fargo in the form of e-mails to settlement agents. Please respond!

All lenders are beginning to hold settlement agents to higher standards. South Carolina closing attorneys are encouraged to stay abreast of changes and train, train, train staff members.

And, as always, contact your title insurance companies for insight into these matters.

Wells Fargo distributes new settlement agent memo

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Wells Fargo circulated a new Settlement Agent Communication on December 15, addressing several points that may be of interest to South Carolina closing attorneys. 

  • The Seller Closing Disclosure must be delivered to Wells Fargo prior to closing, and Wells’ performance reports of settlement agents will soon include proper receipt of the Seller CD.
  • Wells Fargo is adamant that the Borrower Closing Disclosure must be the form provided to the closing attorney by the lender. Wells will not tolerate substitutions or additions to the Borrower CD.
  • Closing attorneys are encouraged to communicate with the lender before, during and after closing to insure the accuracy of signing and disbursement dates on the borrower CD.
  • Closing attorneys are instructed to refrain from adding per diem interest charges in the payoff calculations of a Wells Fargo first mortgage when that mortgage is being refinanced with Wells. These payoffs will be net funded and will be the responsibility of the lender.
  • When a title insurance policy is delivered to the lender electronically, there is no need to also provide a paper copy.

The memo also contained a brief RESPA update indicating that despite the July 11 ruling against the CFPB by the D.C. Circuit Court of Appeals in the PHH Corp. v. CFPB case, Wells will continue to adhere to the 2015 bulletin distributed by the CFPB indicating Marketing Service Agreements are in disfavor.

New Settlement Agent Communication from Wells Fargo

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Seller CD must be provided to Wells prior to disbursement

Wells Fargo communicated with its settlement agents (closing attorneys in South Carolina) by memo dated September 22. In case you missed it, you can read it in its entirety here.

The biggest news is that Wells will now require a copy of the seller Closing Disclosure along with the other documents required prior to disbursement. Apparently, receipt of the seller CD has been a challenge, necessitating the procedural modification.

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Another challenge has been the process for handling changes to the borrower’s CD. The memo stated that any changes known prior to closing, including changes to the closing numbers, the closing date and the disbursement date, must be communicated to the Wells Fargo closer.  Wells Fargo’s closer will provide an updated borrower CD and any other updated documents for closing.

Any changes detected at or post-closing should be communicated to:  SAPostClosingCommunications@wellsfargo.com.

The memo also discussed the phased rollout in progress for delivering training materials and other support for the use of Closing Insight™.  We encourage closing attorneys to read and comply with this information to avoid being left out when this process is fully implemented.

Dirt Lawyers: Beware of Marketing Services Agreements

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beware pumpkinsThe Consumer Financial Protection Bureau (CFPB) is scrutinizing Marketing Services Agreements (MSAs) in a way that appears to be contrary to decades of HUD guidance. In addition to a significant number of enforcement actions involving MSAs, the agency issued Compliance Bulletin 2015-05 on October 8 which casts doubt about whether the CFPB would ever approve an MSA.

CFPB Richard Cordray was quoted:  “We are deeply concerned about how marketing services agreements are undermining important consumer protections against kickbacks. Companies do not seem to be recognizing the extent of the risks posed by implementing and monitoring these agreements within the bounds of the law.”

The bulletin began with a seminar message: “The Bureau has received numerous inquiries and whistleblower tips from industry participants describing the harm that can stem from the use of MSAs, but has not received similar input suggesting the use of those agreements benefit either consumers or industry.”

The Bureau’s position appears to be that MSAs serve no useful purpose.

Let’s look at the background. First, the prohibition against kickbacks: Section 8(a) of RESPA prohibits giving or accepting “any fee, kickback or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a party of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” Second, the carve out that MSA participants have relied upon: Section 8(c)(2) provides “(n)othing in this section shall be construed as prohibiting the payment of bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed.”

Based on years of HUD guidance and legal advice from industry authorities, many lenders, real estate agencies, law firms, title agencies and other providers have routinely entered into agreements to pay each other marketing fees. The entities often share office space as well as sophisticated marketing efforts.

The advice of HUD and the experts was, generally:

  • don’t tie the relationship or compensation to sales, referrals or productivity;
  • limit the services to marketing;
  • avoid exclusivity provisions;
  • value marketing services objectively. This requirement was often the sticking point because shared marketing campaigns are difficult to value. Some experts suggested hiring auditing or actuarial companies; and
  • track the services in the event proof is needed.

The bulletin suggested that the kickbacks and referral fees associated with MSAs may result in consumers paying higher prices for mortgages, and that the practice of steering business may indirectly undermine consumers’ ability to shop for mortgages.

Running afoul of the CFPB in this area has resulted in injunctive relief including bans on entering MSAs, bans on working in the mortgage industry for up to five years, and penalties totaling more than $75 million.

Wells Fargo, Bank of America and Prospect Mortgage have announced decisions to discontinue MSAs. The Mortgage Bankers Association, which had asked the CFPB for guidance on this topic, has now warned its members to take the bulletin very seriously because it appears to be a series of warnings rather than the requested guidance.

Because of the possibility of enormous potential liability, I urge South Carolina real estate lawyers to completely avoid MSAs in the current regulatory environment, at least until more guidance is provided either by the CFPB or court action.

BB&T Follows the Lead of Other Large Lenders

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It will produce and deliver Closing Disclosures

BB&T logo 2BB&T announced on May 26 that it will be responsible for completing and delivering borrowers’ Closing Disclosures after the Consumer Financial Protection Bureau’s (CFPB’s) TILA-RESPA Integrated Mortgage Disclosures (TRID) rule becomes effective on August 1.

By making this announcement, BB&T joins Bank of America, Chase, Citi, Wells Fargo, SunTrust and Freedom Mortgage in removing the responsibility for preparing the borrower’s settlement statement from the hands of settlement agents (closing attorneys in South Carolina). Closing attorneys will prepare the seller’s CD as well as other forms necessary for disbursement. It is clear that the borrower’s CD will not contain sufficient information for disbursement, which will continue to be the responsibility of the closing attorney.

Like the other lenders, BB&T confirmed in its announcement that it will continue to work with closing attorneys to determine the fees and other information required for the Closing Disclosure.

stay tunedBB&T also announced, like several other large lenders, that it will use the web-based portal, Closing Insight™, to gather the information and data required to complete the CD. Closing attorneys were encouraged to register with Closing Insight™ immediately.

BB&T promised to provide further communications and training to settlement agents prior to August 1.

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!

SunTrust Requires ALTA Best Practices Compliance by July 1

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… AND indicates it will produce and deliver Closing Disclosures.

suntan lotionMaking a significant announcement with a tight deadline, SunTrust Mortgage revealed in an April 22 letter to its settlement service providers (closing attorneys in South Carolina) that it will require them to comply with ALTA’s Best Practices and to complete an ALTA Self-Assessment no later than July 1, 2015.*

The letter also announced that SunTrust, following the lead of Well Fargo, Bank of America, CitiBank and Chase, will produce and deliver Closing Disclosures to borrowers and will require closing attorneys to provide complete and accurate title and settlement charges up to two weeks prior to scheduled closing dates.

SunTrust also plans to handle Closing Disclosure revisions and expects closing attorneys to provide timely notice of any changes in the closing numbers, including changes that occur after closing.

Closing attorneys will be responsible for preparing and delivering the seller’s Closing Disclosure on purchase transactions. A signed copy of the seller’s Closing Disclosure will be required by SunTrust as a condition of funding approval.

SunTrust will require an attestation form from closing attorneys for each closing, confirming the ability to comply with the new rules and expectations.

* The letter directed closing attorneys to www.alta.org/bestpractices/index.cfm for more information on ALTA’s Best Practices and offered assistance from SunTrust via e-mail at TitleSettlementMgmt@SunTrust.com and mail at Title/Settlement Management, SunTrust Mortgage, Inc., Mail Code: VA-INSB-7882, 5600 Cox Road, Glen Allen, VA 23060.

Five things lenders need to know before August

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Dirt lawyers: Educate your lender contacts!

Our company has developed resources to equip dirt lawyers to educate lenders about how the CFPB will impact them beginning August 1.  I’m sharing a few tips with the letstalkdirtsc.com audience because everyone will benefit if lenders are prepared.

As we have traveled the Palmetto state talking to lawyers, real estate agents and lenders, we have learned that many of the local folks are not familiar with the new rules, even the significant players in the market. We understand the corporate offices of national lenders may not have pushed this information down to the local level at this point. Any lawyer who will provide valuable information to local contacts now will be perceived as an important partner!

This is a primer, a very basic beginning point. As the software companies complete their updates, everyone involved will be trained on the details of the new rule and forms.  For now, let’s give our lender partners the following information:

1 flapWho will be responsible for preparing the Closing Disclosure? The lender will be ultimately responsible for preparing the CD (the document that replaces the HUD-1 and final TIL Disclosure). Four national lenders, Bank of America, CitiBank, Wells Fargo and Chase, have announced that they will prepare the CD. We anticipate that smaller banks may continue to rely on closing attorneys to prepare this important document. Closing attorneys will be responsible for preparing the seller’s side of the CD in all cases.

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Who will be responsible for delivering the Closing Disclosure? The rule requires that the borrower must receive the CD three days prior to closing. This actually translates to delivery six days prior to closing to accommodate transit time. The rule allows the closing attorney, at the lender’s discretion, to deliver the CD. The four banks who have announced that they will prepare the CD will also deliver it.

Closing Disclosure Delivery Timeline Chart

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How will closing attorneys and lenders communicate information contained in their respective systems? The big banks will most likely use some form of electronic communication. Some have already announced that they will use Real EC’s Closing Insight™ Most closing attorneys will work with settlement software companies (such as SoftPro) to connect with these systems. Regardless, information will have to be exchanged earlier to accommodate the delivery requirements of the CD.  Some experts have predicted that the numbers will have to be exchanged between lawyers and lenders no later than ten days prior to closing.

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Who will make changes to the CD? Changes to the CD may occur prior to closing, necessitating adjustments, re-printing, and delivery of the corrected CD at closing. Lenders and lawyers will have to discuss who will make the pre-closing changes. Changes to the settlement numbers on the CD may also occur after closing, requiring preparation and delivery of a revised CD. For example, if recording fees change, the CD will have to be revised. Previously, lawyers had the responsibility for these post-closing changes. Under the new rule, the lenders have primary responsibility, but they may delegate this responsibility to closing attorneys.

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How will closing attorneys communicate title and settlement fees for use in the new forms? Lenders will continue to need accurate estimates of title and settlement fees for the preparation of the Loan Estimate and the Closing Disclosure. In addition, for transactions in which an owner’s policy will be issued, the rule prescribes special mathematical calculations for the disclosure of the owner’s and lender’s title insurance premiums, which may require receipt of rates for both a stand-alone and simultaneously issued lender’s policy, as well as the owner’s policy rate.

Good luck educating your referral sources!

Lenders’ Closing Plans Solidify As August 1 Approaches

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news news newsCitibank recently notified settlement agents (closing attorneys in South Carolina) that they will be requested to register with the FPSDirect Vendor Website at the time they agree to handle a Citibank closing. This website was created to provide the bank’s settlement agents with an easy and efficient method of loan document delivery, closing date confirmation and funding approval, among other matters. The memo stated the bank’s goal is to save the time of faxing and the insecurity of email.

Wells Fargo issued a Settlement Agent Communication on March 16 indicating that, like Bank of America, it plans to integrate with Closing Insight™ with a goal of improving the way instructions, fees and other information is shared. The memo stated: “Unlike today where we typically use email to pass these important details back and forth, Closing Insight™ will support an interactive, online collaboration that includes a full view of information from both parties, and provides an audit trail and quality checks to reduce errors.”

We have learned and the Wells Fargo communication states that many closing attorneys will be able to access Closing Insight™ through connections with their existing software packages. Wells’ communication also states that attorneys without closing software packages will not be left out because a secure web portal will be available. Wells reiterated its goal of continuing to do business with local service providers, but emphasized that it expects closing attorneys to be ready, willing and able to comply with requirements and closing instructions.

Wells Fargo also answered four recent FAQs:

“If co-borrowers plan to sign the loan documents on different dates, which date applies for compliance with the three business day receipt requirement of the CD? The borrower’s CD must have been received not less than three business days before the earliest signing date. This question highlights the importance of communicating specifics about signing plans to your Wells Fargo closing contact, including cases when a mobile signing agent or mail away signing is being requested.

Will Wells Fargo be providing loan closing documents to the settlement agent at the same time the borrower’s CD is delivered? Our goal is to provide the closing documents to the settlement agent shortly after the borrower’s CD has been finalized and provided to the borrower. In most cases, you should receive the closing documents earlier than in the past.

Will Wells Fargo permit any other party to deliver the borrower’s CD to meet the three business day closing requirement for a rush closing situation? No. We have determined that we must be responsible for delivering the borrower’s CD to meet and track the three business day receipt requirement for all transactions We will continue to encourage all parties involved to stay in close communication and work together proactively to minimize the need for expedited CD delivery.

Is my company required to be ALTA Best Practices Certified by August 1 to continue to close Wells Fargo loans?  No. Completing your certification by August 1 will not be a Wells Fargo requirement. However, we hope that if your company is not yet certified you will – at minimum – have already completed a self-assessment and addressed any identified gaps. As communicated in our March 6, 2014, newsletter, Wells Fargo supports the ALTA Best Practices as sound business practices that should ideally already be in place for businesses providing title and closing services to our customers.”

Wells Fargo also stated that it has entered into a business arrangement with ClosingCorp, a leading provider of fee management solutions, to obtain actual fee information from selected settlement agents who closing a high number of Wells Fargo loans.