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3 posts from February 2014

02/27/2014

What Document Should Be Used for Sellers After August 2015?

Several people have asked what document should be used as the settlement statement or Closing Disclosure for sellers after August 2015, when the CFPB’s final rule for integrated mortgage disclosures goes into effect.

Because the Closing Disclosure includes non-public information about the buyer’s loan, such as interest the rate, there have been concerns about how the final rule affects privacy components of the Gramm-Leach-Bliley Act and ALTA’s Best Practices.

When the rule goes into effect Aug. 1, 2015, sellers will also  receive a copy of the Closing Disclosure. Under the rule, settlement agents will provide the seller with the Closing Disclosure reflecting the terms of the seller’s transaction. Due to privacy concerns, the Bureau will allow settlement agents to provide buyers and sellers with separate versions of the Closing Disclosure only showing information relevant to their transaction. These seller and buyer specific forms would be completed in accordance with 12 CFR § 1026.38.

To help illustrate the point, the Bureau produced a sample of a seller only Closing Disclosure at appendix H-25(I), which can be found on page 1,545 of the final rule. As a side note, if the transaction is an all cash sale or a business or investment sale not subject to RESPA, then the buyer, seller and settlement agent are free to agree to their choice of forms or state mandated forms as required.

02/19/2014

A Great Story About Title Insurance in Honor of Presidents' Day

I hope everyone had a great Presidents’ Day, or as it is legally known, Washington’s Birthday. We have come to regard the holiday as a celebration of all of our presidents and before we get into the goings-on at ALTA, please indulge me in this industry-relevant story about our 13th president, Millard Fillmore.

President Fillmore was born January 7, 1800, in Cayuga Country, New York. Just a year before his birth, the future president’s father, Nathaniel, and uncle, Calvin, purchased a farm in Locke Township sight unseen. The land was part of the central New York military tract set aside for sale to soldiers who had fought in the Revolutionary War. Faulty surveys, fraud and ignorance left title to land in the military tract uncertain, prompting the state of New York to send a team of commissioners to review and settle all land titles in the area. Unfortunately for the Fillmore brothers, they were unable to defend their title against the commissioners’ findings.

Following the complete failure of their title, the Fillmores took up a perpetual lease for a farm in Sempronius, NY. However, the poor soil, forest cover and rugged terrain of the plot led to rough times for the Fillmores. This experience led Nathaniel Fillmore to push his children into professions other than farming. For his son Millard (a good student and avid reader), Nathaniel secured a clerkship studying law with Judge Walter Wood. Wood was the richest person in the country, having earned his money and reputation on title litigation. It was this experience that led the future president to become an attorney.

We can assume that his experience clerking for Judge Wood led to one of President Fillmore’s most astute and important acts, promoting a law to perfect title in the new state of California. In 1850, Fillmore became president on the passing of President Zachary Taylor. In his first State of the Union, Fillmore addressed one of the most pressing issues of the day, the status of land ownership in the newly acquired states of California, Texas and New Mexico. In that message to Congress, Fillmore stated:

The uncertainty which exists in regard to the validity of land titles in California is a subject which demands your early consideration. Large bodies of land in that State are claimed under grants said to have been made by authority of the Spanish and Mexican governments. Many of these have not been perfected, others have been revoked, and some are believed to be fraudulent. But until they shall have been judicially investigated they will continue to retard the settlement and improvement of the country. I therefore respectfully recommend that provision be made by law for the appointment of commissioners to examine all such claims with a view to their final adjustment.

This is a great statement about what the land title industry does every day and how that work is important to our country and the free flow of capital. Can you imagine if there was an entire paragraph in a modern day State of the Union about the importance of clear title? Join me in celebrating the achievements of an oft overlooked President Millard Fillmore.

02/18/2014

When Does the Three-day Rule Start to Run?

According to the Consumer Financial Protection Bureau’s final rule for integrated mortgage disclosures, the borrower must RECEIVE their Closing Disclosure at least three business days prior to the date of consummation of the transaction. This means that if the closing is set for Thursday, the Closing Disclosure can be hand delivered on Monday. You could also deliver the disclosure by courier or other shipping or postal service so long as you get a signature from the borrower showing receipt on Monday. If a company does not use a service that provides evidence that the disclosure was received on Monday (ie: US Postal Service first class mail), then it must send the disclosure by the prior Thursday.

Some quick definitions can be helpful when understanding this rule. First, the starting point for determining when the three-day period starts is the day of consummation. Consummation is the day the consumer becomes contractually obligated on the loan (i.e., the day they sign the note). This is typically the same day as closing (12 C.F.R. §§ 1026.2(a)(13) & 1026.38(a)(3)(ii)). Once you have the right starting point then you need to count backwards. The three-day rule requires the counting of “business days,” which are “a day on which the creditor’s offices are open to the public for substantially all of its business functions.” (12 C.F.R. § 1026.2(a)(6)). It is not a 72-hour requirement, but rather a day requirement so you do not need to know the time that closing will take place.

Lastly, while the examples the CFPB provides in the rule all focus on physical delivery of the disclosure, electronic delivery is allowed in accordance with the E-SIGN or Uniform Electronic Transaction Act laws. The timing requirements are the same as for physical delivery and would require obtaining some evidence of receipt (i.e., an email confirmation, system log or other indicia) or complying with the mailbox rule for presuming receipt three days after placing the documents in the mail.

For more information about the integrated disclosures, go to www.alta.org/cfpb.