ALTA Closing Survey Shows More Consumers Reviewing Mortgage Disclosures

More homebuyers are reviewing their mortgage documents ahead of their scheduled closing under new federal regulations, according to results of a Home Closing Survey conducted by the American Land Title Association.

As of Oct. 3, 2016, under the Know Before You Owe regulation, the Consumer Financial Protection Bureau (CFPB) requires homebuyers to receive a five-page Closing Disclosure at least three days before the closing of their mortgage.

Reviewing Documents

Closing survey charts 2“While there remain challenges to complying with the regulation, title and settlement agents went to great lengths to prepare and train staff prior about the new process,” said Michelle Korsmo, ALTA’s chief executive officer. “The hard work of these professionals paid off as our survey found that 92 percent of surveyed homebuyers are taking time to review their mortgage documents before the closing. This compares to only 74 percent of consumers who reported having reviewed their documents prior to the new regulation.”

The survey was held in two phases. During the first stage, data was collected prior to implementation of the new mortgage disclosures to assess the closing experience of more than 800 homebuyers using the HUD-1 Settlement Statement. The second phase gathered information from nearly 700 homebuyers about their closing experience under the new rules requiring use of the Closing Disclosure.

Potential Closing Delays

Additionally, the new regulations have had minimal impact on whether closings occurred on time. Prior to implementation of Know Before You Owe, homebuyers reported that 77 percent of closings took place as scheduled. With the Closing Disclosure, 74 percent of closings are taking place as scheduled.

“Settlement agents reported that the top reasons for rescheduling a closing to another day were issues with lender underwriting, a delay from the lender and an issue with the three-day rule,” Korsmo said.

Collaboration Needed for Positive Consumer Experience

The survey also showed the continued need for all parties involved in the transaction to work together to ensure the consumer experiences a positive closing. According to the survey, consumers received valuable information about their transaction from loan officers (39 percent), title/settlement agents (30 percent) and real estate agents (29 percent).

Closing survey charts 1“ALTA was determined to ensure the vital role of title and settlement agents would not be diminished because the new rules put more liability on lenders,” Korsmo said. “Fortunately, consumers continue to view title and settlement agents as valuable resources that provide peace of mind and help them get the keys to their home. We appreciate the members of the Mortgage Bankers Association and National Association of Realtors working with ALTA members to ensure the consumer experience remains positive. Continued collaboration among title agents, Realtors and lenders is paramount to educate consumers about their real estate transaction.”

Homebuyer Education

The survey indicated that continued education about the benefits of owner’s title insurance is needed. According to the survey, 12 percent of homebuyers in a purchase transaction using the Closing Disclosure were unsure if they bought an owner’s policy. This compares to 8 percent of homebuyers who were unsure if they purchased an owner’s policy under the old regulations.

“Consumers should leave the closing table confident that they know they purchased an owner’s title insurance policy and protected their property rights,” Korsmo said. “Unfortunately, as the CFPB’s current approach does not provide consumers with clear information about their title insurance costs. The required calculation under TRID for title insurance fees is not transparent or accurate and is inconsistent with the Bureau’s mission to better inform consumers.”

The CFPB announced it would clarify and provide additional guidance on the rule this summer. ALTA will continue to work with the CFPB to correct the inaccurate calculation of title insurance policy premiums on the mortgage disclosures.

“In the meantime, we encourage ALTA members to use the education materials provided in our Homebuyer Outreach Program to help educate consumers about the benefits of owner’s title insurance,” Korsmo said. “Homebuyers should understand the important role title agents play in reducing their risks, providing peace of mind and protecting their property rights.”

While on Capitol Hill, Remember ‘Why We Protect’

On May 18, title professionals from across the country will be in Washington, D.C., for ALTA's 2016 Federal Conference & Lobby Day to advocate on behalf of the industry. Watch this short video as ALTA’s Board of Governors explain the important role the industry plays providing peace of mind to homebuyers by protecting their property rights.



How to Disclose Flood Insurance on Loan Estimate and Closing Disclosure

The Consumer Financial Protection Bureau (CFPB) held a webinar April 12 to address frequently asked questions about the TILA-RESPA Integrated Disclosures (TRID) rule. One of the questions addressed was how to show flood insurance premiums on the Loan Estimate and Closing Disclosure.

Click here to access the webinar recording. Click here to access recordings of the CFPB’s previous webinars on the integrated disclosures.

Outlook Live - KBYO Post-Effec Questions and Guidance Slides 16The CFPB staff stated that the term “homeowner’s insurance” as used under the rule includes flood insurance. Specifically, the CFPB staff stated that “homeowner’s insurance” under the rule means, “the amounts identified in § 1026.4(b)(8), which include premiums for insurance against losses or damage to property written in connection with the credit transaction. 

As such, flood insurance is treated under the rule, and more generally under Regulation Z, as other casualty insurance, such as homeowner’s insurance.” CFPB straff noted that flood insurance may be disclosed on the forms under the Estimated Taxes, Insurance and Assessments in the Projected Payments table in the Homeowner’s Insurance line.  Tthe box for Homeowner’s Insurance would be checked, and Yes or No would be indicted to state whether it is escrowed, according to the webinar.  In addition, in the Projected Payments table, the Escrow amount would include any amount escrowed for flood insurance.  

Outlook Live - KBYO Post-Effec Questions and Guidance Slides 17Under the Prepaids section in Other Costs, if there is any amount that is prepaid for flood insurance, it would be disclosed on the Homeowner’s Insurance line Section F along with any other prepaid amount for the homeowner’s insurance premium.  Under the Escrow section in Other Costs, if any flood insurance premiums are in escrow, they would be disclosed on the line for Homeowner’s Insurance in Section G.  

According to Richard Horn of Richard Horn Legal PLLC, the CFPB noted that the flood insurance payments would be reflected in the Escrow tables on page four of the Closing Disclosure, “but they did not explicitly state how it would be referred to (i.e., as Homeowner’s Insurance or Flood Insurance).”

“In addition, this answer does not address how to disclose the payee and the term in the Prepaids section or the amount of months collected in the Escrows section for Flood Insurance if this information is different from the hazard insurance policy,” Horn added.


CFPB Says Owner’s Policy May Be Disclosed as Negative Number Under TRID

During a webinar on April 12, the Consumer Financial Protection Bureau addressed several questions regarding the TILA-RESPA Integrated Disclosures (TRID) rule that stakeholders have submitted in recent weeks, including the disclosure of fees for owner’s title insurance.


The CFPB specifically addressed this question submitted by ALTA during the webinar:

The calculation of the owner’s title policy premium (in a purchase transaction when owner’s and lender’s policies are issued simultaneously) in accordance with the rule might result in a negative number. Does the creditor disclose this negative number for the owner’s title policy on the Loan Estimate and Closing Disclosure?

Dania Ayoubi, counsel in the CFPB’s Office of Regulations, said that in this situation, the creditor would disclose the premium for the owner’s policy as a negative number. 


“When a simultaneous issue rate or discount is used—mostly in purchase transactions—the cost of an owner’s title insurance policy is disclosed as the incremental cost of that owner’s title insurance beyond the standard non-discounted cost of the lender’s title insurance policy,” Ayoubi said. “When disclosed in this fashion, the disclosure conveys to the consumer that it is less expensive to purchase both owner’s title insurance and lenders title insurance together than it is to purchase just lenders policy by itself.”

She referenced Comment 37(g)(4)-2 of the rule, which states “The premium for an owner’s title insurance policy for which a special rate may be available based on the simultaneous issuance of a lender’s and an owner’s policy is calculated and disclosed pursuant to § 1026.37(g)(4) as follows:

    1. The title insurance premium for a lender’s title policy is based on the full premium rate, consistent with § 1026.37(f)(2) or (f)(3).
    2. The owner’s title insurance premium is calculated by taking the full owner’s title insurance premium, adding the simultaneous issuance premium for the lender’s coverage, and then deducting the full premium for lender’s coverage.”

Ayoubi said the CFPB previously addressed how these premiums should be calculated and disclosed in the May 2015 webinar. She added that there are no provisions in Regulation Z that would prohibit the cost of owner’s title insurance from being disclosed as a negative number.

ALTA issued a release last week reminding the CFPB that the way the rule requires the disclosure of premiums for an owner’s policy is not “transparent,” “practical” or “accurate” as the bureau believes and is inconsistent with the Bureau’s mission to better inform consumers.

Other topics covered included:

  • General principles
  • APR
  • Title Interest Percentage
  • Flood insurance premiums
  • Escrow accounts for refinance transactions
  • Separate disclosures (borrower’s and seller’s information, creditor’s copy, seller’s Closing Disclosure, seller-paid costs, seller-paid real estate commissions)
  • Assumptions
  • Property taxes
  • Fees collected prior to consummation
  • Calculating cash to close—loan amount
  • Principal curtailments
  • Construction lending—interest reserve

Click here to access the entire presentation from the April 12 webinar. The format of the webinar was similar to previous webinars the CFPB has provided. Click here to view previous webinars.

Others participating on the webinar from CFPB’s Office of Regulations included Seth Caffrey, counsel; Kristin Switzer, regulatory implementation analyst; Alexa Reimelt, counsel; and Chelsea Peter, counsel.

CFPB staff reminded listeners that the webinar is not a substitute for the rule. Only the rule, including its amendments and official commentary, can provide complete and definitive information regarding the Rule’s requirements, according to the CFPB.

As a general rule, the CFPB presenters indicated that when determining how to comply with the rule, one should first search the rule to see if it specifies how to comply. Absent any specific guidance, one can disclose as he or she thinks is appropriate, as long as that method of disclosing is not prohibited by the rule. The main takeaway was that there are oftentimes several ways of disclosing a fee, any one of which may be acceptable under the rule. This approach reiterates ALTA's message that members need to communicate with their lender partners to determine how fees will be disclosed.


Title Pros Explain Why You Should Attend ALTA's Business Strategies Conference

Offering thoughts on why title professionals should attend ALTA's 2016 Business Strategies Conference are David Townsend NTP, CEO of Agents National Title Insurance Co.; Cynthia Blair NTP, shareholder of Blair Cato Pickren Casterline LLC; Dan Mennenoh, president of H.B. Wilkinson Title Co.; and Diane Evans NTP, vice president of Land Title Guarantee. 

Check out the complete schedule and register today!

There are plenty of cool things to do in Indy!



Title Agent Snuffs Out Fraudulent Email Attempting to Obtain Funds   

A title agent’s diligence in Washington successfully prevented a fraudulent email request for the company to send a wire transfer.

Maureen Pfaff, general manager and chief financial officer for Olympic Peninsula Title Co., recently received a random email requesting the company wire nearly $11,000 to a TD Bank in Florida.

Pfaff said she knew immediately the email was fraudulent because the message came from her father, who wouldn’t make a request like this via email.

“Additionally, the formality of the email and signing it the way they did was a dead giveaway,” Pfaff said.

Realizing it was a scam, Pfaff strung the criminal along, eventually sending something encrypted so she could get an IP address to include in the complaint filed with the FBI. Pfaff created a fake wire transfer notification in an encrypted email, which generated a report when opened.

Pfaff said this was the third fraud attempt the company has experienced in the past six months.

“They’ve all been different strategies,” she added.

Title professionals who receive these types of emails should report the incident to the FBI’s Internet Crime Complaint Center, which is used to track trends in criminal activity.

Below are some of the emails between Pfaff and the fraudster (click to enlarge the image):

  Emails-1 Emails-3

Emails-5 Emails-7









Criminals use various tricks to obtain information and money. Here are several other schemes title professionals should be aware of that are being used by criminals:

  • Social engineering: This is the practice of manipulating users into performing certain actions that will provide the attacker privileged information.
    • Example: WHMCS is a firm that makes online billing and invoicing software that tie into a company's client data and financial backend. One of their database administrators loved social media. Now, he wasn’t putting passwords out there or detailed data about company. But a hacking group used his social media profiles to create a document on him that included everything from his kids’ names and his anniversary to his hobbies and interests outside of work. The hacking group called WHMCS, impersonating the guy, to supposedly reset a forgotten password. When the rep asked the standard security questions, they knew so much about this guy that they knew all the answers. So the company reset the password, the hacking group was in, and they proceeded to download 1.1 gigabytes of credit card numbers and erased all of their databases.

  • Spearfishing: This an email spoofing fraud attempt that targets a specific organization, seeking unauthorized access to confidential data. As with the email messages used in regular phishing expeditions, spear phishing messages appear to come from a trusted source.
    • Example: The perpetrator finds a web page for their target organization that supplies contact information for the company. Using available details to make the message seem authentic, the perpetrator drafts an email to an employee on the contact page that appears to come from an individual who might reasonably request confidential information, such as a network administrator. The email asks the employee to log into a bogus page that requests the employee's user name and password or click on a link that will download spyware or other malicious programming.  If a single employee falls for the spear phisher's ploy, the attacker can masquerade as that individual and use social engineering techniques to gain further access to sensitive data.

  • Whaling: This is a phishing scheme that targets upper management and their access to sensitive information. A successful attack can yield executive passwords and other account details that can open up corporate hard drives, networks and even bank accounts.
    • Example: In 2008, 20,000 CEOs were sent an email masqueraded as a federal subpoena. The official-looking email instructed CEOs to click a link to download special software with which to view the subpoena. About 2,000 CEOs responded unwittingly downloaded a key logger that captured passwords and other sensitive data and sent it back to the phishers. Armed with access, the phishers launched further attacks against those companies.

  • Microphishing: In this scheme, targeted emails are crafted and sent to employees.
    • Example: The hackers will learn someone’s tendencies and copy them in emails. For instance, someone may constantly invert two letters when typing, use a nickname in emails, use Esquire or have an image of their signature. This is a common target for wire transfers. Staff at title companies should be aware of fictitious email that may come from a lender directing transfer of funds to an incorrect account.

FTC Develops New Tools for ID Theft Victims, Provides Tips for Businesses to Protect Data

Identity theft victims can now go online and get a free, personalized identity theft recovery plan as a result of significant enhancements to the Federal Trade Commission’s IdentityTheft.gov website.

The new website is integrated with the FTC’s consumer complaint system, allowing consumers who are victims of identity theft to file a complaint with the FTC and then get a personalized guide to recovery that helps streamline many of the steps involved.

In addition to IdentityTheft.gov and the new personal recovery plan features, the FTC also provides educational materials for businesses with information on how to prevent identity theft and remain vigilant for other scams.

In 2015, the FTC received over 490,000 consumer complaints about identity theft, representing a 47 percent increase over the prior year, and the Department of Justice estimates that 17.6 million Americans were victims of identity theft in 2014.

What can businesses do to help?

  • Tell employees about IdentityTheft.gov. Perhaps send a company-wide email with the short video below about the site. You might also want to consider naming a trusted 
  • Publicize IdentityTheft.gov to your customers. Many businesses have a protocol in place for working with consumers who call about unauthorized charges or unapproved accounts. Consider adding the simple step of mentioning IdentityTheft.gov. Your business can be part of the solution, and change a distraught consumer into a loyal customer.
  • Talk about identity theft prevention and recovery in your community. Everyone knows someone who has been the victim of ID theft. That’s why identity theft prevention and recovery can be a perfect pet project for your industry association or community group.

The third pillar of ALTA’s Title Insurance and Settlement Company Best Practices addresses policies and procedures for an appropriate information security program.

To learn more, register for ALTA’s Feb. 11 compliance webinar “Protecting Sensitive Customer Information: The Basics of Gramm-Leach-Bliley,” The Gramm-Leach-Bliley Act provides the basic legal framework governing title and settlement companies’ duty to protect their customers’ non-public personal information (NPI).

Stewart Executives Ring NYSE Opening Bell on January 29

Several executives from Stewart Information Services including Matt Morris, chief executive officer, rang the opening bell on Jan. 29 for the New York Stock Exchange.

“We are honored to have had the opportunity to ring the iconic opening bell,” Morris said. “It was a great occasion for us to kick off 2016. This will be a year of continued momentum and growth, as well as a year of transformation with our recent governance changes. We will center our business on our customers and real estate partners to drive trusted real estate services delivered by our amazing associates who make it possible.”

Joining Morris on the podium were Thomas Apel, Stewart’s chairman of the board; Allen Berryman, chief financial officer; John Killea, chief legal officer; Ted C. Jones, chief economist; Nat Otis, director of investor relations; and Jennie Craig, vice president marketing programs and media relations.

Morris opened trading with the ringing of the bell at the 4:25 mark of the following video:



Compliance Webinar: What You Need to Know About Gramm-Leach-Bliley

Having trouble viewing this? Go to alta.org for a better viewing experience.

Register and Learn About the Liability of
Protecting Sensitive Customer Information

Passed in 1999, the Gramm-Leach-Bliley Act provides the basic legal framework governing title and settlement companies' duty to protect their customers' non-public personal information (NPI).

With the increase in data breaches and reports of identity theft, regulators are focused more than ever on the processes companies take to safeguard NPI. To help you understand when it's legal to share customer information with or without their explicit permission, register for ALTA's "Protecting Sensitive Customer Information: The Basics of Gramm-Leach-Bliley." The webinar will be held from 1:00-2:00 p.m. ET, Thursday, Feb. 11.

The webinar will:

  • provide an overview of the core requirements of the law
  • address the latest government and regulatory actions regarding customer data
  • review recent court cases and liability for protecting NPI
  • help you understand whether you should share customer information
  • highlight ways NPI should be shared

The featured presenter will be Richard Andreano, a partner of the law firm Ballard Spahr. Andreano, the practice leader of Ballard Spahr's mortgage banking group, has devoted more than 25 years of practice to financial services, mortgage banking and consumer finance law.

Cost is $100 for ALTA members and $250 for non-members.
Register today!

Webinar sponsorship still available! Contact Claire Mitchell for more information.


ALTA CEO Talks with NPR About FinCEN Order for Title Insurers to Provide Info About Suspicious All-cash Deals in Miami, Manhattan

The Financial Crimes Enforcement Network (FinCEN) has issued Geographic Targeting Orders requiring several title insurance underwriters to identify the names of individuals involved in shell companies and other legal entities that make all-cash purchases for high-end residential real estate in Manhattan, N.Y., and Miami-Dade County, Fla.

FinCEN is concerned that all-cash transactions in these areas are being used by individuals to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures. To help mitigate this potential money-laundering vulnerability, FinCEN will require certain underwriters to identify and report the true “beneficial owner” behind a legal entity involved in certain high-end deals in these two areas. The reporting requirement also pertains to the underwriters’ subsidiaries and agents.

NPR interviewed ALTA CEO Michelle Korsmo about the order. Below is audio of NPR's article, which includes a portion of the interview with Korsmo. She can be heard at the 2:17 mark.

Transaction Requirements to File Report with FinCEN

Any underwriters that received the order must file a currency transaction report with FinCEN if these things occur:

  • Location (deal occurs in Manhattan or Miami-Dade County)
  • All-cash deal (no financing)
  • Purchase price in Manhattan is $3 million or more and purchase price in Miami-Dade County is above $1 million
  • There’s a corporate buyer
  • Purchase price paid via monetary instrument

The report must include:

  • Information about the identity of the individual primarily responsible for representing the buyer. The title company must obtain a record of the individual’s driver’s license, passport of other similar identification
  • Date of closing of the covered transaction
  • Total amount transferred in the form of a monetary instrument
  • Total purchase price of the covered transaction
  • Address of real property involved

If the purchase involved in the covered transaction is a limited liability company, the underwriter must provide the name, address and taxpayer identification number of all its members.

Additionally, covered title companies must retain all records relating to compliance with the order for five years, store the records so they are accessible with a reasonable period of time and make the data available to FinCEN or other law enforcement or regulatory agency, upon request.

The term of this order expires in 180 days, but FinCEN may indefinitely renew the order for another six months and for additional areas.

FinCEN said title insurance companies play a central role in real estate transactions and can provide valuable information about potential illegal activities.

“FinCEN appreciates the assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors,” FinCEN said in a release.

ALTA is actively assisting our members to comply with these reporting requirements. Korsmo said "ALTA looks forward to continuing its work with FinCEN as members implement the order to help prevent money laundering schemes and the illegal purchase of real estate in the United States. As the independent third-party at the closing table, ALTA members work to safeguard the real estate transaction for millions of Americans every year. Our work with FinCEN underscores ALTA members’ commitment to providing a compliant real estate settlement experience.”

ALTA has already submitted a letter to FinCEN’s director asking for several clarifications to promote consistency in reporting and help the industry better understand which transactions are covered by the order.


ALTA Seeks Clarification of Orders from FinCEN

ALTA proposes FinCEN adopt RESPA’s definition for “residential.” Industry familiarity with definitions and regulatory scheme provided by RESPA will help title companies identify transactions covered by the order.

ALTA recommends that the definition of “Legal Entity” exclude trusts. The order defines the term “Legal Entity” as a corporation, limited liability company, partnership or other similar business entity.” According to the letter, ALTA said that unlike a corporation, a trust is not considered a separate legal entity under the common law of various states. Adopting this recommendation will provide a definition consistent with those used by the industry for purposes of determining how to effectively transfer title.

ALTA also suggests that the definition of “agents” refer only to people or entities with a contractual relationship with the covered title company. State insurance laws require insurers to appoint agents via a specific written contract or authorization. This will help the insurers consistently determine which business partners they must educate and supervise to comply with the order.

“We urge FinCEN to use a reasonable and good-faith test for determining insurers’ compliance with this order,” ALTA wrote in its letter. “We believe the clarifications requested and joint education with the insurer and FinCEN, should ensure that all covered transactions that the insurer is aware of will be reported; however, even with the best efforts of title insurers, there may be transactions of which the insurer is not made aware.”

To aid compliance, title professionals are encouraged to have a better understanding of the types of customers they do business with. Real estate agents and attorneys should be resources to help gather information about corporate entities purchasing real estate.