FinCEN Addresses GTO Questions

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) verbally provided on Sept. 7 answers to frequently asked questions by title companies on compliance with the Geographic Targeting Order (GTO). These questions were selected from those asked during webinars hosted by ALTA and the California, New York and Texas land title associations. For questions about specific transactions, ALTA and FinCEN recommend calling the FinCEN Resource Center at 800-767-2825. Most transaction specific questions are answered within one to two business days.

Q Multiple buyers. If a purchase is being made by an individual buyer and a corporate entity as tenants in common and would otherwise meet the GTO thresholds is it a covered transaction? Does this answer change if the legal entities portion of the equity in the real estate is less than the reporting threshold?

A – Yes it is a covered transaction. The GTO defines a covered transaction as one in which a legal entity is involved in any manner as a purchaser or real estate in a covered location at or above the covered price. This is true even if the legal entity will own a minority or de minimis stake in the property.

Q – Business Trusts. Is a business trust considered legal entities for purposes of the GTO?

A – No. All trusts, no matter the purpose, are outside the definition of a legal entity under the GTO. The type of trustee, individual or corporate, does not change this result.

Q - Refunded checks/deposits. If an entity pays their earnest money in a business check but this check is not deposited and later returned to the purchaser who then wires the entirety of the purchase price at closing is this a covered transaction?

A – Yes. If a one of the covered payment methods (checks, money orders, cash) is used as part of the transaction by any of the parties then it is covered by the GTO. This includes situations where those funds are later refunded and the entirety of the purchase price is wired.

Q - 1031 exchanges. Does the GTO cover residential properties that are obtained as part of a 1031?

A – Yes. The mere fact it’s a 1031 transaction does not impact the determination on whether a transaction is covered by the GTO.

Q – Vacant lots. Does the GTO cover the purchase of a vacant lot? What if it is going to be used in the construction of a home?

A – It depends. The answer hinges on whether the vacant land would be considered residential under the GTO definition. A good rule of thumb is to consider whether the sale would be covered by TILA or RESPA (requiring the issuance of TRID forms) if it was being purchased using a loan. As a reminder, if you have a question about a specific transaction, it is best to reach out to FinCEN directly for guidance.

Click here for more information about the GTOs.

If you have additional questions about FinCEN and the GTO, you may email Steve Gottheim, ALTA’s senior counsel.


Uncrypting the Encryption Options



By Zafar Khan

In the past, for individuals and small businesses, cybersecurity was important to mitigate the inconvenience of spam, viruses that required restoring back-ups of corrupt files, and letters to credit bureaus to clear up identity theft issues. While painful, the cost of these was generally in the hundreds of dollars and perhaps a few hours of inconvenience.

Today, we see a convergence of trends that is changing the dynamics of cyber security for those in the integrated real estate sector.

  • Consumers and real estate service providers have become habituated to the convenience of online services and apps which require a low level of user sophistication.
  • With increasing volumes of high value transactions exchanged through electronic channels, Internet criminals are coming up with new ways to intercept the communication or deceive the parties involved, such as researching a target’s contacts and background in sites such as LinkedIn, where they can identify real business relationships and pose as one of them.  (See recent article: Business Email Compromise.)
  • Regulators are focusing on protecting consumer information by enacting cyber security regulations and outsourcing audits, increasing the stakes for regulated industries (i.e. realtors, lawyers, title insurance, settlement and escrow agents, lenders, accountants) that may be susceptible to a security breach.
  • In the past, Internet criminals were expert “marketers” who would purchase email addresses, set up internet domains to pretend to be a real company, and then they would bombard users with carefully written emails selling familiar consumer products. Today, hackers and Internet criminals are far more sophisticated, and are willing to invest more time to research their individual targets. As a consequence, according to the FBI, cyber fraud losses per incident average $6,000 per individual and $130,000 per business, with $1.2 billion reported stolen in the last year.
  • If one is encrypting “for compliance”, one might want a service that is secure enough to protect the information in transit (with no storage in the middle). By contrast, if one is looking to protect strategic interests, one might consider email encryption services that maintain the simplicity of use, but yet keep the messages encrypted in transit and within the sender archive/sent folder as well as the recipient archive/inbox. This protects the sender’s strategic interests such that these messages remain private far into the future regardless of a future breach, and content cannot be culled by the recipient’s email platform while it sits in his or her inbox (i.e. Gmail, Hotmail, Yahoo). Consider common email encryption methods and the basics as to what encryption is, in simple terms.

For individuals and small businesses, today’s challenge is to maintain the simplicity of digital communications and transactions, while increasing the protection against these new cyber risks. Armed with just a little more knowledge, users can reduce their exposure to today’s “hacker gold rush.”

Zafar Khan is CEO of RPost. He can be reached at zkhan@rpost.com. Khan will speak more in depth about this topic during a session titled "Uncrypting the Encryption Options" at ALTA's Annual Convention. Click here to register.

The Inside Track to Acing Your Final Exam With Your Lenders



By Kate Steineman

If you are like me, you have been glued to the television watching the summer Olympics.  The talent that those athletes have is amazing to behold.  Each of them depends on a score to understand where they stand in their given sport and what it would take for them to win the gold.

 In today’s regulatory environment, we all want to be gold medal agents. There are increasing requirements of us from your lenders, and they could vary from lender to lender.   Knowing those expectations, and how they measure your performance, is critical for you to “go for the gold”. 

Please join Kate Steineman and me at our Notable session; “The Inside Track to Acing Your Final Exam with Your Lenders” at the ALTA Annual Convention in October to discuss what lenders are measuring and what criteria is being included in their scorecards.  Come ready for an interactive session and bring your questions regarding the scorecard/evaluation process.

Kate Steineman is Vice President and Business Liaison Manager at Wells Fargo Home Mortgage. She can be reached at katesteineman@wellsfargo.com. Steineman and Jack Rattikin III, President and CEO at Rattikin Title Company, will speak more in depth about this topic during a session titled "The Inside Track to Acing your Final Exam with your Lenders" at ALTA's Annual Convention. Click here to register.

The Top 5 Things to Consider When Choosing a Third Party Assessment Provider



By Blaise Wabo

Demonstrating compliance with the ALTA Best Practices framework is a challenging endeavor for many title insurance and settlement companies. There are many factors to consider when choosing an outside company to partner with; from cost, to process and methodology, to a company’s experience, and more.

I will discuss the top five things you must consider when choosing a third party assessment provider to ensure that your organization finds the right provider for your needs. By heeding our advice when selecting a third party assessment provider, your organization will be able to demonstrate compliance with ease!

Blaise Wabo is a Managing Consultant for A-LIGN. Wabo will speak more in depth about this topic during a session titled "The Top 5 Things to Consider When Choosing a 3rd Party Assessment Provider" during ALTA's Annual Convention. Click here to register.

Drive Success, Not Checks With Mobile Deposits



By Ashley Cook

How is our industry losing billions of dollars a year from cybersecurity after spending billions of dollars on increasing IT security and protocols?

The Answer: Realtors and Buyers. While brokers and Realtors are beginning to embrace the importance of IT security, the buyers will always be the wildcard. We can’t force the buyer to use encrypted email or even sit in the front seat of the transaction (i.e., be engaged). After all, most buyers don’t even recall where they closed.

Learn how mobile technology is bridging this gap. What gap? The gap between the true beginning of the transaction verses the beginning of the transaction from the view of the settlement service provider. In other words, THE TRANSACTION BEGINS WITH THE REALTORS AND CONSUMERS, which is days before the title company receives the order.   

Ashley Cook is CEO/Founder of ZOCCAM. She can be reached at ashley@zoccam.com. Cook will speak more in depth about this topic during a session titled "Drive Success, Not Checks with Mobile Deposits" during ALTA's Annual Convention. Click here to register.

Consumers Say the Darndest Things: A Game Show



By Leslie Wyatt

Ever been to a party and have someone come up to you and ask “So what do you do?”  Sure you have, and you have also seen their eyes gloss over when you answer “I am in the title industry.” “The Title industry? What’s that?” they ask. When you try and explain further what exactly it is that you do and what title insurance is you realize quickly that you have lost them! 

Let’s be honest even some people in the title industry don’t fully understand what owner’s title insurance is and how it works. Think about it. This is likely the largest transaction that a consumer will ever make and they don’t understand how important it is for them to have owner’s title insurance! 

There are so many misconceptions out there about title insurance. As an industry, it is our job to educate not only the consumer but all the parties in the closing transaction on the importance of title insurance, what it does and how it works. 

Come join the fun and maybe even participate!  Learn some creative ways to train your staff and educate homebuyers on the benefits of owner’s title insurance. Hear what consumers, real estate agents and lenders think about title insurance, and learn how to help them better understand our business.

Leslie Wyatt is Director of Industry Relations at SoftPro Corporation. She can be reached at leslie.wyatt@softprocorp.com. Wyatt and Bernadette Cuevas, Managing Director at First Nationwide Title Agency, LLC, and Lisa Steele, EVP at Mother Lode Holding Company, will speak more in depth about this topic during a session titled "Consumers Say the Darndest Things: A Game Show" at ALTA's Annual Convention. Click here to register.

Compliance – One of the Best Ways to Market Your Business



By Debra Gentry

In 1900, the Good Housekeeping Research Institute (GHRI) was founded to test various household devices and products. By 1909, the Good Housekeeping magazine had established a unique “Seal of Approval” process whereby all advertisers within the magazine who passed the GHRI quality review were given special status by the GHRI with a unique label affixed to their advertisement. The seal is meaningful even today—both to the millions of consumers who want assurance they are purchasing a tested product and to the manufacturers who seek association with a widely-recognized, independent review.

As the settlement industry begins to market its services to homebuyers, real estate agents and lenders, it is increasingly important the best companies differentiate themselves from their competitors. Being compliant to ALTA’s Best Practices provides you with the title industry’s seal of approval. And, since there are varying degrees of compliance in the marketplace, it is of critical importance that you are able to showcase how and why your offering is different. Otherwise, your messaging will just become part of the noise.

Understanding how the compliance seal of approval can be used to your advantage when promoting title services to the marketplace will provide a marketable point of difference when growing your organization.  How should you use social media? Do you need to advertise on radio or TV? What other mediums are there to promote your services?

In this session, we will have open discussion on the different ideas for how best to market your organization. We will also discuss ways to make your title company stand out in a crowded field.

Debra Gentry is Director of ALTA Best Practices Group at Pershing Yoakley & Associates, PC. She can be reached at dgentry@pyapc.com. Gentry will speak more in depth about this topic during a session titled "Compliance Is One of the Best Ways to Market Your Business" during ALTA's Annual Convention. Click here to register.

 What’s all the Hype with Blockchain?



By Frank Pellegrini

The financial and tech world is abuzz with the potential of blockchain technology. This technology, which underpins the bitcoin “currency,” is being developed for use in an array of financial transactions, including potentially the recording of property records.

What exactly is blockchain? Here’s the definition from Wikipedia (consider the source, of course):

“A blockchain is a distributed database that maintains a continuously-growing list of data records secured from tampering and revision.”

Confused? So are we.

While this new technology clearly has the potential to change the way we record real estate transactions, many questions remain, especially for us novices. During this exciting session we will attempt to clear up some of that confusion by exploring at length a number of questions about blockchain, including:

  1. How does blockchain function?
  1. Is blockchain the next big thing, or the next big bust?
  1. Will it make the process more cost efficient?
  1. Who’s working on making blockchain an efficient technology to use for real estate transactions, and what success have they had?
  1. How secure is blockchain technology compared to cloud-based storage technologies we are working with now?

Come listen to a discussion about this new technology.

Pellegrini, CEO of Prairie Title Services, along with Mark Ladd, VP-Regulatory & Industry Affairs at Simplifile, and Wesley Miller, CEO of ATS Secured, will speak more in depth about this topic during a session titled "What’s all the Hype with Blockchain?” at ALTA's Annual Convention. Click here to register.

Automating Fee Collection and Management to Ensure TRID Compliance



By Pat Carney

Under the TILA-RESPA Integrated Disclosure rule (TRID), there’s a 10 percent tolerance for shoppable fees, like title. Falling “out of tolerance” can result in monetary and reputational penalties for lender clients. So, how can title and settlement agents help their lender clients ensure their fee disclosures are within tolerance?

During the pre-TRID and the early post-TRID period, lenders relied on extra manpower for their fee disclosure process. They collected rates and fees manually, then kept them updated in archaic tables and templates. Some even resulted to calls and faxes (gasp!).

But now, with the CFPB calling on lenders to use “the best information reasonably available,” more and more lenders are moving to automation. They’re partnering with specialized providers that perform fee collection and management on their behalf. Ideally, these solutions can also be integrated with each lender’s LOS, so that the closing fees can be loaded into the LOS, and subsequently the Loan Estimate.

These closing cost fee solutions leverage rate and fee management engines that dynamically load closing costs for a given loan based on the type of loan, loan amount, and subject property address. When a provider changes a fee, which often occurs, the fees will be updated and verified in the fee management engine without lender involvement—improving speed and accuracy by eliminating errors that may result from re-keying, misreading fees in a look-up table, or using outdated information.

By leveraging an automated closing cost fee solution, title and settlement agents are able to market their rates and fees to lenders nationwide and in real time (and ultimately secure more orders). Meanwhile, lenders are able to ensure that the cost disclosed to their borrowers on a Loan Estimate or Good Faith Estimate is the same cost indicated on an order, and ultimately the same cost provided on the final Closing Disclosure at settlement—guaranteeing they stay in TRID compliance and don’t fall “out of tolerance.”

Pat Carney is Chief Innovation Officer at ClosingCorp. He can be reached at pcarney@closing.com. Carney will discuss this topic during a Market Talk (The Need to Deliver Accurate Fees) at ALTA’s Annual Convention. Click here to register.


Digital Advertising in the Title Industry



By Bill Risser

Digital advertising is still new and relatively untested in the title insurance industry. Why? A few reasons come to mind. Historically, title insurance companies have done little advertising, instead relying on relationship marketing to build up relationships with referral partners. Second, digital advertising requires a skill set not usually found in industry marketing/sales departments. Finally, title companies have shied away from reaching out directly to buyers and sellers, fearing a backlash from their real estate agent, lender and attorney relationships. We will discuss this belief and question its relevancy in today’s digital world.

ALTA has embarked on an aggressive campaign to shift the messaging to the consumer. The Homebuyer Outreach Program (HOP) is ALTA’s initiative to connect with buyers and sellers and convey the value of title insurance before a purchase contract is signed. Content created by ALTA is available to ALTA members as companies begin their outreach efforts to educate future homeowners and raise brand awareness.

Digital advertising is everywhere. Ads appear on every major social network. Every Google search shows paid results (ads) along with organic search results. Retargeting allows advertisers to “follow” potential customers via cookies and pixels everywhere they go on the web. Anyone viewing an item on Amazon or any other online retailer has experienced retargeting when that product starts appearing on unrelated websites in the form of banner ads. 

How can the title insurance industry capitalize on digital advertising? This discussion will be a key component at the 2016 ALTA Annual Convention Engagement Lab - “Advertise Online Starting at $50 – REALLY!” 

There are two distinct target audiences the industry can reach out to via digital advertising - industry partners and consumers. Messaging is different for each as well as the channels to access each group. Is the advertising to direct the target audience to click through to content? Perhaps the goal is more geared to brand awareness rather than clicks.

Finally, it is important to understand the metrics of digital advertising so results can be measured. We will discuss the different ways to analyze the success of campaigns based on the desired outcome.

Bill Risser is VP of Digital Strategy for Chicago Title Agency. He can be reached at risserb@ctt.com. Risser will speak more in depth about this topic during a session titled "Advertise Online Starting at $50 – REALLY!" during ALTA's Annual Convention. Click here to register.