A Year in Review of the Title Industry
Looking back on 2016, a lot has happened in relation to the title business. New government regulations, old government regulations, exciting new technologies, and complicated legal matters all figured into the year. Here is a look back at four important news stories and what’s happened since then.
The practice of electronically recording real estate documents reached several big milestones in 2016. In Iowa, the Tama–Toledo News reported the state’s land records office had filed its one-millionth e-record. “Electronic recording has been a long, sometimes precarious journey with a few setbacks but the end result has been a time-saving product for our customers and stakeholders,” explained Deborah Kupka, Tama County Recorder. It took Iowa just over a decade to reach the one-million mark.
Moreover, e-recording is continuing to gain converts. By October, Simplifile, an e-recording network, reported that it had contracted with 1,496 title jurisdictions across 28 states. The company says it covers more than 75 percent of the U.S. population. “More and more jurisdictions sign on to e-recording every day,” Paul Clifford, president of Simplifile, told National Mortgage News. Clifford said manual document recording is set to become the exception, not the rule, nationally “in the very near future.”
The Consumer Financial Protection Bureau’s (CFPB) TILA–RESPA Integrated Disclosure (TRID) rule was the biggest title industry news of 2015 when it went into effect October 3 of that year. However, that was far from the end of reform for real estate disclosure documentation. Things culminated in May of 2016 at the American Land Title Association’s (ALTA) annual lobby day, where 74 members of Congress threw their support behind a letter to the CFPB. The letter, authored by ALTA, asked the CFPB to fix the TRID rule requirement that caused consumers to receive incorrect title insurance premium disclosures.
That problem affected consumers in more than 25 states, due to what is known as “simultaneous issue,” a discounted title insurance premium offered to consumers who purchase both lenders and owners policy simultaneously. The letter went on to say that fixing the issue would “ensure that [the CFPB’s] new forms serve as a credible source of accurate information about the true costs of buying a home for consumers.”
By the end of June, the CFPB had released a set of proposed updates to TRID, including tolerances for the total of payments, housing assistance lending, cooperatives, and privacy and information sharing. However, not addressed was the issue with the calculation of title insurance fees. “Consumers around the country continue to receive unclear information about their title insurance costs at the closing table,” Michelle Korsmo, CEO of ALTA, commented at the time. The CFPB closed its most recent period for comment on October 18 and has yet to rule definitively on this and other TRID concerns.
For 2016, title issues found their way into court a number of times in Illinois. DSNews.com reported in October that recent court decisions in Illinois highlighted how important it was for a title company to spot and cure title defects before they become a problem.
Diana Carpintero, managing attorney for foreclosure and bankruptcy at law firm Kluever & Platt, and Blake Strautins, senior attorney at Kluever & Platt, argued in the article that title insurance and mortgage industry professionals should be aware of a new trend by “industrious” defense counsel attorneys to litigate foreclosure cases with title defenses.
The article reported that once title issues end up in front of a court, such as in the case of CitiMortgage, Inc. v. Parille, lender damage recovery options can be “severely limited.” The authors recommended lenders, servicers, and legal counsel review property titles “carefully and promptly” to address title defects early.
In a follow-up DSNews.com article in November, the same authors detail more issues with Illinois foreclosure law. This time the authors report that several borrower-friendly amendments to the Illinois Mortgage Foreclosure Law (IMFL) were expected to sunset (i.e., automatically repeal) this year or early next year. The legislature took action on some provisions, but seemingly ignored others. The authors cite this “uneven treatment” as a reason for lenders, servicers, and legal counsel to stay on their toes when it comes to Illinois foreclosure cases.
FinCEN Disclosure Rule
Almost a full year ago, the biggest title news had to do with a new Geographic Targeting Order (GTO) by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). FinCEN announced in mid-January 2016 that it wanted national title insurance companies to disclose to authorities the identities of buyers in Manhattan for sales over $3 million and in Miami for sales over $1 million.
Many such high-dollar buyers were using shell companies to purchase their properties, citing privacy concerns. However, the government was concerned about money laundering. A Quartz article on the new rule points to several high-profile stories illustrating the government’s case, including a $33 million Malibu estate secretly purchased by the son of an African head of state and a New York skyscraper owned by the Iranian government for decades. Both were bought with shell companies.
The rule was meant to last for six months initially. By April, The Real Deal Magazine reported that buyers “hadn’t missed a beat.” The rule included a number of loopholes, such as an exclusion for wire transfers, which may have helped some wealthy buyers remain anonymous. Sales volume, according to Manhattan real estate agents, hadn’t seen a notable drop, though some had concerns about privacy. “At the end of the day, it doesn’t preclude people from buying,” Frances Katzen, an agent with Douglas Elliman, remarked.
However, FinCEN elected to expand its new rule in August beyond its six-month trial period and to new geographic areas. The program was expanded to all five boroughs of New York City, Broward, and Palm Beach Counties in addition to Miami–Dade, Bexar County, home to San Antonio, Texas, and five counties in California: San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara Counties.
These stories are likely to come back into the news in 2017. By all estimations, e-recording will continue to grow, legislatures and courts will continue to scrutinize title defects, and the CFPB and FinCEN will continue to refine their respective rules. Of course, many new stories could be on the horizon. We’ll just have to wait and see what surprises are in store in 2017.