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News By Edition
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RESPA News Monthly Edition
RESPA News Monthly July 2014
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Why you should be concerned about the CFPB – Part 1
Posted Date: Wednesday, June 18, 2014
One particular reason you should be concerned about the Consumer Financial Protection Bureau (CFPB) is because the bureau is concerned about you — or at least your interactions with consumers. If what you are doing is violating a federal consumer financial law, the CFPB is going to take interest and likely take action. With the amount of power this agency has, that should concern anyone who is working under the CFPB’s purview. Even if you think the bureau can’t touch you, there’s a chance it can.
When the bureau opened its doors in July 2011, it took over the regulatory authority for 19 consumer financial laws. You may be wondering why you or your company would be subject to CFPB enforcement if you see yourself as falling into one of the agency’s covered persons categories. The issue is, however, that if anything you do falls within the purview of one or more of those 19 laws, then the bureau’s authority can reach you.
“No matter who you are or what business you are in, if [the bureau has a] reason to believe that you are violating one of those particular laws, it has jurisdiction to investigate it and to investigate your role,” said Mitchel Kider, chairman and managing partner at Weiner Brodsky Kider PC, at October Research, LLC’s 2014 National Settlement Services Summit.
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Why you should be concerned about the CFPB – Part 2
Posted Date: Monday, June 23, 2014
In part one of this two-part series, RESPA News explained why you need to keep an eye on the Consumer Financial Protection Bureau (CFPB). It has a long-reaching investigatory arm, and even if you think you are beyond its grasp, you might not be. If you do come under an investigation, the next concern is what an enforcement action could look like. In part two, RESPA News reviews the CFPB’s extensive enforcement powers.
One significant weapon the agency has in its arsenal is the ability to commence its own civil actions.
“The CFPB is a bureau, and it’s part of the Fed,” said Mitchel Kider, chairman and managing partner at Weiner Brodsky Kider PC, at October Research, LLC’s 2014 National Settlement Services Summit. “But in reality, it is about the most independent agency you are ever going to run into. They can bring cases in court or administratively in their own name with their own attorneys, and they don’t have to check with anyone else.”
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CFPB fines title company for alleged RESPA violations
Posted Date: Friday, June 13, 2014
The Consumer Financial Protection Bureau (CFPB) fined Stonebridge Title Services Inc., a New Jersey title company, $30,000 for allegedly paying illegal kickbacks for referrals in violation of RESPA.
“Kickbacks drive up the costs of getting a mortgage and put law-abiding companies at a disadvantage,” said CFPB Director Richard Cordray. “The bureau will continue to take action against companies that seek to attract consumers through illegal schemes.”
According to the consent order, Stonebridge received premiums from consumers for placing title insurance coverage with title underwriters and remitted a percentage of the premiums back to the underwriters.
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RealtySouth ordered to pay $500,000 for alleged RESPA violations
Posted Date: Thursday, May 29, 2014
The Consumer Financial Protection Bureau (CFPB) ordered RealtySouth, the largest real estate firm in Alabama, to pay $500,000 for failing to provide adequate affiliated business arrangement (AfBA) disclosures as required under RESPA.
According to the bureau, the practices identified by the agency’s investigation illegally benefited TitleSouth LLC, an affiliated company owned by the same holding company that owns RealtySouth.
“Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make,” said CFPB Director Richard Cordray. “The consumer bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark.”
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Consumer complaints and CFPB enforcement actions
Posted Date: Thursday, May 22, 2014
When it comes to supervision and enforcement actions, the Consumer Financial Protection Bureau (CFPB) is not playing around. It takes its role seriously, and if you are not compliant with federal consumer protection laws, the bureau can make you pay — literally. One way the CFPB looks for violations is through consumer complaints.
When the CFPB opened its doors in July 2011, it became responsible for the rulemaking, implementation and enforcement of 19 federal consumer protection laws, including RESPA.
The Dodd-Frank Act, which created the CFPB, gave the agency broad investigatory and enforcement powers. The bureau can issue subpoenas, civil investigative demands and cease and desist orders. The agency can also commence its own civil actions.
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Closing Disclosure issues you should consider now
Posted Date: Thursday, May 22, 2014
The new mortgage disclosure forms are still more than a year away from implementation, but that doesn’t mean now is a time to relax. There is much the industry can do right now to prepare for the changes ahead. It’s important to be prepared, and that means knowing the forms and their implementing regulations. At a few recent industry events, industry experts walked through the forms and discussed steps that can be taken now to get ready.
At the American Escrow Association’s 2014 Annual Business Meeting and Education Conference, Diana Hoffman, vice president and corporate escrow administrator at Fidelity National Financial, explained the importance of understanding the changes that are on the way.
“This rule doesn’t take effect until Aug. 1, 2015, which is still over a year away,” Hoffman said. “According to the rule, it is the lender’s obligation to prepare and deliver the Closing Disclosure as well as the Loan Estimate. As an industry, meaning the settlement industry, we are kind of sitting here wondering, ‘Now what do we do?’”
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Could MSAs be illegal under the Henson case?
Posted Date: Friday, June 13, 2014
Expert attorneys who spoke at October Research, LLC’s 2014 National Settlement Services Summit (NS3) said the answer to that question is yes. When a federal district court decided in the case of Henson v. Fidelity National Financial Inc. that the phrase “for services actually performed” contained in RESPA Section 8(c)(2) refers specifically to “settlement services,” it basically held that marketing services agreements (MSAs) are illegal. It is unlikely, however, that the interpretation will be upheld.
“Unfortunately, we now have a situation where a court is determining the meaning of the word “services” in Section 8(c),” said Jeffrey Arouh, a partner at McLaughlin & Stern LLP during an NS3 session covering affiliated business arrangements and MSAs. “And, for better or worse, what the court has said in Henson was that the term ‘services’ in Section 8(c)(2) exempts payment for settlement services actually performed.”
RESPA Section 8(a) prohibits the payment or acceptance of a kickback pursuant to an agreement that business incident to a real estate settlement service will be referred to any person.
Section 8(c)(2) contains an exception, allowing for the “payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed.”
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CFPB: HUD’s 10-factor test not crucial in Borders case
Posted Date: Wednesday, June 4, 2014
The Consumer Financial Protection Bureau (CFPB) filed a complaint against the Kentucky-based law firm of Borders & Borders PLC in October 2013, alleging that the firm violated RESPA by using a network of sham affiliated business arrangements (AfBA) to pay kickbacks for referrals of real estate settlement business. The law firm recently asked the court to dismiss the case, arguing that the CFPB’s complaint relied on the Department of Housing and Urban Development’s (HUD) 10-factor test, which the 6th U.S. Circuit Court of Appeals found unconstitutional. In a reply to the court, the bureau said it can show that Borders violated RESPA without using the controversial test.
In its complaint, the CFPB alleged that Borders & Borders violated RESPA by paying kickbacks to real estate and mortgage brokerage companies that referred business to the firm. The kickbacks, the bureau claimed, were disguised as profit distributions made by nine joint ventures that were created and operated by Borders. According to the bureau, the firm also failed to provide adequate AfBA disclosures to its customers, which are required under RESPA and Regulation X.
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Borrower argues RESPA applies to rental property that was intended as residence
Posted Date: Thursday, June 5, 2014
In a lawsuit filed against a mortgage servicer for failing to timely respond to a borrowers’ qualified written request (QWR), the servicer argued that RESPA did not apply because the property was used for business purposes. The servicer requested that the case be dismissed because the borrower rented the property to tenants. The borrower argued that RESPA applied to his claim because when he obtained the loan, his intention had been to use the property as a secondary residence. He said that because of hard economic times, however, he had been forced to rent the property to tenants. The court determined that it could not dismiss the case because it was not clear at this stage whether RESPA applied.
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Borrowers say prohibited services cannot be considered actual services
Posted Date: Friday, June 6, 2014
A couple sued their title company, arguing that the company violated RESPA Section 8(b) by splitting a closing fee. Under Georgia law, it is illegal for anyone other than a Georgia attorney to conduct a closing. The couple argued that because the title company could not conduct a closing under state law, its closing services could not be considered “services actually performed.” They claimed that if state law prohibits the company from conducting closing services, then splitting the closing fee with the settlement attorney was a violation of RESPA.
The defendants filed a motion to dismiss, arguing they provided actual services. The court granted the motion to dismiss, finding that actual services were performed even if those services may not be allowed under state law.
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Court: Servicer had duty to pay borrower’s insurance premiums from escrow account
Posted Date: Monday, June 9, 2014
A borrower sued her mortgage servicer when her homeowners insurance lapsed after the servicer allegedly failed to pay the premium. The borrower alleged violations of RESPA and a claim for negligence. The servicer argued that there was no private right of action available under RESPA and that it owed no duty to the borrower. The court disagreed. It denied the servicer’s motion for summary judgment, finding that there is a right of action available to the borrower under RESPA and that the servicer had a duty to the borrower to pay insurance premiums from her escrow account.
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CFPB opens advisory board meetings to public
Posted Date: Thursday, May 22, 2014
The Consumer Financial Protection Bureau (CFPB) is opening its advisory board and council meetings to the public. The bureau said that it received requests from stakeholders for more openness in regard to the meetings, and, taking the requests to heart, the agency is allowing the public to attend in person or watch the meetings online.
Under the Dodd-Frank Act, the CFPB was required to establish a Consumer Advisory Board. The purpose of the board is to “advise and consult with the bureau in the exercise of its functions under the federal consumer financial laws, and to provide information on emerging practices in the consumer financial products and services industry, including regional trends, concerns and other relevant information.”
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NS3 Live Coverage: Keynote discusses vendor management from the lender’s perspective
Posted Date: Tuesday, June 10, 2014
Regulators have made it clear that they want lenders to beef up their oversight of third-party service providers, but just how those expectations will impact the relationship between lenders and the settlement services industry remains unclear. In a keynote speech at October Research, LLC’s 2014 National Settlement Services Summit (NS3) in New Orleans, Mike Flynn, executive vice president and general counsel with Flagstar Bank, discussed vendor management from the lender’s perspective.
Flynn said that in the title space, regional and national underwriters and large agencies that have ongoing contracts with banks are already feeling the impacts of vendor management guidance released by the Office of the Comptroller of the Currency (OCC) and Consumer Financial Protection Bureau (CFPB) because it’s clear such providers are major third-party vendors.
The real question, Flynn said, regards the impact that the regulators’ expectations will have on smaller services providers — such as local title agents — who are not engaged in long-term contractual relationships with a lender.
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Lender liability and dealing with regulatory uncertainties
Posted Date: Thursday, June 26, 2014
Since the Consumer Financial Protection Bureau (CFPB) issued its April 13 bulletin two years ago, lender liability has been an important topic of discussion among lenders and settlement service providers alike. In that time, the industry has made strides to assure comply with regulatory expectations, but those expectations remain unclear.
During October Research, LLC’s National Settlement Services Summit this year, George Houghton, group president, agency operations, Stewart Information Services Corp., led a panel discussion with William Burding, executive vice president, general counsel, Orange Coast Title Co.; Penny Reed, vice president, industry outreach-business capabilities development, Wells Fargo Home Mortgage; and Paula-Rose Stark, senior principal, Promontory Financial Group LLC, on how to gain clarity and move forward to address the concerns of lenders and agents.
Regulatory ambiguity
It makes it hard to move forward when you don’t quite know the rules of the road. While sweeping changes have been made as to how the mortgage industry must operate, it is still unclear how to implement and verify these changes.
One thing is for certain, settlement service providers are an important inclusion to the definition of third-party providers.
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California man admits to preparing fraudulent HUD-1s
Posted Date: Thursday, June 26, 2014
Joseph Gekko, 45, of Yorba Linda, Calif., pleaded guilty to three counts of wire fraud in connection with a mortgage fraud scheme, U.S. Attorney Benjamin Wagner announced.
Gekko’s guilty plea marks another event in a wide-ranging series of prosecutions related to Loomis Wealth Solutions, a “wealth-building” program offered to the public in California, Illinois, Washington and elsewhere, from 2006 through 2008. According to indictments, persons connected to Loomis Wealth Solutions are alleged to have committed various acts of investment fraud, mortgage fraud and money laundering.
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Wisconsin man sentenced to prison for role in mortgage fraud scheme
Posted Date: Wednesday, June 18, 2014
John Vaudreuil, U.S. Attorney for the Western District of Wisconsin, announced that David Robert, Madison, Wis., was sentenced on June 12 by U.S. District Judge Barbara Crabb to six months in federal prison, a $1,000 fine and two years of supervised release for his role in a mortgage fraud scheme. He was also ordered to pay $336,100 in restitution. Robert pleaded guilty on April 3.
Robert was the owner of Western Designs and Sterling Concepts, residential construction companies that operated in Dane County. Between March 16 and April 21, 2006, Robert allegedly conspired with Becky Ring, formerly known as Becky Stoltenberg, and P. Edwin Gray to make false statements to Washington Mutual Bank to secure a first and second mortgage for the purchase of a home in Westport, Wis.
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Mortgage Choice Act passed in House
Posted Date: Wednesday, June 11, 2014
On June 9, the U.S. House of Representatives unanimously passed H.R. 3211, the Mortgage Choice Act. The bill amends the qualified mortgage (QM) definition in the Dodd Frank Act, designed to improve access to credit and qualified mortgages for low and moderate income borrowers while protecting consumers from bad loans.
The bill, sponsored by Rep. Bill Huizenga, R-Michigan, specifically clarifies the treatment of insurance and taxes held in escrow and removes affiliated title fees from the points and fees calculation under the Ability to Repay Rule.
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NS3 attendees help “Make a Child Smile”
Posted Date: Wednesday, June 11, 2014
The goal of October Research, LLC’s 2014 National Settlement Services Summit (NS3) is to help settlement services companies build their businesses and grow their bottom line, but conference goers took time out from networking and attending panel discussions Monday to focus on a more important goal — helping restore the city of New Orleans, one nut and bolt at a time.
The third-annual “Make a Child Smile” charity event, sponsored by Winward Consulting | Software LLC, saw attendees across industries roll up their sleeves to help assemble 30 bikes that will be donated, along with corresponding helmets, to New Orleans children in need, some of whom were on hand to be presented with the bikes at Tuesday’s conference.
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October Research announces industry award winners
Posted Date: Tuesday, June 10, 2014
October Research, LLC, publisher of The Title Report, The Legal Description, Valuation Review, RESPA News and Dodd Frank Update, today announced the winners in its annual awards program, launched to honor men and women in the mortgage and settlement services industries for exemplary accomplishment in the areas of leadership, innovation and philanthropy.
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Voters unsure about changes to closing process
Posted Date: Friday, June 6, 2014
RESPA News asked readers in a recent poll about their opinion regarding possible changes to closings. Specifically, we asked readers if they thought the Consumer Financial Protection Bureau (CFPB) should make a universal closing process. A majority of the voters were against the idea.
The CFPB published a notice in the Federal Register on Jan. 3, requesting information from the public about the mortgage closing process. The agency said it wanted to develop a more streamlined and efficient closing process and sought information on “key consumer pain points” associated with closings and how those pain points can be addressed by market innovations and new technology.
To find out our readers’ opinions on the bureau making closing changes, RESPA News published a poll asking: Do you think the CFPB should mandate a new, universal closing process?
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North American Title Group and Real Estate Data Shield team up for data security training
Posted Date: Friday, June 6, 2014
North American Title Group has contracted with Real Estate Data Shield (REDS) to provide online training for its settlement services employees as well as other personnel, addressing compliance with data privacy laws and regulations. REDS’ award-winning e-courseware, “Privacy and Security for Real Estate Settlement Services Companies,” will cover appropriate procedures and practices to ensure compliance with those laws and regulations impacting the company’s business and data-handling operations.
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California court: Mortgage loan servicers’ failure to respond to homeowner’s QWR violates RESPA
Posted Date: Wednesday, June 4, 2014
A federal court in California upheld a plaintiff’s RESPA claims relating to the foreclosure of his home, finding that his loan servicers failed to respond to his qualified written requests (QWR) for information on his loan within the timeframe prescribed by the statute.
Although the many defendants named in the case argued that the plaintiff’s 45-page pro se complaint made it difficult to “disentangle” his allegations, the court zeroed in on his RESPA claim and found that the servicers’ conduct clearly violated the law.
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CFPB releases semi-annual report
Posted Date: Wednesday, June 4, 2014
The Consumer Financial Protection Bureau released its semi-annual report on May 28. The report covers the CFPB’s activities from October 2013 through March 2014.
“Congress created the CFPB to stand on the side of consumers and ensure they are treated fairly in the financial marketplace,” the bureau wrote on its website. “Since we opened our doors, we’ve been focused on making consumer financial markets work better for the American people, and helping them improve their financial lives. In our fifth semi-annual report, we describe our efforts to achieve this vital mission.”
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Virginia man uses settlement company to commit mortgage fraud
Posted Date: Wednesday, June 4, 2014
Jose Marinay, of Annandale, Va., pleaded guilty to conspiracy to commit wire fraud for his involvement in a short sale mortgage fraud conspiracy.
Marinay was indicted April 15 by a federal grand jury on multiple charges, including conspiracy to commit wire fraud. Marinay faces a maximum penalty of 20 years in prison when he is sentenced Sept. 26.
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