The National Association of Independent Land Title Agents (NAILTA) has issued a white paper on Congresswoman Marcy Kaptur’s HR 2425 that would curtail the Mortgage Electronic Registration System (MERS) and prevent government sponsored enterprises such as Fannie Mae and Freddie Mac, which are also MERS shareholders, from utilizing the MERS system. The position paper is detailed below.
NAILTA: Why Congress Should Examine HR 2425 and MERS Together
The OAITA has just announced that U.S. Senator Sherrod Brown (D-OH) a member of the Senate Housing and Urban Affairs Committee will be speaking at this year’s OAITA Conference on Monday, August 8, 2011 in Columbus, Ohio at the Crowne Plaza Hotel – Downtown Columbus. Senator Brown is the senior Senator from Ohio and considered one of the leading legislators concerning consumer protection issues. He will be speaking at the OAITA conference on the role of the Consumer Financial Protection Bureau and the potential impacts that role will have with the housing and mortgage industry. For more information on Senator Brown, please visit his website by clicking here.
For those interested in attending the OAITA Conference, please visit our website for conference registration details and book your hotel reservations by contacting the Crowne Plaza Hotel – Downtown Columbus. You can click here for hotel information.
Make sure to tell the hotel registration desk that you are attending the OAITA Conference to receive your hotel room discount.
A case that originated in Cleveland, Ohio involving one of the largest national title insurance underwriters and a former captive title partner will now be heard before the U.S. Supreme Court after the Court granted a writ of certiorari to hear the case.
In the underlying suit, Edwards moved to obtain class-action certification status against First American Title in her illegal kick-back suit against the title insurer. In her original suit, Edwards claimed First American violated provisions of the Real Estate Settlement Procedures Act of 1974 by buying a minority interest in title agencies and establishing an exclusive agency agreement with those agencies to sell First American’s title insurance policies.
In the suit, Edwards contended the agreements were exclusive in nature and not in compliance with guidelines established under the anti-kickback provisions of RESPA.
At the district and appellate court levels, First American challenged Edwards on the grounds that the plaintiffs lacked standing under RESPA to bring the claim. The lower courts found standing, but the case has now been appealed to the Supreme Court for the top court’s review. Lower courts said Edwards could claim statutory standing under RESPA even if all individual plaintiffs were not directly harmed by the allegations of overcharging.
The oral arguments are likely to be held in November or December of this year. A decision is likely in the Spring of 2012.
In case you were wondering, posting an invitation to ALTA members on ALTA’s LinkedIn page to attend NAILTA’s recently concluded Annual Conference in Baltimore, MD will get you this response from ALTA’s Director of Communications:
Hello [Redacted],
I hope you are doing well. I noticed you posted a message about NAILTA’s conference. Could you please refrain from posting marketing information for NAILTA on the ALTA LinkedIn page? Seems a bit odd to allow solicitation for another association that likes to take pot shots at ALTA. While I ask you not to market NAILTA on this page, you are encouraged to post information impacting the industry to stir a discussion. I hope you understand.
[Redacted]
Yes, independent title agents. If you criticize ALTA and attempt to encourage them to engage in debate on the most important issues of our day, you are minimized. One could understand why ALTA doesn’t like NAILTA seeking them out on their site, but marginalizing the criticism as “pot shots” is a tad arrogant.
To wit, a response to the above email went as follows:
[Redacted]:
Always good to hear from you. I enjoyed your participation and comments back in October of 2008 when we first met in Independence, Ohio regarding the independent title agent associations and while your employment since then has changed, my respect for you has not.
By now, you’ve probably received correspondence from [redacted] who, like others in NAILTA, think ALTA’s appreciation for NAILTA and its members is woefully inadequate. I happen to be a proud member of both organizations. While I enjoy my membership experience in both organizations, I must take issue with your characterization of what membership in either organization affords. First, as a member of ALTA and as someone with a deep interest in the future of the title insurance industry, I think it is important for all of ALTA’s members to know about any organization that focuses its core mission on the preservation of the title insurance industry, regardless of whether that serves the interests of underwriters or agents. Why not let ALTA members choose what is relevant to them when reading a simple post from another ALTA member. After all, isn’t that what “information designed to stir a discussion” about issues vital to our industry is all about?
Second, even you have to admit that your personal editorial concerning “pot shots” is not meant to encourage discussion, but rather to belittle it. If that is the official position of ALTA, as a member, I think we – ALTA – need to come up with a better answer to the concerns of independent land title agents then marginalizing them as “pot shots”. [Redacted], people care about these things you call “pot shots”. These people are title agents, abstractors, examiners, escrow clerks, attorneys, underwriters, etc. I don’t think they would take too kindly to having their legitimate concerns regarding the title insurance industry reduced to a schoolyard scrap between ALTA and NAILTA.
I’m looking forward to having an open forum through social media and other outlets to encourage debate on a range of important issues affecting the title insurance industry. I’m even hoping, as a member of ALTA, that your side of the fence will stop with the juvenile artistry and engage in real debate with NAILTA on issues important to independent settlement service providers. ALTA has an inconsistent past concerning independent title agents. I think members of ALTA deserve to know how ALTA plans on reconciling that for the future. I think organizations such as NAILTA can help stir debate and motivate public policy in favor of preserving the title insurance industry. As a member of ALTA, I see value in that. As a member of NAILTA, I already know it.
I look forward to hearing from you again. Hopefully, instead of reminding me why you can’t talk to me, we can start figuring out ways to discover how we can.”
Shortly thereafter, the following email showed up from ALTA in response to the above:
[Redacted] and [Redacted],
Thanks for all of the comments about this post. At the very least, it has given us a chance to talk about how we can share ideas. I encourage you to participate in ALTA’s LinkedIn page to promote healthy discussion of the industry. As I am sure you know, the purpose of the page is to provide an avenue for group members to discuss and share information impacting the title insurance industry. However, as I mentioned before, participants should refrain from promoting their own services or products. We make these same comments to all of our members of the group.
I hope you find the ALTA LinkedIn group a valuable tool in promoting industry discussion.
Thanks,
[Redacted]
Almost sounded like we were getting somewhere, no? Thus, the next exchange to ALTA in response to the above:
[Redacted]:
I didn’t see where you were talking about sharing ideas between NAILTA and ALTA. Did I miss something in your email?
Let’s do this, I’m in the DC area next week with the NAILTA Board. Why don’t we arrange a meeting where you or the representatives from ALTA can sit down with representatives from NAILTA and actually talk about sharing ideas with NAILTA? Wouldn’t that be a better outlet than the phony social symbolism of LinkedIn or the political correctness of an impersonal email?
I look forward to hearing from you.
Thanks!
[Redacted]
To date, we are still waiting for a response from ALTA to set up that date to truly “share ideas” about the title insurance industry.
There was a reason we liked Maryland.
In arguably the clearest and most concise statement on RESPA class action litigation ever written, U.S. District Court Judge William Nickerson (a George H.W. Bush appointee from 1990) authored a decision in Maryland that not only certified a major RESPA Section 8 class action against an alleged sham AfBA created by Wells Fargo Bank and Long & Foster Realty, but also made a pointed statement to Judge Jack Zouhary (a George W. Bush appointee from 2006) relative to his since-appealed decision in the Carter v. Welles Bowen Realty case pending here in Ohio.
The facts:
Denise Minter obtained a mortgage through Prosperity Mortgage Company in 2006 with the assistance of a Long & Foster realtor. She later sued in 2007 arguing that the affiliated business arrangement created between Wells Fargo and Long & Foster violated RESPA, Sections 8(a), 8(c) and 8(c)(4), RICO and several state law claims. Minter alleged that Prosperity was formed as a joint venture between Wells Fargo Bank and Long & Foster Real Estate Inc. and that it was a front organization formed to circumvent RESPA, rather than as an independent mortgage lender.
Prosperity Mortgage was no small time operation. In fact, it was run by former FHA Director, David Stevens, whose original appointment to FHA was actually held up by his involvement in this litigation. There is no word on whether the ongoing nature of the Minter case — and now the decision to certify a class of potential plaintiffs against the venture — helped precipitate Stevens’ departure from FHA and his convenient exit to the Mortgage Bankers Association.
RESPA Section 8:
Judge Nickerson’s highlight is the full-bodied review he gave to RESPA Section 8 and the legislative history surrounding it.
“While neither the statute nor Regulation X explicitly say so, the statements in [Regulation X] strongly imply that AfBAs not in compliance with the three conditions of Section 8(c)(4) are per se violations.”
”In other words, AfBAs avoid RESPA liability only if they satisfy the requirement of Section 8(c)(4); otherwise, they violate the statute.”
The defendants argued that even if an AfBA is not in compliance with RESPA Section 8(c)(4), they are not in violation of RESPA unless they violate Section 8(a) or (b). Defendants contend that the language in Section 8(c) expressly permitted AfBAs.
Judge Nickerson disagreed.
“Nothing in the statute indicates AfBAs do no violate Sections 8(a) and (b). Rather, Section 8(c) provides merely that ‘nothing in Section 8 shall …prohibit…AfBAs so long as’ the AfBAs satisfy three conditions. If anything, this language indicates AfBAs do violate RESPA’s prohibitions, hence the need for the ‘exemption’.”
Nickerson v. Zouhary
Where the Minter opinion became really interesting is when the Minter Court reviewed the arguments made by the AfBA defendants that Carter v. Welles Bowen — which held that RESPA’s ten-part test was unconstitutionally vague — and determined that Carter was wrongly decided.
“This Court does not share the Carter court’s hesitation and will not follow it. True, it may not be immediately clear to a layperson how much operating capital is ‘sufficient’ for a mortgage lender, but the statute need only be clear enough for a person familiar with the conditions the regulations are meant to address and the objectives the regulations are meant to acheive.”
In other words, the ten part test is not vague and not void.
Judge Nickerson also made it clear that the purpose of RESPA Section 8(c)(4) was not to ensure AfBAs can exist or ensure that rogue courts would not improperly extend RESPA to capture AfBAs where they otherwise should not. Clearly, this was a dig at Judge Zouhary, who in Carter, ruled to the contrary.
Carter is currently on appeal to the U.S. Sixth Circuit Court of Appeals in Cincinnati, Ohio. Minter will likely be appealed by the defendants, as well. Stay tuned.
You won’t find anything on the ALTA site about this one.
NAILTA has confirmed through the American Land Title Association (ALTA) that ALTA’s CEO, Kurt Pfotenhauer, recently became the Chairman of the Board for MERSCorp, Inc. and its controversal subsidiary, MERS, Inc. (MERS). MERS is the mortgage recording registry that ALTA and the banking industry helped create back in the 1990′s. Since it’s creation, MERS has helped turn the foreclosure crisis upside down. MERS has been in the news for months after revelations over its structure and its questionable legal efficacy arose in courtrooms across the United States. Several state supreme courts have recently held that the registry improperly foreclosed on homeowners and lacks legal standing to prosecute foreclosure actions. The registry has also been the subject of scorn from county recorders who believe that MERS acted as a conduit to syphon county recorder fees from local governments and, in turn, allowed banks and mortgage entities involved in MERS to profit from the troubled registry. The registry has also come under fire from the land title industry, including NAILTA, NALTEA and others, who believe that the MERS registry destroyed the time-honored tradition of unity between the note and mortgage (i.e. once they are separated — as they are in the MERS registry — the mortgage is no longer enforceable).
Pfotenhauer is no stranger to the mortgage industry having cultivated a long career lobbying for the Mortgage Bankers Association prior to his ascension to CEO for ALTA. He has also served on the MERS Board since its inception making him — and ALTA — directly involved in the messy history of MERS.
What does this mean to the title insurance industry? Plenty. The titular head of the title insurance industry is now the Chairman of the Board of one of the most controversial and troublesome failures of the housing and mortgage collapse. The conflict of interest issue is inescapable. ALTA’s support for the further consolidation of the title insurance industry with the mortgage and banking industry is fully evident. However, MERS has not brought about the improvements it promised in the 1990′s.
It has done the opposite.
MERS participants have no penalty and thereby no incentive to make the registry current or accurate. Title examiners must continue to stumble through the weeds to find who the actual servicer or real party in interest is relative to the 60 million mortgages still found on the MERS registry system. Time has not been saved, it has been wasted. At its core, MERS was nothing more than a shell game designed to increase referral source participation in the title profit stream.
If you are not convinced that the present leaders of ALTA are hell-bent on finishing off the title insurance industry and its traditional methods of risk elimination, this news should do it.
The National Association of Independent Land Title Agents (NAILTA) has taken up the Fed’s new rule regarding loan originator compensation and has announced its support for the measure as a necessary bulwark against controlled business arrangements.
Here are some excerpts of the letter:
“Recently, NAILTA became aware of comments that were filed by various real estate related trade associations contesting the Federal Reserve Board of Governors’ final rule regarding loan originator compensation practices and, in particular, the definitions of the terms “affiliate” and “third party charges” therein. The trade associations argue that the Federal Reserve (the Board) interpretation of those important terms would cause “irreparable injury to the various members of [their] associations, to competition in the marketplace and to consumers if adopted.”
The trade associations referenced by NAILTA in their letter to the Fed include the NAR and RESPRO, among others.
”Ironically, NAILTA believes it is these same trade associations, through their business affiliations, who have stifled competition in the real estate settlement marketplace, eliminated healthy competition and stymied consumer choice when it comes to the selection of a real estate settlement service provider. Since the 1980’s, each of the trade associations who authored the February 28th correspondence have benefitted from a coordinated effort to consolidate and steer the services of all real estate settlement providers, including title insurance, to one source called a “one-stop shop” in the hopes of dominating local, regional and national real estate service markets.”
The affiliated trade associations referenced in the NAILTA letter made the argument that preventing the expanse of “one stop shops” would harm consumers and competition alike. This is a classic Rovian reversal. Take your greatest weaknesses and argue them as strengths until the other side actually believes you. One cannot accept the trade associations at their word. Since CBAs began, competition has worsened in the title insurance industry and claims have skyrocketed. Neither condition has been beneficial for consumers.
”As a byproduct of this process, real estate firms, mortgage companies and banks have stretched out into all areas of the real estate settlement service field in an attempt to consolidate such services as title insurance, surveying, mortgage origination, homeowner’s insurance, and appraisals into their “one-stop shops.” The trade associations now believe that the Board’s new prohibitions concerning dual source compensation will prevent current and further consolidation efforts. They even argue that such a rule would harm consumers and competition alike.”
”NAILTA rejects the CBA trade association argument that the rule harms consumers or competition and advises the Board to do the same. Even by their own data, consumers lack an understanding of what “one-stop shops” are and an overwhelming majority of consumers do not believe there is any real benefit to using one. Further, NAILTA members can provide the Board with a plethora of national examples of actual anti-competitive market practices perpetrated by the trade associations and their members in real estate transactions across the United States; whether from strong-arm steering of consumers to their affiliate “one-stop shops” or by referral sources unilaterally preventing independent real estate service providers from acting as real estate settlement mediums.”
”NAILTA supports the Board’s definition of the term “affiliate” as a single person for the purposes of the loan originator compensation rule set forth in Regulation Z. Affiliated business arrangements, as found within the title insurance industry, which consist of co-ownership of a title insurance entity by a referral source (i.e. a bank, a mortgage company, a homebuilder, or a real estate firm) and a title insurance agency are by their own definition a single entity. After all, the corresponding trade associations refer to the “affiliate” as a “one-stop” shop. Treating them differently for purposes of the Board rule ignores their own intent – a single location for all real estate settlement services.”
To read the full text of the letter, click on the link below.
Uh-oh, part two.
A few weeks ago we shared the Ibanez decision, a Massachusetts state supreme court decision which held that two national banks that were attempting to foreclose could not foreclose when they could not prove they were the holder of both the promissory note and the mortgage. The real estate and banking industry paused for a moment after that case and then released a collective “no-big-deal” response. After all, it was just a state supreme court case and the facts were limited to Massachusetts or title theory states. MERS was not involved in Ibanez, even though the application was the same.
Despite the ruling, MERS could live for another day.
Then, last week, Judge Robert E. Grossman, a U.S. Bankruptcy Court Judge in New York, issued a decision in the case In re Ferrel L. Agard that may change everything there is to be said about MERS and its ability to foreclose mortgages from within its registry. In his 37 page ruling — a copy of which is embedded below — Judge Grossman held that unless MERS or the party moving for foreclosure can show that it validly holds both the mortgage AND the underlying note, it will not have standing to pursue remedies in bankruptcy court. The decision is sure to be picked up by counsel for countless mortgagors across the United States who will argue the same in each jurisdiction citing, with breathless praise, Judge Grossman’s analysis of MERS and its registry.
The problems for MERS are only just beginning.
The national title insurance underwriters take their fair share of deserved hits on these pages. However, today we take time out to salute the fine folks at First American whose financial analytics spin-off, CoreLogic, has just announced that the oft-cited housing data provided by the National Association of Realtors (NAR) is flawed to the tune of 15% to 20%.
You can read the full story here.
Give credit to First American’s spin-off. Challenging NAR is no cheap thrill. Nevertheless, the claim is noteworthy. There’s no allegation of purposeful manipulation, but apparently NAR has allowed “benchmarking drift” to weaken the validity of its numbers.
“Benchmarking drift,” more sales going through MLS systems due to consolidation and a lower share of FSBO transactions contributed to divergence between NAR’s numbers and the rest of the stats provided by the Department of Treasury, Census, the MBA and CoreLogic.
Faulty data is nothing new for NAR, though. The 2008 Harris Interactive study that NAR released concerning settlement service preferences in the United States became the subject of our OAITA Settlement Preference Survey in 2009-2010. OAITA debunked the myth that real estate consumers preferred “one-stop” shops to independent settlement providers.
Another interesting tidbit in the early stages of this story is the fact that no major news publication other than the UPI has picked up the story. We have long surmised that most national newspapers fear the NAR because realtors provide the majority of advertising revenue for those publications. So far, only bloggers and the United Press International have reported this important claim. It will be interesting to see if any other major newspapers run with the story.
We have harped on the issue of how the American Land Title Association’s approach to leading on title insurance issues leaves much to be desired. Most of our criticism stems from the fact that ALTA seems to defer to the larger real estate-related lobbies, i.e. the NAR and the ABA, to drive the discussion on what is best for title insurance, thereby leaving title insurance professionals in the position of bowing down to their referral source brethren.
Deferment leads to bad policy.
Today, we see another prime example of ALTA stumbling mightily at the altar of true leadership. This time, it occurs when there is, unfortunately, a great deal at stake.
Late last week, the Obama Administration announced its plans to wind down the involvement of the government-sponsored enterprises (GSEs) that make up 90% of the current housing industry’s mortgage backstop. Under Obama’s plan, Fannie Mae and Freddie Mac would divest much of their involvement in the mortgage industry and the result could have huge impacts on the title insurance industry. Featured in an article on the Housing Wire, ALTA’s director of government affairs, Justin Ailes, attempted to address the concerns of the title insurance industry by saying that ALTA supports GSE power in the title insurance marketplace because, “[t]he GSEs provide the marketplace with clarity on how the title insurance should be applied to a property.”
Ailes continued, “[i]t’s not clear who will take over that role.”
Gulp. ALTA is not clear who should be responsible for telling the marketplace how title insurance should be applied to real estate? Ailes must be feeding the reader with a softball. He’s surely going to promote ALTA as the clear voice of title insurance to help the marketplace figure out what title insurance standards should guide the ongoing stream of commerce. After all, this guy is a DC regular. Surely, he’s going to thump his chest, right?
Wrong.
He went on to say this, “These types of standards (set by the GSEs for passing title insurance and buying properties) allow investors to be able to purchase these investments with certainty.” He fears that no longer having public GSEs to serve as models for handling title insurance, appraisals and other homebuyer issues will create confusion, and he’s not sure what entity would take on that role.
Yikes.
The Obama Administration is pulling government props out of the mortgage market. The marketplace is going to be looking to an organization to provide necessary guidelines and structure to the private market concerning title insurance and the titular head of the title insurance industry just took the ball, feared the rush and punted.
Other proponents of the title insurance industry, such as OAITA and NAILTA, would likely view this as an opportunity. After all, that is what leaders do.
