ALABAMA QUARTERLY: the Legislative and Regulatory Edition
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Newsletter from Stewart Title Guaranty Company Q2/2013 ALABAMA QUARTERLY: The Legislative and Regulatory Edition In this issue: News From the Front 1 Education 5 Inside Alabama 5 2013 Legislative Update 6 Regulatory and Licensing Update 9 2013 TIPS Seminar – Back to the Beach! 11 NEWS FROM THE FRONT – The 2013 ALTA Federal Conference by Warren Laird, State Manager & Counsel Legislation, regulation and policy have changed the marketplace and affected the way that you conduct your business. As expectations shift, we are called on to make adjustments to meet these new and different standards. Meeting these expectations, however, neither diminishes nor mitigates the continued need to explain to legislators and regulators the value of what we do to protect consumers before, during and after the closing of a real estate transaction. The 2013 ALTA Federal Conference, held in Washington, DC May 5-8, set a record. Descending on our nation’s capital were 250 ALTA members from 30 states. Last year, there were only two of us representing Alabama. We established a goal to have a Judge Stan McDonald (left) with Rep. Spencer representative from each of Alabama’s th seven (7) congressional districts. While we Bachus (6 Congressional District) did not reach this goal this year, Alabama’s representation doubled for this year’s A special thank you is extended to Judge conference, and we had a representative Stan McDonald (“once a judge, always a from three of the state’s seven districts - judge”) of McDonald Long & Johnston three times the number of districts Escrow, LLC in Huntsville for taking the time represented last year. So, we are definitely to attend the 2013 Federal Conference. It making progress toward reaching our goal! was extremely helpful for members of (Continued on Page 2) 1 disclosure forms merge portions of Congress and their staff to hear from a title RESPA and TILA; and closing agent’s perspective. Lobby Day 4. Help consumers make informed 2013 was busy and non-stop. Stan had an financial decisions by encouraging early meeting with Rep. Robert Aderholt. them to investigate whether an We both met with Rep. Mo Brooks and Rep. owner’s title insurance policy is in Spencer Bachus; the legislative staff in the their best interest rather that offices of Senator Shelby and Senator predisposing them to bias by Sessions, as well as either legislative labeling owner’s title insurance as counsel or other staff in the offices of Rep. “optional;” and Jo Bonner, Rep. Martha Roby, and Rep. 5. Make simple formatting changes, Terri Sewell. Stan and I circled back to meet test the forms on real closings, and with Rep. Aderholt’s Chief of Staff later in provide the industry with uniform the day. design specifications to reduce the costs associated with compliance. This year’s lobbying efforts focused on three subjects: Reform of Government Sponsored 1. The CFPB Combined Mortgage Entities (GSE) Disclosures; 2. Reform of Fannie Mae and Freddie This is an issue that hits home to each of us Mac (i.e., GSE reform); and in Alabama. Fannie Mae and Freddie Mac 3. How you provide confidence and trust have played very important roles in in real estate closings. Alabama’s real estate development. Most importantly, both are very significant in the CFPB Combined Mortgage Disclosures ability of Alabamians to realize the American dream of home ownership. The Dodd-Frank Act directs CFPB to replace existing RESPA and Truth-in- The good news is that GSE’s are reporting Lending (TILA) disclosures with a single profits and are repaying the loans made to disclosure. We discussed with the members them by the federal government at the and staff of the Alabama Congressional advent of the economic crisis. If they Delegation the need for their assistance to continue to post profits and repay the loans, convince CFPB to navigate an approach perhaps the priority for reform will be that would not harm consumers or small lessened – but there are no guarantees. businesses. This would include: There is considerable benefit to the 1. Protecting consumers by presence of GSE’s in the secondary maintaining a trusted third-party at mortgage market, especially when it comes the closing table by ensuring that to market competition and efficiency. While lenders and settlement agents each of us might recognize the need for maintain the same liabilities, some reform, the answer does not exist in responsibilities and level of the total elimination of the government’s collaboration for providing presence in the secondary mortgage disclosures to consumers as is done market. Instead, the answer most likely currently; exists in scaling back government’s 2. Fix the three-day waiting period and presence to its original and limited mission – broaden the exceptions for the re- to provide stability in the secondary market disclosure requirement to prevent for residential mortgages. That is the the three-day waiting period from message we took to Congress, which operating to the consumer’s consisted of four components: detriment; 3. Clarify that the liability and penalty 1. Without a government role in the provisions of RESPA and TILA are secondary mortgage market, the distinct, even though the combined (Continued on Page 3) 2 accurately appraised for value and standard 30-year fixed rate physically inspected so that the mortgage that is pre-payable without condition of the collateral as penalty will likely disappear or, in the described on paper is the true alternative, will be much more condition of the property. Equally expensive and inaccessible to most. critical are the seller servicing guidelines that ensure the legal right 2. A total GSE annihilation would to the home is properly identified remove the ability of small and established. This gives the businesses to compete. Market homeowner, lender and investor share would be reallocated to the certainty in the knowledge that the largest institutions, at the expense of collateral pledged for a loan is valid. the community banks, credit unions Without a government role in the and regional banks. An even greater secondary mortgage market, number of mortgage loans will be underwriting standards will erode. found in the portfolios of fewer Homeowners, lenders and investors institutions, consolidating risk in were all harmed as a result of the institutions that are already last bursting bubble. A federal role in designated “too-big-to-fail.” Market the housing finance system will concentration among entities so prevent future decay of collateral designated will keep taxpayers on underwriting standards and protects the hook for future bailouts of our homeowners, lenders, investors and housing finance system. As the taxpayers. market shifts from the GSE’s to larger institutions, business 4. GSE’s lower the costs of providing relationships will shift from local to credit to consumers through national settlement service universally acceptable credit providers. As the institutions grow underwriting standards, thereby even larger, smaller loan originators increasing market efficiencies and will likely disappear. Jobs will be lost reducing underwriting costs. This at small businesses including title produces a huge savings for agencies, appraisers, attorneys and consumers and taxpayers. property inspectors. Each of these Universally acceptable underwriting small businesses provides crucial standards also alleviate the need for services to the community-based borrowers to negotiate all of the lenders during real estate mortgage terms, saving them time transactions. GSE’s serve as and money. Having universal effective counterbalances to the standards also permit borrowers to largest institutions, allowing small, compare mortgage loan terms, costs community-based lenders who and options with little or no originate 44% of all mortgage loans, confusion. The result makes it easier to compete with their larger rivals. and cheaper to buy and sell homes. GSE’s ensure that ALL lenders have access to the same secondary Simply put, our message was “yes, reform market capital. of Fannie Mae and Freddie Mac is needed, but the title industry strongly encourages 3. GSE’s promote responsible preservation of the benefits that are underwriting standards for real currently provided by GSE’s in our future estate mortgages. Standards set by finance system.” Simply put, there is a place Fannie and Freddie protect the for government in the secondary mortgage integrity of the collateral used to market. secure mortgage loans. Uniform credit underwriting standards are (Continued on Page 4) needed to ensure homes are 3 Providing Confidence and Trust in Real Congress will recess for a month this Estate Closings summer. Contact the office of your Representative and both Senators now We introduced members of Congress to and begin planning now to invite your ALTA’s Best Practices as the manner in U.S. Representative into your agency to which title insurance and other settlement speak to your staff. Have a closing service professionals provide the framework scheduled while they are there and ask for transparency and consistency in real them to sit it on and observe what goes estate transactions. Through the into an Alabama closing (be sure to clear implementation of the Best Practices, title it with the parties to the transaction in insurance and other settlement service advance). Explain the pre-closing professionals are helping mortgage lenders process as well as the post-closing manage the financial, regulatory and process to them so they have a complete reputational risks at closing by: picture of what goes into an Alabama closing. Please let me know if you need 1. Maintaining current licenses and assistance with contact information. complying with continuing education requirements as required by law; According to ALTA, there are 1340 people 2. Maintaining written procedures and employed in the land title profession in controls for trust and escrow Alabama. Out of that 1340 people, there accounts; were only four at the 2013 Federal 3.