Important Updates: Rules, Requests & More

Reminder. Need a refresher on some of the regulatory aspects of being a title agent? Here's a link to the page on the Agency Division of the Department of Financial Services website that might be worth reading. Title Insurance Agents (myfloridacfo.com)  Even if you do your title business through a law firm, it's a good idea to familiarize yourself with these rules. DFS does not regulate attorneys. But you are still obligated to comply with Florida law, i.e., the insurance code. And these rules and regulations are a good indicator of things that might be brought to the attention of The Florida Bar. Just sayin'.

Federal Update. There is soooo much going on at the federal level that affects our industry. Three areas to pay attention to:

• FinCEN proposed rule on anti-money laundering; required reporting of cash transactions;
• CFPB Request for Information on Closing Costs for Residential Mortgage Loan Closings; and
• FNMA Title Waiver Project.

FinCEN proposed rule. I hope you at least have some familiarity with this issue based on previous blogs and various pop-up webinars we have offered. In a nutshell, this rule, when finalized, will eliminate the Geographic Targeting Orders and require the reporting of just about ALL cash transfers of residential property to entities. Highlights of the rule:

• No geographic limitation, i.e., it applies across the country.
• No threshold purchase price, i.e., gratuitous transfers and transfers of a very low dollar amount, must be reported.
• Vacant land transfers are now covered (they were excluded under the GTOs).
• Still limited to entity purchasers but now includes trusts (which were excluded under the GTOs).
• Obligation to report will fall squarely on the settlement agent, but there are others on the list who have the potential responsibility to do the reporting.
• Information about funds received by or on behalf of the transferee has greatly expanded.
• Information about the transferor and transferee has expanded.

Here's my update:

• The final rule is now expected to be issued in SEPTEMBER 2024. We originally thought it would be at the end of 2024 or early 2025.
• We are still hoping for an adequate amount of time before the rule goes into effect so that the industry can prepare to comply. But that is an unknown.

So stay in touch. Pay attention to the information I will send in this blog and in our educational offerings. We will make sure you are ready to comply when the time comes.

CFPB Request for Information. On May 30, 2024, the Consumer Financial Protection Bureau (CFPB) issued a Request for Information Regarding Fees Imposed in Residential Mortgage Transactions. Supplementary information was provided by the CFPB with the RFI. This information made these statements of fact and opinion:

• Closing costs have risen "sharply" between 2021 and 2023.
• The above, along with increased home prices and interest rates, have created a "lack of access" to homeownership.
• The largest disclosed (TRID) fees are origination fees and discount points charged by the lender.
• The "second largest category" of closing costs are title fees, including title insurance, search, and settlement.
• "Title Insurance" is "one of the costliest settlement services at closing."
  • Consumers are "forced to pay for the lender's title insurance premium."

Nine questions were posed by the CFPB to guide the type of information they want to receive. Of course, ALTA is preparing a response, and I am participating in that process. FLTA is preparing a response on behalf of the Florida title and settlement industry.

Some are predicting that the CFPB will come out with a rule as a result of this RFI. That rule will, among other things, prohibit the lender from requiring their borrower to pay for the lender's title insurance. This would create what is called a "lender-pay model." I'm not sure what the consequences would be for the market if this were to be the result of this endeavor.

• Would lenders move quickly to a very limited list of title underwriters and/or agents from whom they will accept a title policy?
• Would lenders negotiate what one might call loosely "more favorable rates?" It is not clear how they would do that under Florida law.
• Would the prohibition on "borrower pay" include the usual closing services fee for "handling the loan package?" 

This is another "stay tuned." I will share information as I get it.

FNMA Title Waiver Project. Not too much to report here other than FNMA is proceeding with a Request for Proposals from vendors who can participate in the pilot by providing "technology solutions for managing title-related risk and reducing closing costs for borrowers." Recall that this is a project that would allow FNMA to waive the requirement for ANY type of title assurance, i.e., title insurance or an attorney opinion letter. The project is, we think, limited to certain types of re-finances. This is another area to which I am paying close attention, and I will report what I know when I know something!

That's all for this week. Let me know how we can help you.
 

Melissa Jay Murphy
Executive Vice President, Chief Legal Officer,
and General Counsel