Monday, December 13, 2010

Has the American Land Title Association lost all it's marbles?

As you know, I'm a firm believer that the economic mortgage crisis was caused from the removal of the "checks and balances" and from the increase of affiliated business arrangements so strongly now supported by ALTA. The American Land Title Association (ALTA) has apparently given up listening, supporting or otherwise giving a rats patootee about the independent title agent and the real estate consumer in America. They might as well take the word American out of their name since they no longer advocate for any of the real values and ethics that this industry was originally built on. This lack of stewardship has sunk the boat and their board of directors are a huge disappointment.

As highlighted in a recent blog post by Slade Smith at the Source of Title. (see below the entire Blog post with permission to reprint below)

Controlled Business Arrangements: From the Outhouse to the Penthouse at ALTA (subscription required)

Once upon a time, The American Land Title Association, otherwise known as ALTA, the primary national advocate for the title insurance business, actually actively and vociferously fought controlled business arrangements.

Back in these times long ago, title insurance business were often pressured to pay kickbacks to other real estate related business that referred them title work. Owners of title businesses generally did not like these kickback arrangements-- they were the ones who were pressured to pay them to just to get business, and they were the ones that lost out when they did not play ball. Plus, these payments were giving the title industry a black eye-- for instance, in the early 1970s, the title industry was the subject of some not so friendly scrutiny by Congress that cast the title business in an unfavorable light. It was probably not much fun to be pressured to unethically pay out part of your profits to compete for business and be considered sleazy by association even if you held the line.

ALTA, as the professional association speaking for these businesses, therefore had advocated for provisions in The Real Estate Settlement Procedures Act (RESPA), passed in 1974, which outlawed kickbacks from title companies to the businesses that referred business to them.

A controlled business-- a business engaged in a line of work where the work flow came from other businesses, not consumers, and which got some or all of its business from referrals from its own owner-- was seen as a highly suspect arrangement by most in the title insurance industry back in those times. The thought was that if realtors, lenders, and builders were allowed to own their own title companies, they could lock up most of the business, since they, not consumers, typically decided where title business went. Independent title agencies without a ownership tie-in with a source of business would be shut out of the market, the thought went.

Moreover, it was easy to see how a controlled business arrangement could be set up to deliver a payment to a referrer of title business that looked an awful lot like a kickback. For instance, a realtor or a lender would take a partial ownership interest in a title agency, basically do nothing for that agency except refer it business, yet just take what amounted to a kickback from the agency's coffers.

With kickbacks now explicitly illegal, the issue of controlled businesses became much more important in the title industry. The players in the real estate business who had been used to receiving the money were now facing stiff new penalties under RESPA if they accepted kickbacks the old fashioned way. They'd be looking for a way to get around that.

in 1976, Coldwell Banker, a real estate brokerage, attempted to license a wholly owned title insurance business in California. The insurance commissioner nixed the idea, saying that the arrangement was anticompetitive. Coldwell Banker appealed, but the commissioner's ruling was upheld. A controlled business had been put out of business on competitive grounds. Did this mean that controlled business arrangements were illegal under RESPA? It was enough of a threat to controlled business arrangements that efforts arose to amend RESPA to explicitly legalize them.

Not surprisingly then, in the late 1970s and early 1980s, the fight over against legalizing controlled business in the title insurance industry was a primary and sustained focus of ALTA's lobbying efforts. They were, after all, fighting for the interests of their members.

ALTA pounded the table on controlled business arrangements year after year. ALTA's President in 1979, Robert C. Bates, said that the financial inducements inherent in controlled business arrangements were "as harmful as the payment of outright kickbacks." In 1981, another ALTA President, James L. Boren, Jr., testified before a Congressional committee and described the evils of controlled business arrangements. In 1982, when President Reagan himself proposed that rules prohibiting realtors from selling title insurance should be lifted, Boren's successor as ALTA President, Fred B. Fromhold, wrote a letter to the President on behalf of ALTA's membership, expressing "shock and dismay." If such restrictions were lifted, title business would have to be bought rather than earned, Fromhold said.

But President Reagan had run on a platform of deregulation, and so despite this advocacy, RESPA was amended in 1983, with explicit language that legalized "affiliated" businesses arrangements in the title insurance industry if certain conditions were met.

Still, there was considerable uncertainty over what separated a legal controlled business arrangement from an illegal one. So HUD issued a series of opinions, outlining what kind of ownership arrangements would be considered tantamount to an illegal kickback arrangement. But these opinions really did not resolve the issue definitively, and the issue remained confused and contentious, and there were various ongoing efforts to change or clarify the rules.

ALTA remained involved. When legislative attempts were made to further weaken regulations regarding controlled business arrangements, ALTA continued to advocate against these attempts. For example, in a 1993 Congressional hearing on RESPA reform which concentrated on the controlled business issue, another past ALTA president, Roger N. Bell, appearing on behalf of ALTA, argued strongly against new HUD rules which allowed a business to pay bonuses to its employees for referrals to controlled businesses. "it is already difficult to compete with the controlled business company," Bell told the committee. "Now, the regulations could be the last nail in the coffin for many independent small businesses such as mine."

It's hard to avoid the implication of Bell's statement-- that several nails had already been driven into the coffin of the independent small businesses by the emergence of controlled businesses in the title industry.

Who had been hammering in those nails?

Ironically, as it turns out, more than a few metaphorical nails had been driven in by none other than current ALTA President, Anne Anastasi, according to some independent title agents.

Anastasi is president of Troon Management Corp., "the only independent management team in the country, dedicated to the creation and facilitation of title Affiliated Business Arrangements," according to its website. Catering to builders, realtors, banks, and attorneys, Troon has helped set up controlled title business arrangements in thirty major cities in sixteen states, it says.

Anastasi personally established her first title industry controlled business arrangement in 1984, before the ink was dry on the legislation legalizing them-- one of the first controlled business arrangements in the country, according to the Troon website.

Troon's consulting service promises a "plan of action" to set up an controlled business from a two day consulting session. During this session, the correct, compliant answers will be provided for the questions your would-be business partners are likely to have, Troon says. From only two unspecified numbers provided by your potential partners in the arrangement, Troon promises to calculate financial projections and scenarios for the venture.

Troon's mottoes imply the urgency of setting up controlled business arrangements for title businesses. "If you wait you may not have enough partners or the right partners left," the site says. Another motto stresses that those setting up a controlled business arrangement should not be too "piggish," or "your competition will easily steal your clients."

Anastiasi's role in promoting controlled business arrangements has not escaped the wrath of certain independent title agents. "[T]he title insurance industry is now led by someone who makes a living destroying competition in the title insurance industry," according to a November post on the Ohio Association of Independent Title Agent's blog.

Tuesday, September 14, 2010

Ohio Hardest-Hit Fund (Ohio HHF)

Directly from the Ohio Housing Finance Agency (OHFA) website:

President Obama established the Housing Finance Agency Innovation Fund for the Hardest-Hit Markets in February 2010 to provide financial assistance to families in the states most impacted by the downturn of the housing market. On August 4, the U.S. Department of Treasury (U.S. Treasury) announced the approval of the Ohio Hardest-Hit Fund (Ohio HHF) plan for $172 million. Subsequently on August 11, U.S. Treasury announced another round of funding which allocated $148 million to help unemployed and underemployed homeowners pay their mortgage. The Ohio Housing Finance Agency (OHFA) will administer the program and use the total allocation of $320 million in federal foreclosure prevention funding to help families who have fallen behind on their mortgage loans, or are having trouble making monthly payments. Homeowners experiencing a financial hardship may begin submitting applications online or over the phone on September 27, 2010.

OHFA has worked with Governor Ted Strickland, the Department of Commerce and the Save the Dream Ohio partners to develop a comprehensive, statewide strategy. The plan aims to assist 26,000 unemployed and underemployed homeowners who are experiencing financial hardship and are at-risk of mortgage loan default or foreclosure. Ohio HHF program options will assist homeowners with financial hardships who have been unable to qualify for existing loan modification and foreclosure prevention programs. Available programs will include:

• Rescue Payment Assistance will provide a payment to a participating homeowner's servicer to help bring the homeowner current on his or her delinquent mortgage. The payment could cover principal, interest, fees, delinquent taxes or escrow shortage and homeowners insurance.

• Partial Mortgage Payment Assistance will support unemployed homeowners by providing partial mortgage payments while they search for a job or participate in job training.

• Modification Assistance with Principal Reduction will provide a payment incentive to servicers to reduce a participating homeowner's mortgage principal to the level necessary to achieve a loan modification with a target of a 115 percent loan-to–value ratio or less. This program should increase the number of loan modifications that are approved and available to both Home Affordable Modification Program (HAMP) eligible and non-HAMP eligible borrowers.

• Transitional Assistance will offer an incentive to servicers to complete short sales and deed-in-lieu agreements to help homeowners exit their homes gracefully. This will allow homeowners who cannot sustain homeownership to pursue alternatives to foreclosure, reducing the negative impact on their credit rating and losses to the servicer.

If a homeowner uses Ohio HHF to stay in their home and then sells or refinances their home within five years, the assistance would be repayable from the net proceeds.

The Ohio HHF plan will launch September 27, 2010, but borrowers who are in need of immediate assistance should visit the Save the Dream Ohio website at or call the hotline at (888) 404-4674 to get free assistance and speak directly with a housing counselor.

Friday, August 20, 2010

Changes to Homeowners Association Bylaws - SB 187

Directly from the Ohio Legislative Service Commission website:

The bill creates new procedures in state law for the establishment and governance of planned communities similar to those for condominium associations. The bill sets out definitions for planned communities and homeowners' associations, provides for the establishment of boards of directors, establishes the rights of these boards and individual homeowners in associations, and lays out the powers and duties of the boards in governing the associations. Overall, these provisions will increase the number of legal instruments processed by county recorders. The bill is most likely to have a greater effect on urban and suburban counties, where most of these planned communities are situated, than on rural counties.

The bill identifies three instances in which an individual or association would be required to file with the county recorder's office: (1) the initial declaration and bylaws for the establishment of a planned community, (2) any subsequent amendments made to the declaration or bylaws, and (3) any lien placed on an individual lot by the association for payment of assessments, charges, and other fees and costs. The bill also applies to existing non-condominium developments that wish to have the status of a planned community. In all these cases, county recorders would process the required instruments and collect the filing fees.

While it is difficult to predict how many existing communities might declare as planned communities or how many new communities may be developed as a result of the bill, a majority of these planned communities are likely to be in predominantly urban or suburban counties. Recorders' offices in these counties would thus incur some new costs for processing the necessary legal instruments, most if not all of which would be offset by recordation fees. Both new expenses and revenues would depend upon the number of (1) newly formed planned communities, (2) amendments to declarations and bylaws, and (3) liens placed on property owners in a community.

Additionally, the bill provides for civil actions by owners and associations concerning disputes over liens and other violations of association policy or law. This is unlikely to create any significant new costs for county municipal courts and courts of common pleas.
Click here for more information.

Wednesday, August 18, 2010

FHA MIP Delayed

The Federal Housing Administration (FHA) has decided to delay instituting the planned adjustments to its insurance premium structure by one month, after the industry expressed concerns about being ready for the upcoming changes in time.

According to a statement from HUD Deputy Assistant Secretary Vicki Bott, FHA will make the premium fee changes on all new case numbers effective October 4, 2010. “Over this past week, the industry responded with support of the new fee structure, but voiced strong concern about having system changes ready in time to meet the original September 7, 2010 deadline,” Bott said. “Since these system changes impact regulatory disclosures, lenders expressed they must have the additional time to implement and test systems. FHA took this feedback seriously and has accommodated the need for additional time.”

FHA received congressional approval on August 5th to raise borrowers’ annual premiums for single family mortgage insurance. Lawmakers gave the federal mortgage insurer enough leeway to increase the annual fee it charges borrowers three-fold, up to 1.55 percent. However, according to Bott, the annual premium is not going to go that high. The annual mortgage insurance premium will increase from 0.55 percent to between 0.85 percent and 0.90 percent of the loan amount. At the same time, though, FHA will lower the upfront premium charged on the amount borrowed by 100 basis points from the current 2.25 percent.

The new premium structure gives FHA a means of increasing its capital reserve funds, which as a result of rising mortgage defaults had deteriorated to its lowest level in the agency’s 75-year history at the end of fiscal year 2009.

Thursday, July 22, 2010

FHA Mortgages - Seller concessions gone gone gone

One of the key attractions of FHA home mortgage financing might be gone very soon. Sometime this summer, the Federal Housing Administration plans to slash maximum “seller concessions” from 6 percent of the home price to 3 percent. However, sellers and buyers who move fast can still make the most of it.

Thursday, July 1, 2010

Homebuyer Tax Credit Closing Deadline Extended

Congress has passed an extension of the closing deadline for the Homebuyer Tax Credit, the Homebuyer Assistance and Improvement Act (H.R. 5623). The extension applies only to transactions that have ratified contracts in place as of April 30, 2010, that have not yet closed. The legislation is designed to create a seamless extension; the new closing deadline for eligible transactions is now September 30, 2010. There will be no gap between June 30 and the date the President signs the bill into law.

Friday, June 18, 2010

HUD Asks for Public Comment on RESPA Rules Regarding Affiliated Business Arrangements

As recently stated on the OAITA blog,

HUD has just announced that it is now seeking public comment until September 1, 2010 concerning the "required use" of controlled business arrangements by way of the Advance Notice of Proposed Rulemaking (ANPR).

You can make comments hereClick on the Public Submissions to see the comments from others.

The purpose of the ANPR is to solicit information that can be used to inform any future revision or clarification of the regulatory definition of the "required use" of affiliated settlement service providers in residential mortgage transactions.

While that sounds broad, the ANPR is principally directed at homebuilders. The ANPR was launched once before and tabled in 2008. The latest ANPR is in response to the complaints that homebuyers have sent to HUD concerning the practice of homebuilders forcing their customers to use a builder's affiliated mortgage lender in exchange for construction discounts, etc.

The specific requests HUD provided within the latest ANPR suggest a sole focus on the homebuilder question, not realtor-owned or bank-owned CBAs. With the weakened state of the homebuilder lobby and the desire on the part of real estate and bank lobbies to squeeze more business out of the settlement service market, look for the homebuilders to get creamed with this rule.

Further driving a pessimistic view of the ANPR is the fact that the former guru of the CBA program for Long & Foster Realty is now the Director of FHA within RESPA and has heavy influence over the Interstate Land Sales office from which RESPA compliance activities are launched.

Thursday, June 10, 2010

Closing Date and Possession Date the Same! Really?

In the past within the central Ohio real estate market place, it was more common that the closing date was different than the possession date. The closing date is the day title legally changes hands. When the buyer gets possession of the property is always negotiable.

Again, it used to be customary in our area to give the seller an extra 3 to 4 days to move out completely. Ideally, in a perfect world the buyer gets possession on the day the deal closes, however, in today’s crazy last minute world, I’m not so sure that possession date and closing date should ever be the same. For both the buyer and seller, this can wreak havoc on their personal and financial lives.

Within the last year, we have seen closing after closing where the seller has moved out of the house only to find that the buyer does not get approved until the very last minute or not at all.

We have even had deals where the buyer's loan was still in underwriting and "not approved" until they walked into the closing room. I could write a chapter or two on "bomb outs". This does not make good sense for either side when they have their moving trucks in our parking lots and it doesn’t close that day or worse off doesn’t close the next day or even weeks later.  You can only imagine the ramifications.

2010 Multi-Chamber Business After Hours & Expo


The Dublin Chamber, in conjunction with the Westerville, Worthington and Powell Chambers of Commerce, will host the 2010 Chamber Business Expo. One of the best business development events of the year, the Expo brings together more than 100 vendors and 600 area business representatives!

The 2010 Chamber Business Expo takes place from 4:30 to 7 p.m. June 17 at the Bridgewater Banquet & Conference Center, 10561 Sawmill Pkwy., Powell.

Admission is free to this great networking event. Complimentary hors d’oeuvres and a cash bar are available. In addition, you will have the opportunity to enter to win one of many great door prizes.

To RSVP to attend as a guest, please submit the form below.