Friday, April 6, 2018

IDFPR Disclosure Rule



 
April 6, 2018
         
New Guidance from IDFPR! 
Disclosure Rule Updated,  Effective May 15, 2018

In a surprise move, the Illinois Department of Professional and Financial Regulation on April 4 implemented a new rule on the Disclosure of Financial Interest form effective May 15, 2018. The crux of IDFPR’s new guidance is:

“The Department of Financial and Professional Regulation, Division of Financial Institutions announces that the Disclosure of Financial Interest form, also known as the DS-1 form, has been revised. This revised disclosure form is effective at 12:01 a.m., April 4, 2018 [now May 15, 2018], and the current form will no longer be used.

“The Title Insurance Act (Act) authorizes the Department to prepare the disclosure form so that a producer of title business (usually the attorneys, real estate brokers or lenders in transactions) discloses their financial interest to any home seller and buyer involved in the closing process. This includes the title insurer, independent escrowee or title agent/agency involved in the closing.” 
 
Note: As of this writing, the Illinois Land Title Association has requested that IDFPR delay implementation of mandatory use of the new form for 90 days. IDFPR has announced a new effective date of May 15, 2018.

Click here to go to the online form, and here for instructions on filling out the form.

What you need to know:

·         Compliance with this guidance is mandatory and effective immediately.
·         You must present the revised disclosure form to your client at the beginning of each transaction process, i.e. before the title commitment is issued.
·         For each transaction, the title insurer (underwriter), “Must review and approve the disclosure, including accurately verifying the percentage the agent will receive for statutorily authorized services that the agent will perform, including an estimate of the fee.”

How can Prairie Title help?

We are here to help you through the new process. Do not hesitate to reach out to your representative with any questions you have and for the assistance you need.

Friday, February 23, 2018

Upbeat Commercial Real Estate



In the News   Presented by Prairie Title  
February 22, 2018

         

Can CRE Lead the Way?






Last year’s federal tax legislation has begun to sink in, with employers adjusting withholding levels to match the new IRS charts and many employees seeing larger paychecks as a result. It’s hard to tell what effect the tax changes will have on the economy overall, and the real estate market in particular, but there is hope that changes affecting real estate LLCs will boost commercial real estate this year.

In a slideshow posted on nreionline.com, six economists give their generally positive views on the state of CRE in 2018. For instance, Ryan Severino, chief economist at JLL asserts: “The recent tax cuts are likely to benefit real estate significantly and should have a far more substantial impact than either changes to immigration policy or infrastructure policy."

We may need commercial to lead the way this year as housing continues to be a puzzle despite January housing construction news termed “terrific” by NAR Chief Economist Laurence Yun. “This rise in single-family housing construction will help tame home price growth,” Yun said.

As Reuters reported: “Housing starts jumped 9.7 percent to a seasonally adjusted annual rate of 1.326 million units in January. …Economists polled by Reuters had forecast housing starts rising to a pace of 1.234 million units last month after a previously reported rate of 1.192 million units. Building permits surged 7.4 percent to a rate of 1.396 million units in January.”

Will January’s construction numbers provide a push for housing? We hope so, but continued lack of inventory and high prices are keeping the overall housing market flat at best. And it remains to be seen if the elimination of federal deductibility of state and local taxes will negatively impact housing.

Good news out of Washington: The House recently passed bipartisan ALTA-supported legislation that corrects the inaccurate disclosure of title insurance premiums on the TILA-RESPA Integrated Disclosures (TRID) form and will help consumers understand the true cost of their real estate transaction. Here’s hoping the Senate follows suit and the fix becomes law.

A final thought. We’re moving more and more toward a digital mortgage/closing process from start to finish. It won’t happen overnight but there are signs of movement. Just last month Chase announced its intention to soon offer digital mortgages on smartphones. Also, I found this article on operationalizing the digital mortgage process in Housing Wire to be an interesting read.

Finally, finally. I recently authored an article in an Illinois State Bar publication titled, “The Bond that’s not: How to convey real estate in an unprobated estate.” For those interested in the subject matter, or others who might suffer from insomnia, I thought you might find it helpful.

Let’s close out the first quarter strong!

Wednesday, January 10, 2018

New Regulatory Initiative in Illinois



Illinois Moving Forward on Regulatory Guidance for Title Insurance Fees


In a most welcome development, last week I attended a meeting at the Thompson Center in downtown Chicago called by the Illinois Department of Financial and Professional Regulation. The topic was IDFPR’s proposed regulatory guidance with respect to premium-sharing practices and update fees. The official document can be found here.
In my opinion, the proposed guidance and regulatory action is long overdue and is a good start in addressing certain questionable practices which have been occurring with greater frequency in recent years.

Several important items emerged from the meeting that I wanted to share with you:
·         IDFPR feels that premium splits should reflect market concerns. However, no clear definition was offered. I questioned whether premium splits should be considered compensation for work actually performed or reflect division of liability. The Title Act and RESPA require agents to perform “core services,” understood to be: 1) examine title; i.e. determine insurability, 2) clear exceptions, and 3) underwrite title risks.
·         Contracts between underwriters and their agents may be reviewed by IDFPR to determine if the premium splits reflect the prevailing market. Further, there may be a need to audit actual transactions to confirm the contract terms are carried out according to the agreed split.
·         IDFPR indicates that certain fees for settlement services should not be paid to nor shared with attorney agents. These include later date fees, chain of title fees, commitment update fees, policy update fees, etc. Paying these fees or sharing them may constitute illegal inducements. Further, unless services are actually performed, sharing or paying these fees to attorney agents may violate RESPA.
·         It was generally agreed that consumers do not understand the mechanics behind the division of title fees. There is a possibility that the disclosure forms may be revised to create greater transparency.
·         The question was raised of whether an attorney at the closing who believes certain fees or arrangements are inappropriate has an ethical obligation to report that conduct. The IDFPR officials indicated that they could not opine on the Rules of Professional Conduct, but they welcome reports of bad behavior, and gave assurance that anonymity would be would be protected as much as possible.
·         On the issue of required reciprocal referrals by several real estate brokerages which operate affiliated title companies, IDFPR is interested in these matters and indicated they may address them at some time, but they wanted to limit the discussion to the issues raised in the proposed guidance.

During the meeting, I made the point that title insurance and the advocacy provided by attorneys for the respective parties are important consumer protections and any guidance issued should take this into account. We should not create disincentives in the market where consumers may opt out of title insurance or forego the advice of legal counsel. Let’s be careful not to throw the baby out with the bath water as has occurred in other parts of the country.

Overall the discussion was candid and open. IDFPR Secretary Bryan A. Schneider referenced shedding light on the issues; this is a positive outcome. If nothing else, the meeting raises awareness and gives us the opportunity to more openly talk about inappropriate behavior in the market.

I applaud the Department for initiating the discussion and raising awareness. Perhaps more clarity will come as more light is cast on proper market conduct.

As always, I welcome your comments and questions, and I assure you that if Prairie Title provides you with support services, nothing will change for you. Our invoicing, billing, and remittance practices are already (and always have been) in line with the proper conduct suggested by the IDFPR guidance document.

I would love to have your thoughts and comments. Please share them below. Let's start a conversation.

Thursday, December 21, 2017

So Long 2017



In the News   Presented by Prairie Title  
December 21, 2017
         
Closing a Volatile Year
As 2017 comes to a close, I am hard pressed to think of a year in my lifetime that witnessed so much Washington-based controvery since Vietnam coupled with Watergate. Front and center on my mind at the end of a tumultuous year is that state of the real estate economy and just how much real estate impacts the U.S. economy as a whole. 

An interesting piece in Mortgage Professional America recently spoke of the benefits to the real estate economy if a home purchase tax credit were adopted, and a statistical note in the article really stood out to me: “According to the Bureau of Economic Analysis, the GDP reached $18.6 trillion in 2016. Of this amount, real estate chipped in $2.48 trillion, or 13.3 percent. In comparison, manufacturing was worth $2.18 trillion, retail contributed $1.1 trillion, and lawyers produced services worth $245 billion."

Clearly, the need to promote real estate transactions through the tax code is imperative. Thankfuly, the tax bill just passed in Congress ended up being less unfavorable to real estate than previous versions. Some deductibility for property taxes was maintained and the mortgage interest deduction was largely preserved, while capital gains treatment on the sale of a primary residence was  preserved. Commercial real estate also should benefit as pass-through entities such as LLCs will be treated more favorably in the new tax environment.
For my part, I am keeping an open mind on the possibilities for the real estate market as the new tax laws come into greater focus during 2018. 

CFPB Follies. There’s no need to discuss the spectacle of the agency temporarily having two diretors, but there has been movement onTRID disclosures since we last published.

On Dec. 6, CFPB issued an updated version of the TRID Guide to the Loan Estimate and Closing Disclosure forms, which did not really help solve disclosure issues. More hopefully, there is some momentum behind a bipartisan effort in Congress to legislate needed changes to the disclosure rule. We hope the new year will bring good news in this arena.

Finally, We recently saw Mudbound, an early 2017 movie release set in post World War II Mississippi. While I enjoyed the entire movie, one scene struck me as it unfolded: A family arrives at a home they believe they have rented (and indeed put $100 down on, quite a sum in those days) only to find that the homeowner has sold the home in the interim and they are out their money. The renter had made the deal on a handshake, with no paperwork, and unfortunately paid the price for that mistake.

To me, the scene was a reminder that real estate fraud has always been and always will be with us, and the need for vigilance to guard against fraud and theft remains and grows greater every day.