BULLETIN NO. 18-04
APRIL 10, 2018
TO: ALL NEW JERSEY STATE CHARTERED BANKS, SAVINGS BANKS, SAVINGS AND LOAN ASSOCIATIONS, CREDIT UNIONS, NEW JERSEY LICENSED RESIDENTIAL MORTGAGE LENDERS AND BROKERS, MORTGAGE LOAN ORIGINATORS, TITLE INSURERS, TITLE PRODUCERS, AND LICENSED REAL ESTATE BROKERS AND SALESPERSONS
FROM: MARLENE CARIDE, ACTING COMMISSIONER, STATE OF NEW JERSEY, DEPARTMENT OF BANKING AND INSURANCE
RE: WIRE TRANSFER FRAUD
The industries addressed in this Bulletin handle millions of dollars in wire transfers every day in connection with mortgage loan transactions in this State. The purpose of this Bulletin is to remind you of the prevalence of fraudulent schemes to divert funds transferred by wire.
Washington, DC, November 15, 2017 — Washington, D.C., Nov. 15, 2017 — The American Land Title Association (ALTA), the national trade association of the land title insurance industry, issued the following statement following the announcement that Richard Cordray would step down as director of the Consumer Financial Protection Bureau (CFPB).
“Since being officially nominated more than four years ago as the first director of the Consumer Financial Protection Bureau (CFPB), ALTA has worked closely with Richard Cordray and his staff to help them understand the important role title and settlement agents play in the safe and efficient transfer of real estate,” said Michelle Korsmo, ALTA’s chief executive officer. “During this leadership transition, ALTA will continue to support CFPB staff to help provide positive and compliant real estate settlement experiences for consumers and lenders, and serve as a resource on important consumer issues such as wire transfer fraud, third-party oversight and mortgage disclosures.”
The New York Department of Financial Services (DFS) adopted two new regulations for the title insurance industry that clarify rules for marketing expenses and address affiliated business arrangements.
The first final regulation clarifies rules about marketing expenses including meals and entertainment, and ancillary fees that title agents or title insurers may charge the insured at closing. The second final regulation requires title insurance companies or agents that generate a portion of their business from affiliates to function separately and independently from any affiliate and be open for business from other sources.
The New York State Land Title Association provided input to DFS as it created the new regulations, but said “regrettably, the end product does not serve the people of New York State, despite its good intentions.”
“In fact, we believe these regulations will have major fallout for the title insurance industry, and therefore, consumers, other real estate professionals, and the real estate industry as a whole,” the NYSLTA reported in a release. “We believe the new regulations will force small, local title insurance companies to close, costing jobs and making the market ripe for take-over by multi-state conglomerates, thereby reducing the options available to consumers.”
There is a new trend regarding municipal fees being assessed against vacant properties during foreclosure. On July 14, 2014, N.J.S.A. 46:10B-51 was amended to allow municipalities to enact local ordinances that impose penalties on mortgage lenders who fail to remedy municipal ordinance violations on vacant or abandoned property during a foreclosure action.
In addition, the amended law allows municipalities to use public funds to abate a nuisance or correct a violation on residential property for which the lender was given notice. The municipality can place a lien on the property if these funds are not paid back.
Several municipalities in New Jersey have either proposed or are considering proposing local ordinances in accordance with N.J.S.A 46:10B-51 to enforce penalties against lenders. Accordingly, if a property has gone through foreclosure, the municipality should be contacted to inquire about any vacant property fees. Some vendors are now including notes regarding vacant property fees as part of their tax search products.
Any fees associated with public funds being used to resolve a violation can become a lien on the property and must be resolved.
A power of attorney ("POA") is a legal document authorizing one person to act on another’s behalf. POAs can be used to conduct financial transactions, buy and sell real estate, encumber real estate, provide for health care directives or manage one’s general affairs, just to name a few. Because of the significant power bestowed by a POA, it is critical that you understand who the parties are, and ascertain the nature and extent of the grant of power under the document.
There are typically two parties to a POA. The person who authorizes another to act on his or her behalf is commonly called the "grantor" or "principal." The person authorized to act is commonly called the "attorney in fact" or "agent."
If you're shopping for a home in New Jersey, you may be considering townhouses and condominiums. But what are the differences between the two?
A townhome is a single family home that shares one or more walls with other independently owned units. With a townhome a buyer will own their home and the land on which the house sits. With a condominium, a buyer will own the interior of their unit but the unit owners jointly own the land and this common interest cannot be separated from the others.
A townhouse is attached to one or more houses and while there are no neighbors above or below the home like in a condo or apartment, because the homes are attached, they still offer a greater sense of security.
As of May 1, 2017, a paper cover sheet is required with all paper land documents submitted for recording at any of the 21 NJ County Clerk's Offices via U.S. Mail, express mail, courier service, or in-person over the counter delivery.
The cover sheet will be counted as an extra page in calculating recording fees so an additional $10.00 must be included.
Any land document submitted for recording without a cover sheet must include an additional $20.00 or the document will be rejected and returned. This requirement does not apply to eRecorded documents as the cover sheet is already integrated into eDocuments submitted. The new cover sheet requirement is mandated by N.J.S.A. 46:26A-5.
If recording a deed, the cover sheet must include:
The lot and block or other real property tax designation of the real property conveyed or a statement that the information is not available;
The consideration for the conveyance;
The mailing address of the grantee.
For an assignment, release, satisfaction of a mortgage or an agreement respecting a mortgage, the book and page number or document identifying number of the mortgage to which it relates must be stated on the cover sheet.
The Foreign Investment in Real Property Tax Act ("FIRPTA") imposes tax withholding, reporting and record retention obligations on buyers ("transferees") of U.S. real property interests when the seller is a "foreign person," i.e. a nonresident alien, foreign corporation or other entity, etc. Withholding is required unless an exemption applies.
Some underwriters caution closers that they are typically not agents of the seller or the buyer for purposes of FIRPTA, while at the same time recognizing that closers sometimes do withhold and report or prepare exemption affidavit forms as part of the closing process. Closing instructions may contain provisions that the settlement agent is responsible for any applicable FIRPTA reporting.
FIRPTA withholding rates are among the many matters affected by the Protecting Americans From Tax Hikes Act of 2015 (the "PATH Act") which was signed into law on December 18, 2015. For transactions closing on or after February 16, 2016, Section 324 of the PATH Act changed some FIRPTA withholding rates. As of such date, applicable withholding rates are as follows:
The Certification of Settlement Agent to the Closing Disclosure for a Federal Housing Administration ("FHA") insured loan transaction reads as follows:
To the best of my knowledge, the Closing Disclosure which I have prepared is a true and accurate account of the funds which were (i) received, or (ii) paid outside closing, and the funds received have been or will be disbursed by the undersigned as part of the settlement of this transaction. I further certify that I have obtained the above certifications which were executed by the borrower(s) and seller(s) as indicated. (emphasis added.)
Several ALTA members have reported that lenders are unsure how to calculate the owner’s title insurance premium when issued simultaneously with a lender’s policy under the CFPB’s Know Before You Owe (TILA-RESPA Integrated Disclosures) rule.
The premium for an owner's title insurance policy for which a special rate may be available based on the simultaneous issuance of a lender's and an owner's policy is calculated and disclosed pursuant to § 1026.37(g)(4) as follows:
The title insurance premium for a lender's title policy is based on the full premium rate, consistent with § 1026.37(f)(2) or (f)(3).
The owner's title insurance premium is calculated by taking the full owner's title insurance premium, adding the simultaneous issuance premium for the lender's coverage, and then deducting the full premium for lender's coverage.” § 1026.37(g)(4)-2.
ALTA has pointed out that in the majority of states the cost of a homebuyer’s title insurance premiums will be inaccurate on the Closing Disclosure due to the CFPB’s mandatory calculation method when where the lender’s and owner’s title insurance policies are simultaneously issued. Many state regulators require settlement agents to disclose the actual costs for each fee the homebuyer is responsible for paying. ALTA developed model Settlement Statements to help settlement agents disclose the accurate costs to homebuyers.