The “Mortgagegate” Scandal: Congratulations America, You’re Now in the Title-Insurance Business

[Editor's Note: On Wednesday, in the latest development in the "Mortgagegate" scandal, Fidelity National Financial Inc., the largest U.S. title-insurance firm, reversed course and said it wouldn't require an indemnity agreement before insuring individual foreclosed properties. Money Morning's Shah Gilani, a retired hedge-fund manager, warns that there's a deep game being played, and provides investors with detailed insights, and advice on the steps to take.]

By Shah Gilani, Contributing Editor, Money Morning

U.S. taxpayers already own pieces of such problem-plagued companies as General Motors Corp., Chrysler LLC, American International Group Inc. (NYSE: AIG), Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC). Now the increasingly problematic "Mortgagegate" saga could land American taxpayers in the trouble-ridden title-insurance business.

On Oct. 8, Bank of America Corp. (NYSE: BAC) indemnified Fidelity National Financial Inc. (NYSE: FNF) against any losses that Fidelity might sustain in litigation over title insurance it writes on foreclosed homes - the same homes, coincidentally, that Bank of America wants to sell to new buyers.

This arrangement amounts to U.S. taxpayers, who are the ultimate backers of the Federal Deposit Insurance Corp. (FDIC), backstopping a giant, publicly held title-insurance company, which is backstopping a huge commercial bank, so that the bank can sell properties that it might not have proper title to.

It sounds like a Wall Street version of the "Six Degrees of Kevin Bacon," but it's no game - it's a daisy-chain scheme that once again sets American households up as the biggest losers.

via moneymorning.com

Click throught to the original article on this one. This guy got some interesting feedback

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A.M. Best Special Report: Title Results Rebound in 2009 and 2010, but Challenges Remain

OLDWICK, N.J.--(BUSINESS WIRE)--After the real estate market freefall in 2008—when title insurance revenues fell sharply and most major title insurance underwriters posted net losses—operating results rebounded in 2009, although total industry written premiums declined from 2008 levels. During the first quarter of 2010, however, title insurance revenues—helped partly by federal policy and tax incentives—improved compared with the similar period in 2009.

While revenues were down in the second quarter of 2010, most major underwriters posted positive operating margins through the first six months of the year. Despite economic uncertainties and housing market challenges—particularly given recent foreclosure processing issues—A.M. Best Co. has revised its rating outlook for the title sector to stable from negative, given strengthened capitalization and improved operating performance trends.

In 2009, the industry reported:

• An approximate 22% increase in surplus, due to improved operating performance as well as capital contributions.
• Title insurance direct premiums written were down about 9%, year over year; a smaller decline compared with that of 2008.
• A yearly net income of $429 million, compared with a net loss of $416 million in 2008, driven by a pretax operating gain of $418 million.
• The net underwriting loss of $96 million was far smaller compared with 2008’s relatively large underwriting loss of $688 million. As a result, the industry’s combined ratio (known as composite ratio) improved to 102.9% from 109.1% in 2008.
• Investment income improved to $552 million from $380 million in 2008, which more than offset the modest underwriting loss resulting in an operating gain.

Access a copy of this special report. BestWeek subscribers can download a PDF copy of all special reports as well as the associated spreadsheet data. Non-subscribers can access an excerpt of each special report and purchase individual reports and spreadsheet data.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

via businesswire.com

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American Land Title Association Names Anastasi as President

WASHINGTON--(BUSINESS WIRE)--The American Land Title Association (ALTA) announced that veteran land title insurance industry professional Anne L. Anastasi has been named president for the 2010-2011 year.

“Anne is as passionate and articulate a spokesperson for the title industry as you could ever hope to find, but she also has other qualities such as the ability to listen and great judgment, that will distinguish her leadership”

Anastasi is president of Hatboro, Pa.-based Genesis Abstract, LLC. Prior to opening her own company in 1994, she served as vice president of a regional land title insurance underwriter. In 1999, Anastasi served as the first female president in the 80-year history of the Pennsylvania Land Title Association.

"I am honored to serve ALTA as its president, especially at this time,” Anastasi said. "The importance of title insurance in assuring property rights has been amplified with the recent foreclosure issues stemming from lending processing errors. This has afforded us a great teaching opportunity to explain the repairing and closing process so that people purchasing a home or those refinancing their mortgages will understand that title insurance is not just a product but a valuable process that protects their investment.”

Anastasi is a renowned national speaker, covering topics such as title insurance, customer service, sales and motivation. She has been the keynote speaker at 46 title industry state conventions and has addressed audiences for ALTA, Real Estate Services Providers Council (RESPRO), bar associations and mortgage bankers.

“Anne is as passionate and articulate a spokesperson for the title industry as you could ever hope to find, but she also has other qualities such as the ability to listen and great judgment, that will distinguish her leadership,” said Kurt Pfotenhauer, chief executive officer of ALTA. “Given the challenges facing the title industry, we are blessed to have a leader of such quality."

via businesswire.com

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Title Insurance No Longer an Issue in Foreclosure-Gate - Daniel Indiviglio - Business - The Atlantic####

Although the mortgage market mess persists, one aspect of the fiasco appears to have worked itself out. Several major title insurance companies were demanding that mortgage servicers take on liability for title problems, but dropped that request on Thursday. This matters a lot, because it could mean that purchasers of foreclosed homes won't shy away from buying due to the fear of not getting title insurance.

Elizabeth Razzi of the Washington Post reports that three big title insurers, First American Financial, Old Republic International and Stewart Information Services, are no longer demanding indemnifications from banks and servicers on foreclosed properties. Those three firms make up more than half of the title insurance market.

Calculated Risk explains why this is so important:

This is means that the buyers of REO (lender Real Estate Owned) will be able to obtain title insurance, and that the new owner can sell the property. There was some concern that buyers would shy away from REOs.

So the demand problem is partially solved. Although some buyers might still worry about purchasing a foreclosed home, it won't be due to a lack of title insurance. Instead, they may fear title insurers' ability to back up a flood of claims if many titles are bad. Since that's likely less of a concern, however, this new development should prevent a plummet in foreclosed property sales.

But it doesn't fix the supply problem. Some banks and servicers are still investigating their documentation and procedures and halting some foreclosures temporarily. This will reduce the number of defaulted properties that hit the market, which will further delay the sector's recovery. Housing cannot move confidently forward until all properties from bad mortgages have been absorbed by the market.

via theatlantic.com

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Where Is The Housing Recovery? - Intelligent Investing - Ideas from Forbes Investor Team - Forbes

Posted by John Mauldin

We are going to quickly review a few charts from Gary Shilling’s latest letter, where he reviewed the housing market in depth. Bottom line, the housing market has not yet begun to recover and it is not only going to take longer but the decline in prices may be greater than many have forecast. I wrote three years ago that it could be well into 2011 before we get to a “bottom.” That may have been optimistic, given what we will cover in this letter.

via blogs.forbes.com

This seems to be a realistic view of the market. I'm not sure we've seen the bottom and I certainly haven't seen any increase in activity.

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Addressing concerns raised by providers of a common form of mortgage loan assistance, the Department of Housing and Urban Development (HUD) decided to exempt certain silent second lien mortgage loans from the requirements to provide a good faith estimate and HUD-1 under the Real Estate Settlement Procedures Act (RESPA).    

State housing agencies, nonprofit organizations and similar entities often provide mortgage assistance to home buyers by extending a second lien mortgage loan for down payment and/or closing cost purposes. The loans, commonly referred to as “silent seconds,” often provide for no interest rate or periodic payment, often are either forgiven or require repayment based on certain events, and often have no or minimal fees. The loans pose disclosure issues for purposes of the good faith estimate and HUD-1 under RESPA. For example, the documents require the disclosure of various loan terms, including the repayment terms.

Requests for an exemption from the good faith estimate and HUD-1 requirements were made to HUD by administrators of various silent second programs. The administrators advised that producing good faith estimates and HUD-1s is difficult for silent seconds, and that the disclosures provided for in the documents are of little benefit to borrowers given the nature of silent seconds.

HUD decided to use its exemption authority under RESPA to exempt silent seconds meeting certain conditions from the requirements to provide a good faith estimate and HUD-1. The conditions are as follows:

• The loan is a subordinate lien loan; and
• The purpose of the loan is:
  • Down payment, closing cost or other similar homebuyer assistance, such as principal or interest subsidies; or
  • Property rehabilitation assistance; or
  • Energy efficiency assistance; or
  • Foreclosure avoidance or prevention; and
• The loan carries a zero percent interest rate; and
• The repayment terms are as follows:
  • Repayment is forgiven, incrementally or at a date certain; or
  • Repayment is forgiven, incrementally or at a date certain, subject to certain ownership and occupancy conditions (e.g., the recipient must maintain the property as his or her primary residence for five years); or
  • Repayment is deferred for a minimum of 20 years; or
  • Repayment is deferred until sale of the property; or
  • Repayment is deferred until the property is no longer the primary residence of the recipient; and
• The total of the settlement costs assessed to the recipient for the subordinate loan is less than one percent of the amount of the subordinate loan and includes, at most, charges for the following items:
  • Recordation fee;
  • Application fee; and/or
  • Housing counseling fee; and
• At or before settlement the recipient/mortgagor receives a written disclosure that effectively describes the loan terms, repayment conditions and any costs associated with the loan.

The exemption for qualifying silent seconds applies only to RESPA sections 4 and 5 —the good faith estimate and HUD-1 Settlement Statement. The exemption does not apply to any other RESPA sections, including section 8.

Silent seconds also pose issues with regard to disclosures under the Truth in Lending Act (TILA). The Federal Reserve Board has not issued any similar exemption for silent seconds with regard to TILA disclosures.

via lexology.com

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Just Do It!

I liked this article from Robert Reich.

Art

For the present, however, it is enough to know that neither the government under which you live nor the capitalistic or competitive system of industry can keep you from [being successful]. When you enter upon the creative plane of thought you will rise above all these things… Wallace Wattles, circa 1910, from The Science of Getting Rich In the past I have said to myself (and others), “Just wait until the economy recovers and the real estate market turns around…then business will be good again.”   Usually everyone agrees with me and we then go on to speculate which year the good times will come: 2011, 2012, 2013, or later?  I started to realize more a year ago this kind of thinking did me or our title agent customers no good.  It occurred to me no matter what the economic or political environment the country is (or was) in there are always obstacles to success.  When the market was at its peak, the industry was too competitive; when the market was at its lowest business had dried up.  If it wasn’t any of those things then it’s the end of the month, the beginning of the month, mid-month, Christmas, Thanksgiving or summer vacation.  Let’s not forget Spring Break and Fridays. There is opportunity in front of all of us every day.  It is there when subprime lending is prevalent, and when it is not.  It doesn’t matter if short sales abound, if foreclosures are halted, when the Democrats are in the White House, or the Republicans.  Opportunity and success is what you make it and most times it doesn’t walk through your front door to the sound of the king’s trumpets.  It is much more subtle than that. I refuse anymore, now that I have learned my lesson, to listen to anyone who wants to be pessimistic and tell me success is not possible.   Yes, the landscape has changed.  Yes, the real estate market nationwide will close fewer transactions this year than several years ago.  SO WHAT?  There has never been a greater opportunity to win market share than there is right now.  Some of your competition has gone out of business and has “orphaned” their customers.  Some of your competition has decreased its customers service and has left their customers vulnerable to you. Don’t procrastinate starting new initiatives and trying new things.  The challenges of this market is exactly that, challenges—no more no less.  Be as Wallace Wattles said 100 years ago, “…upon the creative plane of thought”. Think new marketing ideas, brainstorm new concepts, make new plans and take calculated chances.   Now is the time. Not next year, not 2013…now.   Increase your business by two orders in October, 5% in November and 10% for the quarter.  It doesn’t matter if you are the senior person in the office or if you were hired yesterday.  And don’t listen to that person who has been saying, “It will be 2015 until market gets back on its feet”.  As Michael Jordan told Nike, “Just Do It!”.   Robert L. Reich Digital Docs.net

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