Lenders require third party vetting of title agents and realtors per CFPB

In recent months, title insurance agencies across the country have received notification from several lenders explaining that, according to Bulletin 2012-03 issued April 13, 2012 by the Consumer Financial Protection Bureau (CFPB), they must be vetted through a third party risk management firm prior to wiring proceeds and obtaining clearance to close.  This vetting is required for all individuals involved in the transaction who will be conducting the closing, handling closing documents and disbursement of funds.  This includes the closing agent, notary, realtors and attorneys.  The letter states that this change is effective immediately, but will not affect closings until January 1, 2013.

They assert that agents who wish to continue closing transactions with them to register with Secure Settlements, Inc., and that by complying with this requirement meets their obligations under Dodd-Frank/CFPB and applicable FNMA and FHA guidelines to actively manage closing agent fraud risk.

Secure Settlements, Inc. charges $299.00 for each closing agent or employee of a title insurance agency who handles the funds or documents in a loan closing transaction and $99.00 for a background screening for contract closers.

This reporter contacted Florida Chief Financial Officer Jeff Atwater’s office and explained the matter to them and asked for some guidance on how title insurance agencies should proceed.   Below is their response:

“The Florida Land Title Association (FLTA) reports that they have not been able to identify the provision in Dodd-Frank which some are claiming expressly requires the use of outside “vetting companies,” and that the services offered by Secure Settlements, Inc., do not appear to be in line with the CFPB bulletin. (Bold Italics by Reporter) However, as you know, SSI is using this bulletin as part of their sales pitch for charging for background checks on title agencies and their employees. So far, at least anecdotally, few title companies have been willing to provide such sensitive personal information to this entity.

While FLTA is working with industry leaders on the best way to approach this issue, Mr. Fields told me that they plan to address the issue in more depth in their October newsletter. He also directed me to a website wherein the National Land Title Association documents its concerns with the bulletin and the corresponding solicitations by third party “vetting” companies: http://activerain.com/blogsview/3452010/misinterpretation-cfpb-bulletin-2012-03-hurting-small-business-owners.”

In the FLTA Summer newsletter agent’s concerns with respect to this issue were already being expressed.  FLTA President Beverly McReynolds wrote that after contacting Secure Settlements, Inc. and speaking with them “I did not find their process to be as complete as our state licensing process or that of obtaining underwriter approval.” Most states require licensing and continuing education for title insurance agents.  In addition, background screening, including obtaining credit reports and drug testing, is usually required by employers of prospective employees.

The lenders that have requested this third party vetting procedure in order to continue to close their transactions after January 1, 2013 are:

• American Capital Corp.
• American Pacific Mortgage Corp
• Amerisave Mortgage Corp
• Cascade Financial Services
• Cascade Land Home Financing
• Circle Mortgage Corporation
• DAS Acquisition Company (St. Louis, Missouri)
• Fidelity Funding Mortgage Corp
• First Choice Lending
• First Choice Loan Services, Inc.
• First Choice Mortgage
• First Equity Mortgage Bankers
• First Tennessee – Mortgage Warehousing Group
• GT Financial (a Division of American Pacific Mortgage)
• Residential Home Funding Corp.
• Residential Home Mortgage
• Texas Capital Bank

Ashley Mayer, Director of Policy, Research & Legislative Affairsin Jeff Atwater’s office has alerted the staff at the Florida Division of Insurance Agents and Agency Services “in the event they get any questions concerning this issue from our licensees.”

If you are a realtor or title agent and receive a letter advising that you or your agency be vetted in order to close mortgage transactions after January 1, 2013, contact your state agency for further guidance.