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Compliance Risk & Consumer Protection

The passage of the Dodd-Frank Act by Congress in 2010 ushered in consumer protection as an additional level of regulatory focus for banks, credit unions and other providers of consumer financial services, including title companies. Prior to Dodd-Frank, the safety and soundness of financial institutions was the primary focus of regulators. Dodd-Frank put consumer protection on equal footing and created the Consumer Financial Protection Bureau (CFPB) to act as judge, jury and executioner.

Bulletin 2012-03 issued by the CFPB on April 13, 2012 (ironically, a Friday) reminded its supervised institutions that they were responsible for the acts of independent third party service providers used by the bank to provide services to the bank’s customers. The FDIC, Federal Reserve, OCC and the NCUA each have provided similar guidance, both before and after the CFPB bulletin. Additionally they have provided instructions regarding risk assessment, due diligence and monitoring of those third party relationships.

A consistent theme in all of this regulatory communication is that the protection of a consumer’s personal, non-public information (PPI) by third party service providers should be near the top of a financial institution’s due diligence. Title companies come into possession of a bank customer’s PPI in the ordinary course of closing real estate transactions.

In the context of this regulatory focus and in the wake of regular breaches of large sophisticated consumer data bases–most recently Target and Neiman Marcus–John Bethell Title recently upgraded its IT network infrastructure in order to assure our clients that the information entrusted to us is maintained in a secure environment. Our servers are now housed in a sophisticated data center that is annually certified to SSAE16, ISAW3402 and AT-101 standards and accessed via an encrypted private network. Additional enhancements will be implemented throughout 2014.

Protecting PPI is just one part of the consumer protection regulatory burden. Other areas of third party provider risk with title companies include trust account management, on-line banking practices, pricing and consumer complaint tracking and resolution mechanisms.

If you or your compliance team would like to discuss the effects of consumer protection regulations on your title and closing service provider relatiohships, I’d be happy to meet with you. Just let me know.

~John Bethell

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We will be closed for business Monday February 17th while we transition to exciting new title and closing production software. We will reopen Tuesday February 18th.

On February 18th our wire instructions will change! New wire instructions will be sent to you Wednesday February 12th. Look for them in your email.

We are grateful for your patience while we make these changes to better serve you and your clients.

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The End of an Era?

The first Refi Boom started in August 1982 when Henry Kaufman of Solomon Brothers, then Wall Street’s most watched guru, publicly announced that the recession had bottomed out. Mortgage interest rates, then at 15 to 18 percent, started falling. I quickly took advantage and refinanced into an 11 ½ percent FHA graduated payment mortgage that did not start amortizing until year five. I thought that I had the deal of lifetime.

I now believe that we’re at the end of a thirty year declining interest rate cycle. Mortgage recordings in Monroe County during the fourth quarter certainly don’t contradict that thought. Volume was the lowest since the fourth quarter of 2008. (chart page 9) I’m sure you all remember the craziness back then. It’s quite a difference from the end of 2010, 2011 and 2012 when refinance applications dominated our business.

The purchase market continued modest improvement in 2013. The glass half full take is that there’s still some upside between 2013 and whatever a normal market is. (chart pages 1, 8, 15-18) The new mortgage regulatory environment of the Consumer Financial Protection Bureau notwithstanding, I believe we’ll see more improvement in 2014.

The best news of 2013 is the decline in new foreclosures filed in the Circuit Court. (chart pages 19 & 20) The life cycle of a foreclosure seems to be longer than a year. I expect the number of properties sold at sheriff’s sale to fall as the year goes on.


We are excited to be transitioning to a completely new title and closing production software system during the month of February. The system includes a workflow management component that will help us be even more proactive for our clients!  Team member training will be conducted through early February as we prepare for our go live date, Monday February 17th.

To allow our team members the opportunity to concentrate on working with new system we will be closed to business on Monday February 17th. We will reopen for business February 18th.

John Bethell

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Wishing You a Happy Holiday Season

from all of us at John Bethell Title Company

JBTC_BLOOM_111813_REV2_1

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Happy Holidays

from all of us at John Bethell Title Company

JBTC_BLOOM_111813_REV2_1

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An Emphasis on Process

We think a lot about processes here ― a lot. Our need to be better at what we do drives us to continually question and improve our processes so that we always provide The Premier Title and Closing Experience.

In the coming months all of us are going to be thinking about our processes as they relate to regulatory compliance. (I know that many of you wish that you could stop thinking about regulatory compliance!) The final rule combining the current Truth in Lending and RESPA disclosure paradigms is expected from the Consumer Financial Protection Bureau (CFPB) before year’s end. Twelve months ago, a proposed rule was one thousand ninety five pages long. I’m hoping the final rule is a shorter read, but who knows?

It seems clear that providing borrowers with a completed final (as in few or no changes permitted) closing disclosure (that’s what we now call a HUD-1) three days prior to closing will make the cut in the final rule. As will tighter tolerance requirements and increased transparency. Whether we get six months to comply or twelve or eighteen, comply we must.

The regulatory changes, although likely disruptive in the short term, are also an opportunity. The newer, more difficult performance expectations that come with the new rule will challenge us to question and validate many of our assumptions about what we can and cannot accomplish.

At John Bethell Title we will not spend any time worrying about why we have to change. We can’t control that. We will spend a lot of time thinking about our processes, your processes and how they work together. We will seek to find ways to be profitably compliant―and find ways to help you do the same.

That’s our pledge! Every single day!

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This month, we are excited to share some new pictures of our team members with you. At John Bethell Title Company, our team is passionate about what we do. Learn more about our team and how we can help you.

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The future ain’t what it used to be ~ Yogi Berra

Fueled by record low interest rates (how many times has that been said in the last four years?) the Monroe County mortgage market made its fifth strongest quarterly showing ever. (charts pages 8 & 9) Judging by our own mix of business, refinancing probably comprised more than half of that volume.

Sale transactions (see chart page 14) while stronger than 2012, are still below the levels seen prior to the late 2008 market collapse. I’m certain that we won’t see numbers like those from 2004-2007 again, but I do believe that the local market still has another fifteen to twenty percent growth left in it.

So maybe, we’re not yet back to “normal.” How long it will take to get there is anybody’s guess.

New foreclosures started in the second quarter dropped significantly. Hopefully that trend will continue. There were no sheriff’s deeds recorded in April―very unusual. I’m not aware of any procedural or regulatory change that would account for that. Maybe Mr. Kennedy was on vacation?

On July 1st Closing Protection Letters for buyers, borrowers, lenders and sellers became mandatory in Indiana. This new law ensures that everyone’s funds entrusted to a closing agent are protected from misappropriation―a good thing. Whether the additional $50 to $75 per transaction being paid to title underwriters is warranted by the additional risk is debatable. The underwriters will need to justify those charges next year when the Indiana Department of Insurance is required to approve their premium rates prior to their use.

If you have any questions about the new law and how the fees are being handled, please let us know. We appreciate the patience of our valued clients as we all deal with the regulatory forces that affect our business.

John Bethell
July 17, 2013

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Click Here to Access the April 2013 Mortgage Market Share Report for Monroe County Indiana

Effective July 1, 2013 New Indiana Law Requires Closing Protection Letters for All Parties

Senate Bill 370 (P.L. 80-2013), enacted in the most recent legislative session, mandates that Closing Protection Letters (CPL) be provided to all lenders, buyers (or borrowers) and sellers in every transaction closed by a licensed title insurance agent or title insurance underwriter branch office. The effective date of implementation is July 1, 2013.

The legislation also mandated that a fee (premium) be collected for each such letter. The entire fee is paid to the title insurance underwriter issuing the CPL. Title insurance underwriters must have their fee and CPL form approved by the Indiana Department of Insurance (DOI) prior to June 24, 2013. The DOI will only approve the fee if they determine that it is reasonable in light of the risk being assumed by the title insurance underwriter.

I’m sure that many will have questions. I’ve posted a series of questions and answers on our website. You may link to it here. CPL Questions.

As more information becomes available, we will update you.

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