If you haven’t seen it by now, please be sure to read “Title-Insurer Fees Draw Scrutiny,” which was buried below the fold in the last section of Tuesday’s Wall Street Journal. It's obviously not a paid ad for the industry, but you should know that we worked with the reporter for several days on the article before its appearance and were able to successfully challenge several pieces of misinformation peddled to him by industry opponents. I am also aware that several letters to the editor were sent in the wake of the article's publication. We're keeping watch and will pass those along.
Permit me a brief pep talk. To fully appreciate how valuable the work of the title industry is, just look a what happens when an independent third party is not present as a fiduciary to a transaction. Two respected professors outlined in a Wall Street Journal op-ed last week – “Why Toxic Assets Are So Hard to Clean Up,” – precisely what happens to a market (the derivatives market in this case) in which property transactions are not adequately recorded. We must never forget that markets function on trust, and when trust fails, markets fail. The title industry keeps the trust every day when we do a thorough search and quicly update the public records.
We gained a modest victory last week when House Financial Services Chairman Barney Frank announced the Committee would delay a vote on the controversial Consumer Financial Protection Agency (CFPA) until September. ALTA was joined by other trade associations in urging the Chairman to do just that (you can see the first letter "Industry Letter Opposing the inclusion of "Insurance" under the Consumer Financial Protection Agency" from July 15, 2009 here, and the second letter,"Multi-Industry Letter to Representative Frank and Representative Bachus asking for a delay in voting on H.R. 3126" from July 20, 2009 here), and we are continuing to make the case to Congress and the Administration that title insurance, as a state regulated industry, should not be included in the CFPA beyond the oversight already provided under RESPA.
At a hearing on Friday on the proposed CFPA, Treasury Secretary Geithner fessed up that there is, “a lot of dumb regulation in our country,” while Fed Chariman Bernanke, FDIC Chairman Bair, OCC Comptroller Dugan, OTS Acting Director Bowman and a state banking supervisor, and Secretary Geithner signaled that the administration would be willing to negotiate on the plan, which has frankly lost a lot of steam in the past month. Worth reading, the economist Robert Schiller questions how a CFPA could walk the fine line between consumer protection and stifling innovation. Richard Posner argues that we should restructure financial regulation thoughtfully, rather than rush to pass a CFPA immediately.
Fed Chairman Bernanke also waded into the debate big time over the CFPA last week arguing that, as an alternative to the CFPA, the Fed’s mandate to maintain stable prices and full employment be formally expanded to include consumer protection. He confronted Congress (Bernanke Jabs Back at Fed’s Critics in Congress and Bernanke Heads to Congress Battling Calls to Tame the Fed), spoke directly to the public (Taking Questions: Mr. Bernanke, Fed Chairman Opts for Televised Event to Explain Motives and Bernanke Feared a Second Great Depression: Taking His Cast to the People, Fed Chairman Defends Aggressive Actions to Stem Financial Crisis, Calls for Regulatory Overhaul) and reassured financial markets that the Fed will divest itself of purchases and lending it has made to restart the flow of credit in the last year. The guy clearly has guts. Remember, all of this activity comes as the President considers whether to reappoint Bernanke to a second term.
The Federal Reserve also announced last week new draft regulations for the Truth in Lending Act (TILA) which could have a significant impact on the title industry. Consider this quote: “And it wants to revise how the annual percentage rate, or APR, is calculated in disclosures to reflect several routine costs that are passed on from the lender to the borrower, such as title insurance. Fed Senior Counsel Kathleen Ryan said the change could lower costs for consumers by encouraging lenders to put downward pressure on such third-party fees .” These rules will go through a rulemaking process similar to the one which RESPA did last year, and ALTA will be examining them closely and providing comments and advocacy to the Fed as it draws up these new rules. Those of you serving on ALTA committees will see more information and a request for your feedback shortly.
This week, additional new rules take effect on TILA which have a less-direct impact on the title industry, but you should be aware of them. Check out these two articles from the Washington Post for additional information:
“New Rules Give Buyers More Protection At Closing” from Ken Harney.
“New Disclosure Rules Could Mean a Later Settlement” from Benny Kass.
With today’s headline that “Loans Shrink as Fear Lingers” and the headline “Commercial Loans Failing at Rapid Pace,” ALTA continues to be concerned about the effect of weak credit conditions on the commercial real estate industry. In response, we have joined other real estate trade organizations in urging congressional support for an extension of the Fed’s Term Asset-Backed Securities Lending Facility (TALF) through 2010. (It is due to expire at the end of 2009.) Fed Chairman Bernanke has indicated the Fed will be closely watching market conditions over the next several months before making a judgment on whether TALF should be extended. Click here to read the letter which we are asking Congress to sign.
Mortgage rates edged slightly up for the first time in a month to 5.2% on a 30-year fixed while mortgage applications rose 2.8 % last week according to the MBA (purchase applications rose 1.3% while refi applications moved up 4%). New home sales rose 11% in June from the previous month. That's the third month of increase in a row. When it is released tomorrow, the S&P/Case Shiller home price index for May is expected to be down sharply from a year ago but not as much as April, hinting again that we may finally be reaching the bottom. Home sales are all over the map as reported by the Wall Street Journal last week. Princeton economics professor and former vice chairman of the Fed, Alan Blinder, argues, “The Economy Has Hit Bottom.”
I am sending Justin Ailes to New York again this week to join NYSLTA at a meeting with the state’s insurance department on new draft title insurance regulations and then on to Florida next week to attend a meeting of that state’s Title Insurance Study Advisory Council.
We met last week with Treasury Assistant Secretary Michael Barr, Reps. Eric Cantor (R-VA), Ed Royce (R-CA), Aaron Shock (R-IL), Andre Carson (D-IN), and the offices of Representatives Bill Posey (R-FL) and Senate Banking Chairman Chris Dodd (D-CT).
Speaking of Chairman Chris Dodd – you may be interested in this profile which appeared in the Washington Post: “Dodd Looks to Distance Himself From Financial Firms.” As a follow up to the article last week about Citigroup Chairman Richard Parsons, a Sunday New York Times profile of JPMorgan Chase’s CEO Jamie Dimon portrays a well-connected executive who knows the pulse of Washington – something we all should strive to be, “In Washington, One Bank Chief Still Holds Sway.” Finally, Freddie Mac announced it has found its fourth CEO in year in Charles Haldeman, Jr.
I hope you find this ALTA Advocacy Update useful. Please email me if you have questions or comments.