Volume 1 Issue 6| August 2019
WIRE FRAUD IS REAL!

Are you a title agent? A real estate attorney? A real estate broker or agent? A homebuyer or mortgage borrower? If yes, it is our hope that you do not need to read this article. Everyone is talking about wire fraud; if you have been listening, you know that wire fraud is real, and that you must think before you wire, and take steps to make sure that you do not become a victim yourself or a participant in a transaction where wire fraud occurs.

If you are a real estate professional, you have already heard some of the stories. The internet is full of them. The FBI is having some success in coordinated efforts with the Department of Justice, Department of Homeland Security, Department of the Treasury, and the Postal Inspection Service, but their efforts are barely scratching the surface. Between October 2013 and May 2019, the FBI has attributed more than $12 billion in domestic and international losses to business e-mail compromise schemes. If you have not already taken steps to protect yourself, you may very well be a part of the statistics for next year.

The Consumer Financial Protection Bureau has outlined steps you can take to protect yourself and your clients. It has gotten a lot more complicated than that e-mail from the Nigerian Prince. We know everyone is talking about it. We at CATIC Title lend our voice to the conversation in the hope that all real estate professionals, our agents, attorneys, and friends recognize that wire fraud is real.
FROM THE TRENCHES: AUGUST 2019

The agent received the seller’s closing docs on Friday at 10 AM. The closing was scheduled for noon. The e-mail from the seller’s attorney noted that a power of attorney would be used. The agent followed his instincts and forwarded the documents to us for review. “I generally do not like accepting deeds with a POA,” he said. He also said the sellers were out of the country.

As with all questions we hear, we don’t jump to conclusions. We know that there is a greater likelihood that a title claim may result when documents are signed under a power of attorney, but not every POA is a problem. The good POAs are as easy to spot as the bad ones, if you know what you are looking for.

The Revised Durable Power of Attorney Act has all of the rules. It is critically important that the power of attorney be good and valid because a title insurance policy specifically insures against a deed or mortgage being executed under a falsified, expired, or otherwise invalid power of attorney. The first question is always, do the facts make sense? Why is the POA being used? Is the transaction in the best interests of the principal? Answers to these questions can help avoid claims questions should someone seek to set aside the deed.

Short notice of the use of a POA should always raise a red flag; you should also determine the relationship between the principal and the agent. Is the attorney-in-fact a close family member, or a stranger, possibly with an interest in the transaction? Does it appear to be an arm’s length sale for value to a BFP, or a sale for what appears to be less than reasonably equivalent value? Have we verified that the people we are dealing with are, in fact, who they say they are? Is there any question as to the propriety of the transaction, the documents, or the people? Not proceeding to close would be the right answer.

But here, everything looked good! We were looking at an arm’s length sale to a BFP. The attorney-in-fact was the brother/brother-in-law of the sellers whose travel plans made them unavailable AND we are dealing with both a buyer’s attorney and a seller’s attorney, both of whom are sensitive to and on top of the POA issues. Once we reviewed the POA to make certain it was recordable, our only requirement was the use of a Power of Attorney Affidavit which should always be signed by the attorney-in-fact and retained in the agent’s file.

This deal closed at noon that Friday and we heard that the buyers moved in over the weekend. It feels so good when CATIC Title, our agents, and our NJ attorneys collaborate in a transaction’s best interests! Maybe YOU have a question FROM THE TRENCHES that will show up in a future issue of The Courier?
Feds Address Access to Financial Services
by Legitimate Cannabis-Related Businesses

The short title of the bill before the 116 th Congress is the “Secure and Fair Enforcement Banking Act of 2019,” or the “SAFE Banking Act of 2019.” The chief purpose of the bill, pending before the House of Representatives as H.R. 1595 and the Senate as S. 1200 , is to provide banking and financial services access to legitimate cannabis-related businesses. By creating a safe harbor for dealings with these state legal entities, the chilling effect of the conflicts between state and federal laws would continue its thaw. 

Since federal law criminalizes cannabis, entities that conduct business with cannabis-related legitimate businesses are handling the proceeds of criminal activity. As such they are exposed to federal criminal and civil risks under money laundering, racketeering, and other laws. This proposal provides a carve-out from 18 USC 1956 (laundering of financial instruments) and 18 USC 1957 (engaging in monetary transactions derived from unlawful activities) for handling cannabis-related business proceeds, either directly or indirectly. 

Insurance companies are specifically named in section 4 of the bill, in addition to banks and other financial institutions. The proposed legislation goes on to say that neither the company, nor the officers, directors, or employees of financial service providers, may be held liable under federal law or regulation for providing financial services to a cannabis-related legitimate business or service provider. 

Much has been written about the title insurance issues when insuring lands used for the cultivation, distribution, or sale of cannabis products. Should the SAFE Banking Act of 2019 become law, the need to take exception for the consequences of the conflicts between state and federal law may no longer exist. CATIC Title agents involved in transactions pertaining to existing or planned cannabis-related business activities should contact the state office to assist in determining present terms of insurability.  

FHA Eases Path to American Dream

The Federal Housing Administration has issued revised guidelines for FHA-insured mortgages on single-family condominium units. Anyone involved in the real estate settlement industry has experienced the difficulties associated with the requirements of the past. The new rules, which take effect October 15, 2019, are expected to qualify an estimated 20,000 to 60,000 more condo units for FHA financing.

An article in HousingWire reported on this FHA action, and quoted Department of Housing and Urban Development Secretary Ben Carson. In a phone call with reporters, he stated: 

“FHA is publishing a new rule in the Federal Register that we believe will offer significantly more options for individuals and families to buy a home, specifically the kind of home more and more people are looking for in order to achieve homeownership, and of course that is a condominium.” He added that the new rules “will open many doors to buyers who have been waiting on the sidelines, waiting to become homeowners, waiting to share in the American Dream.”

Any government action that increases and enhances the ability to buy and sell homes is certainly good news for the title industry!
A gents Funding Through Attorneys?
Don’t Wait Until Closing!

By now, everyone knows that CATIC Title is a Bar-Related ® title insurance underwriter. Here in New Jersey, we continue the CATIC tradition of honoring, fostering, and always seeking to enable attorney and real estate professional involvement in the real estate process. If you are a CATIC Title agent who works with NJ Attorneys who fund their closing transactions, we invite you to get them on the CATIC Title NJ Approved List before the lender requests the Closing Protection Letter.

The process is simple. Either the Agent or the Attorney can request attorney approval by completing a simple form. A copy of the declaration page of the attorney’s liability insurance is the only formal requirement. Please visit the Approved Attorney page on our website for more information.
About The CATIC Title Courier

The CATIC Title Courier is published monthly by the New Jersey State Office of CATIC Title Insurance Company. The Courier is intended to provide interesting, relevant, and informative articles and information to our agents, attorneys, agent prospects, industry partners, and our other CATIC Title friends. You are receiving this monthly newsletter because we believe you fall into one of these categories. CATIC Title agents who wish to add their attorney applicants or others in their offices to our list of recipients should send an e-mail request to LydiaBell@CaticTitle.com . 

The CATIC Title School of Continuing Education is now licensed as an approved insurance education provider by the New Jersey Department of Banking and Insurance, pursuant to NJAC 11:17-3.1(a). We will be announcing the scheduling of our first CE and CLE educational seminar in our September issue of the CATIC Title Courier. 

You can rely on CATIC Title for monthly updates on changes in the law, court decisions of interest, NJDOBI news and Rate Manual or form changes, interesting underwriting issues, and articles about relevant topics that give you something to think about. 

We hope you enjoy the August 2019 edition of The CATIC Title Courier: Different news and information from a different kind of title underwriter. Comments, feedback, or suggestions for future content are welcome! See what full-time title agent and attorney support looks like!