In addition to the leading tax and flood services we provide at CoreLogic®, our clients also rely on us to anticipate and adapt to trends and issues impacting the marketplace. This spring, our teams have been keeping an eye on important legislative issues that could impact your organization. There has been a recent surge of legislative activity regarding homeowner associations in super lien states and the impact delinquencies can have on servicing operations. While tax delinquencies are an important barometer of servicing risk, other complexities regarding lien priorities are beginning to emerge. You can read more about these important developments in our Legislative Updates section of this newsletter. And, our Featured Article in this issue will also touch on unprecedented state legislative activity regarding flood insurance.
Source: LEHC and CoreLogic, The Market Pulse, Feb. 2015.
In Q4 of 2014, the Mortgage Bankers Association forecasted a seven percent increase in mortgage originations, rising to $1.19 trillion. In the February issue of the CoreLogic MarketPulse report, our economists also reported continued traction. Between Q4 2013 and Q4 2014, new residential orders for seven selected homebuilders increased 16 percent, up from a four percent decline a year ago, and the trend continued into January for several builders. In the report, our economists state they expect home prices will rise by an additional five percent over the next twelve months.
As the market begins to swing back toward some volume improvement, our Flood and Tax teams continue to implement process enhancements in an effort to accommodate the current needs of our clients. And, with the completion of our data center migration and further implementation of our technology and automation initiatives, we are well positioned to help our clients scale. I am optimistic about the outlook for the remainder of 2015 and we look forward to working with your teams to ensure a successful outcome this year.
As always, we appreciate your continued businesses and look forward to working with you in the months ahead.
Senior Vice President, CoreLogic Escrow Services
Unprecedented State Legislative Activity
Regarding Flood Insurance
The National Flood Insurance Program (NFIP) is a federal program and the mandatory purchase of flood insurance requirement is a federal law governing lending institutions, therefore, reforms historically come through the U.S. Congress and are not expected to occur in individual state legislatures. The consumer impact of the BW 12 flood insurance premium increases and the concerns raised over Storm Sandy flood insurance claims has brought the focus of state legislatures onto the flood program. Activity, which included last year’s passage of the Massachusetts bill limiting the amount of flood insurance a lender may require on residential mortgage loans, continues in various state legislatures.
In Connecticut, Senate Bill 678 would prohibit mortgage lenders from requiring flood insurance on a property if the property is not within the SFHA or for which a LOMA has been issued. Introduced in Massachusetts this year, House bill 810 would require the state insurance commissioner to perform a bi-annual study of NFIP insurance rates for certain purposes while House bill 814 includes a provision that would designate an Assistant Attorney General to scrutinize the methodology used to promulgate new FEMA flood maps.
New York Assembly bill 5638 and companion Senate bill 4222 were introduced last month and would create the New York Flood Insurance Association, a state-run underwriting association of state-approved insurers to provide an alternative to NFIP and private flood insurance coverage. Also proposed in New York, Assembly bill 2241 would require insurers insuring property in the floodplain to make available homeowners insurance coverage for wave damage, and Assembly bill 4435 contains provisions that would require insurers to provide a disclosure with homeowners insurance policies that includes the flood zone and associated level of risk, and to provide an updated disclosure if the flood zone changes.
Florida Senate bill 1094 passed both the state Senate and House last week and expands upon legislation enacted last year (Senate bill 542) to encourage private market flood insurance options in the state. Among other things, the current legislation would allow private insurers to provide a flexible flood insurance coverage option for personal lines residential policies and, if applicable, to obtain certification from the Office of Insurance Regulation that a flood policy or endorsement issued by the insurer equals or exceeds coverage offered by the NFIP.
In Pennsylvania, House bill 1029 was introduced last week and would establish a state “Flood Insurance Premium Assistance Program” through an agreement with FEMA to provide a 15 percent discount on NFIP flood insurance policies for state residents and businesses.
While it is not clear how many of these proposals may become law, this activity indicates the increased interest in flood insurance from consumers and their legislative representatives. You may wish to consider whether or not the provisions of these state bills and proposals may impact your business processes, and consult with your Compliance or Legal departments as appropriate. If you are interested in additional information or discussion related to the topics in this article, please feel free to contact our Compliance Department via email.
Comment Period Open for FFRMS Guidelines
Since the President issued Executive Order 13690 earlier this year, FEMA has been conducting public listening sessions throughout the country and is accepting public comments until May 6 to gain input (as required by EO 13690) on proposed revised guidelines for federal agencies to implement a new Federal Flood Risk Management Standard (FFRMS). Subsequent to the issuance of final guidelines, it is expected that federal agencies will amend their floodplain management rules and regulations based on the FFRMS.
EO 13690 amends existing floodplain management requirements for federal agencies by raising the flood protection standards on federally funded projects. The intent of such standards is to protect federal assets from the risk of flooding while ensuring that federal agencies mitigate against adversely impacting existing floodplains. Prior to the FFRMS, the standard was based upon the “one percent or greater chance of flooding in any given year,” or as it is also referred to, the 100-year flood or the base flood. With the issuance of EO 13690 and the FFRMS, a new standard is established that provides a flexible approach for federal agencies in defining a floodplain relative to any federal actions taken in the floodplain. Federal agencies will now be required to define the floodplain as the elevation and flood hazard area that result from using a climate-informed science approach, the elevation and flood hazard area that result from using a 2-3 foot freeboard value added to the base flood elevation, or the area subject to flooding by the 0.2 percent annual chance flood.
EO 13690 does not amend existing flood insurance requirements or standards under the NFIP although some are concerned about possible impact. Section 4 directs federal agencies (e.g. FHA, VA, FDIC), which guarantee or regulate financial transactions related to activity in the Special Flood Hazard Area, to inform private parties of the hazards associated with buildings in the SFHA. We encourage you to review the FFRMS to determine if it may impact your business processes and if providing feedback to FEMA during the comment period is appropriate.
Notable Upcoming Map Revisions:
Over 300 communities across the country are scheduled to receive updated FEMA flood maps throughout the summer of 2015. Some of the more notable communities scheduled to receive new flood maps include:
- Kane County, IL – June 2 (Chicago suburbs)
- Little Rock, AR – July 6
- Norfolk County, MA – July 16 (Boston suburbs)
- Clay County, MO – August 3 (Kansas City suburbs)
- Portsmouth, VA – August 3
Some of these communities are only being revised partially. CoreLogic clients who opt for Life of Loan service will receive appropriate notices based on their portfolio with us in these population areas. While some properties may require additional research by our trained staff, most notifications should be sent within a few days from the new effective map dates. You can download our Risk Map Updates document to view a list of communities to receive flood map revisions in the coming weeks.
As FEMA continues to implement various outreach efforts related to flood mapping, your customers may receive letters from FEMA or otherwise be made aware of ongoing mapping activity in their communities. Most recently, many property owners in New York City whose properties are shown in or nearby a Special Flood Hazard Area according to preliminary flood maps received letters directly from FEMA about these changes and the proper avenue for comment and appeals.
We trust this advance information helps you as you prepare for map changes that may impact your portfolio and your customers. As always, feel free to contact us at 1-800-447-1772 with any questions on upcoming map changes or with other flood related inquiries.
CoreLogic Preparing to Deliver LOMA/LOMR Case Number
The current version of the Standard Flood Hazard Determination Form (FEMA Form 086-0-32) is set to expire on May 30, 2015. While the new form has yet to be finalized, CoreLogic is preparing to be able to deliver the LOMA/LOMR case number, which is expected to be a new data requirement.
Thus, once the new version of the form becomes effective and we make it available, you will receive both the LOMA/LOMR date and case number on properties for which a LOMA/LOMR applies. With our extensive library of FEMA Letters of Map Change, we are strongly positioned to deliver these data. As you consider the transition to the new version of the form, consider whether there are system or business process impacts of receiving the LOMA/LOMR case number.
We hope to hear from FEMA soon in terms of the new version of the form and anticipate there will be a transition period for lenders to move to the new version.
If you have any questions in the meantime, please feel free to contact our Compliance Department.
CoreLogic Insights Blog: When First Doesn’t Really Mean First
Source: CoreLogic, 2015.
Third-party lenders may add additional considerations when managing risk in today’s servicing environment. In the event that a homeowner defaults on his or her mortgage loan and the home is to be sold, who would be first in line to receive funds? Some would expect the first-lien holder to be first but this may not necessarily be true. In some states like Texas and Nevada, others may legally be able to jump to the front of the line in the foreclosure process, bumping even first-lien mortgage holders. One such example is third-party property tax lenders.
“Understanding the risk in one’s portfolio in the affected states will enhance forecasting and provide a deeper understanding of a portfolio,” said Teik Francis, VP II, Tax Operations.
CoreLogic leverages a unique Tax Delinquency Scorecard to help clients manage risk. The scorecard ranks borrowers based on their likelihood of tax delinquency over a six-month timeframe. “By flagging potential issues ahead of time, servicers are better able to take preemptive actions to manage risk,” Francis added.
To read the complete blog posting, visit the CoreLogic Insights blog here.
New SMARTWeb® Login Area
On May 3, 2015, the SMARTWeb login page will receive an update in an effort to align the layout of the start page with other CoreLogic applications. While the SMARTWeb functionality users currently have today will remain the same, the login area is being streamlined to provide an enhanced user experience.
SMARTWeb information, such as FAQs and contact info, will be easily accessed from the main corelogic.com website. And, the URL will be unchanged. Users will continue to access SMARTWeb at https://smartweb.corelogic.com.
If you have any questions concerning this upcoming change, please call our toll-free support center at 866.440.7449.
HOA Super-Lien Challenges and Solutions
As described in our Legislative Updates section below, our compliance team has been monitoring the status of bills related to Homeowner Association (HOA) Super Liens. As you may be aware, this is a complex and ever changing component of managing risk.
According to the Community Associations Institute, the estimated number of community associations in 2015 is between 336,000 and 338,000. The table at right illustrates the significant growth of community associations during the last several decades.
The National and State Statistical Review for 2014 also estimated a $4.95 trillion dollar value of homes in community associations. Collected homeowner assessments in 2014 totaled approximately $70 billion. Like unpaid property taxes, the potential for unpaid HOA dues can present significant risk to a servicing portfolio, especially in certain states. To help our clients manage this growing challenge, our product development teams have been working to build new risk mitigation solutions such as our HOA Super Lien Check solution which helps identify properties that are part of an HOA and also located in super lien states.
Once identified, HOA Super Lien Check leverages CoreLogic industry-leading databases and sophisticated APN matching technology to match the specific property address to the HOA or Management Company. Quality control is conducted on the data and contact information for accuracy against the subject property address.
For more information about the HOA Super Lien Check solution, visit our site here.
Subpoenas and Code Violations
From time to time, CoreLogic receives subpoenas and code violation notices as CoreLogic is listed in the tax records of many properties due to its role in the facilitation of tax payments. The issuers of these subpoenas and code violations may mistakenly assume CoreLogic is a lien holder or servicer.
To simplify the efficient handling of these documents, CoreLogic will identify the name of the appropriate customer in response to subpoenas and code violations that are misdirected to CoreLogic. These documents are appropriately directed to and handled by the mortgage servicers pursuant to their established processes. Because these documents usually indicate an issue with the servicer’s borrower (i.e. he/she is being pursued for unpaid taxes or other debts) or with the property (i.e. the property is abandoned and in disrepair), our customers generally want to be made aware of these instances in order to work together with the issuers to resolve in a timely manner.
Last month, appropriations legislation was enacted (HR 240) to fund the Department of Homeland Security through the remainder of fiscal year 2015, with funding made available for FEMA and certain activities of the NFIP.
In news related to FEMA and the NFIP, TMAC convened in March and will be holding their fourth in-person meeting on May 12-13, and FEMA released a fact sheet on the Interim Office of the Flood Insurance Advocate to provide information about the capabilities of this office until it is permanently staffed. Consideration of future appropriations for FEMA and NFIP-related activities is already underway, as the Homeland Security Subcommittees of both the Senate and House Committees on Appropriations held budget hearings recently regarding FEMA’s budget request for fiscal year 2016.
Legislative tracking and monitoring activity for the Tax Service remained at elevated levels through March and April with most states remaining in active legislative session. Alabama and Florida convened in early March and Louisiana convened its 2015 legislative session April 13. Numerous states have already adjourned their 2015 regular sessions sine die, meaning that those states are not expected to reconvene their regular session this year; those states are Arizona, Georgia, Kentucky, Mississippi, New Mexico, South Dakota, Utah, Virginia, West Virginia and Wyoming. Georgia is the only one of these states in a dual-year (15-16) session, meaning that any bills not acted upon in the 2015 regular session can carry-over to their 2016 regular session. Virginia reconvened for a veto session on April 15. In all, 38 states, DC and Congress remain in regular session, including the three states currently in recess. The states of Alaska, Maryland, Montana and North Dakota are projecting sine die adjournment dates later in April.
During March, and through April 3, we alerted clients to the introduction of numerous residential PACE bills. Additionally, we updated numerous bills previously alerted via the Weekly Tax Bulletin (WTB). Clients have been alerted to a total of fifteen bills via the WTB thus far this session as represented in the summary table below.
In last month’s report we alerted to numerous bills that had been introduced thus far in the 2015 legislative sessions that proposed to implement variations of amendments enacted in July 2014 to the Uniform Common Interest Ownership Act to affirm in these jurisdictions that a properly foreclosed HOA lien rightfully extinguishes a first mortgage lien or first deed of trust. Of the six bills being tracked to date, our Tax Compliance teams reported that Mississippi House Bill 1183, New Hampshire House Bill 157 and Washington Senate Bill 5263 had been defeated. We have now additionally confirmed that Tennessee’s Senate Bill 405 and House Bill 610 have been deferred in committee until 2016, and West Virginia House Bill 2430 had failed to advance prior to that state’s 2015 legislative session adjourning sine die on March 18.
While these bills may seek to codify the “super-priority” lien ruling filed September 18, 2014 by the Nevada Supreme Court, there appears to be some momentum toward countering the effects of this ruling. We reported previously that a Fannie Mae and FHFA joint complaint sought a determination that a HOA’s foreclosure sale is invalid and contrary to federal law to the extent that it purports to extinguish Fannie Mae's property rights. And while a favorable ruling in that case would only affect and protect GSE-backed loans while Fannie Mae and Freddie Mac remain in FHFA conservatorship, we have since learned of a new bill, Nevada Senate Bill 306 introduced on March 16, that could potentially serve to mitigate risk not only for GSE-backed loans, but for conventional mortgages as well. If passed as introduced, this bill would seek to mitigate mortgagee risk resulting from the aforementioned Nevada Supreme Court’s lien priority decision. While not removing the HOA super lien priority outright, the bill in its politically palatable introduced version, would place a cap on the amount of costs to be included in the super lien, extensively revise provisions relating to the notice of the HOA’s intended foreclosure that must be given to the mortgage lenders/servicers who hold a recorded security interest on the property in question, and also provide a limited right of redemption for mortgage lien holders following HOA foreclosure. This bill is the product of discussions between numerous Nevada stakeholder groups, including the MBA and NMLA (Nevada Mortgage Lenders Association). The bill is scheduled for hearings in April.
The remaining lien assignment bills that CoreLogic is currently tracking are the New York Assembly bills (1966 & 2686), which are a reiteration of failed measures from previous sessions and have seen no further movement since their January introduction.
Last month we reported on favorable legislation introduced in Texas this session where Senate Bill 525 proposed favorable amendments regarding notice requirements as it relates to owner-initiated tax lien transfers. Another bill, Texas House Bill 3222, introduced March 11, 2015, provides for further positive change to lien assignment law in Texas. This bill proposes to subordinate a transferred tax lien to a pre-existing first mortgage lien. This would impact tax liens assigned to a transferee after the effective date of this bill if passed.
You may wish to consider whether or not the provisions of these state bills and proposals might impact your business processes, and consult with your Compliance or Legal departments as appropriate.
Q: I heard that the Preferred Risk Policy Eligibility Extension (“PRPEE”) is no longer an option for properties newly mapped into a Special Flood Hazard Area (“SFHA”). Will property owners and insureds now have to pay full actuarial rates?
A: As part of FEMA’s implementation of HFIAA, PRPEE is being replaced with Newly Mapped In rating procedures. Effective April 1, 2015, new procedures have been put in place for properties newly mapped into the SFHA on revised flood maps. Under the new procedures a new or renewal policy on a building newly mapped in a SFHA is charged the Preferred Risk Policy rate for the first year. After the first year, the rate will begin to transition to full risk rates with an increase of no more than 18% per year in accordance with HFIAA. FEMA has issued this fact sheet to help insureds and agents understand the new program. As with the PRPEE, CoreLogic provides mapping data to assist WYO insurance companies and their vendors with identifying properties newly mapped in the SFHA as part of the Newly Mapped In rating process.
If you have a question for Ask the Flood Expert that you believe would benefit the lending or insurance community through response in this quarterly publication, please send us an email. All questions will receive a response regardless of whether or not they are published.
Q: How are Property Tax Redemption Reports used?
A: Redemption reporting services help users quickly and accurately determine the status of real estate tax payments on properties and the payment information required to resolve a delinquency and/or tax sale. The redemption reports contain all applicable property tax data for each parcel searched. Delinquent years, bill types, penalty, interest and payee information are typically obtained as part of the service.
If you have a question for Ask the Tax Expert that you believe would benefit the lending community through response in this quarterly publication, please submit by email. All questions will receive a response regardless of whether or not they are published.
Feel free to forward this newsletter to any colleagues you think will find it informative. However, any other reproduction of, or modifications to, any part of this newsletter is strictly prohibited without the prior written consent of CoreLogic.
If you have any questions or comments regarding this newsletter, please call us at (800) 447-1772
or email us here. To learn more about CoreLogic visit us at corelogic.com.
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