Another year has come to a close and we hope that you and your teams have enjoyed a successful 2015. With the conclusion of the year, many of us can reflect on industry changes implemented during 2015. Whether addressing CFPB requirements, flood regulations, technology enhancements, or process improvements, I am proud of the focus our teams placed on improving operational excellence with our clients.
Throughout 2015, our CoreLogic Escrow Services Flood and Tax teams worked diligently to enhance and optimize our services to accommodate industry volumes. In 2014, our tax operations team made over $112B in payments directly to the taxing agencies. In 2015, tax payments trended slightly over 2014 volumes. In our flood group, we processed over 8.5M orders in 2014 and exceeded that number for 2015.
In the area of innovation, we also continued our focus and collaborated with other CoreLogic teams to identify and create new solutions. To provide added value for our clients, these new tools are leveraging some of the most comprehensive datasets available. Recently, the CoreLogic Advisory Services team built a unique solution combining various data components and workflows into a single solution that helps financial institutions determine and calculate flood insurance adequacy. The Flood Insurance Coverage Analysis solution is an example of our continued commitment to provide new and innovative solutions to our lending and servicing clients to help optimize risk mitigation efforts. You can read more about the new offering in our featured story below.
Throughout 2016, we expect to continue our focus on innovation and process improvements. By partnering with business units across CoreLogic, our teams will be positioned to help your organization benefit through the broader use of data, technologies and services.
In the area of industry trends, CoreLogic data research teams continue to compile and analyze mortgage data. Our economists recently released the Q3 2015 Equity Report. According to the report, approximately 4.1 million mortgage residential properties still have negative equity as of Q3 of 2015. And, the national aggregate value of homes in negative equity was $301B for Q3. Additionally, the Loan-to-Value ratios for Q3 were comparable to Q2 2015.
Source: CoreLogic, Inc., Q3, 2015
For additional research and data, be sure to visit the CoreLogic research page here.
CoreLogic appreciates your business and we look forward to continued success with you and your team in 2016.
Senior Vice President, CoreLogic Escrow Services
Flood Insurance Coverage Analysis
For lenders and servicers, determining the appropriate flood insurance coverage can be a challenge due to valuation uncertainty. Not having complete or current valuation information can quickly lead to cases of over-insurance or under-insurance; neither is a desired outcome from a customer experience, risk management or compliance perspective.
The Flood Insurance Coverage Analysis (FICA) offered by the CoreLogic Advisory Services team leverages our unique property-level insights to help support clients' compliance efforts under federal flood insurance regulations and related guidance. This automated solution combines Marshall & Swift data with Advisory Services Lien and Credit data and then leverages our MindBox decision engine tool to increase efficiencies and help our clients make better decisions about their flood risk.
The FICA report will support lenders and servicers with various flood risk related efforts, including:
- Compliance with the Flood Disaster Protection Act (FDPA) - Lenders and servicers must comply with minimum coverage requirements on designated loans.
- Documentation - Demonstrating compliance requires documenting the data supporting the flood insurance adequacy calculation with clarity and consistency.
- Efficiency - By combining sourcing of data elements and operations into one activity, clients can optimize production and risk mitigation processes.
- Examinations - In anticipation of or in response to a regulatory or internal audit and/or the cleanup of purchased portfolios, clients can utilize the Flood Insurance Coverage Analysis report to identify areas of risk or exposure.
- Junior Lien Coverage Considerations - The Flood Insurance Coverage Analysis considers superior liens in its calculation of flood insurance adequacy consistent with requirements under the FDPA.
- Leverage the Lien Report to determine first lien balance when in second position, either to perform a flood insurance adequacy calculation or to determine the need to offer an escrow account.
- Access replacement cost values - Lenders and services can use the Flood Insurance Coverage Analysis tool to help provide the latest replacement cost values.
For more information about Flood Insurance Coverage Analysis, please contact us or call 866.774.3282. If you are planning to attend the upcoming 2016 MBA Servicing Conference in Orlando, Feb 16 - 19, be sure to connect with us there as well to learn more about the new service.
Upcoming Flood Map Revisions
As your Life of Loan service provider, CoreLogic recognizes the impact of flood map revisions on your loan portfolios and the importance of timely information related to them. In addition to these highlights of upcoming map revisions, we hope you regularly refer to our Risk Map Updates where we maintain a list by map revision date of recent map revisions and those scheduled as much as six months in the future.
Over 200 communities across the country are scheduled to receive new FEMA flood maps in the first few months of 2016. These include:
- Los Angeles County, California – January 6
- Austin, Texas – January 6
- St. Charles, Missouri – January 20
- Chattanooga, Tennessee – February 3
- Rockford, Illinois – February 17
- Montgomery County, Pennsylvania – March 2
- Gadsden, Alabama – March 16
Some of these communities are only being revised partially. Although 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. CoreLogic is prepared to rapidly and effectively handle the upcoming map revision volume, and clients that have opted into the Life of Loan service will receive appropriate notices based on their portfolio within these updated areas.
We trust this advance information assists you in preparing for map changes that may affect your portfolio and customers. As always, feel free to contact us at 1-800-447-1772 with any questions regarding upcoming map changes or with any other flood related inquiries.
Revised EC Available
Last week FEMA announced the approval and availability of the revised Elevation Certificate and Flood-Proofing Certificate forms. The new expiration date of the forms is November 30, 2018.
FEMA and NFIP Updates
FEMA's latest Policy on Standards for Flood Risk Analysis and Mapping was issued on November 30, 2015. The Policy provides the standards for FEMA's flood mapping and Risk MAP activities, and is updated as the standards are maintained on a semi-annual basis. The Policy includes mapping elements pursuant to the requirements of BW 12 and which may require implementation in coordination with the Technical Mapping Advisory Council (TMAC). Regarding TMAC, their most recent meeting was held last month, and meeting agendas and summary notes can be found through FEMA's webpage on TMAC as the information becomes available. The web page also provides information about TMAC reports and recommendations, with two interim reports recently issued for 2015: one containing TMAC's general recommendations for FEMA's flood mapping program and one specific to TMAC's recommendations for FEMA's development of future conditions flood risk information, both as required by BW 12. A prepublication copy of another report required by BW 12 (as amended by HFIAA) was also released in December. "The Affordability of NFIP Premiums: Report 2" follows the release of Report 1 earlier in 2015 and suggests certain approaches that FEMA could utilize in evaluating affordability options.
Community Rating System at 25
In 1990 the National Flood Insurance Program implemented the Community Rating System (CRS) as a means of recognizing and rewarding communities which administer floodplain management activities that exceed FEMA's minimum standards with NFIP flood insurance discounts to its residents. Community participation is voluntary, but any community meeting minimum NFIP floodplain management standards may apply to join. Once accepted, the community is awarded points based on its undertakings in all or some of the 19 public information and floodplain management activities. Then based upon the number of points earned, a community is placed into one of 10 CRS class strata which correspond to flood insurance premium discounts on properties in the SFHA of between 5% for a class rating of 9 and 45% for a class rating of 1. Currently, the city of Roseville, California is the only community to hold an impressive CRS class rating of 1.
Twenty-five years later, the CRS program is helping nearly 3.8 million policy-holders save on their NFIP flood insurance premiums. In the recent era of increasing premiums resulting from Biggert-Waters and HFIAA changes, CRS discounts can be a significant help to property owners. Communities responding to local concerns about flood insurance costs may wish to consider the benefits of the CRS which, for a quarter century, has a proven record of better flood mitigation and lower insurance costs.
New Escrow Requirements in Effect
For many, the new year brings new requirements for closing loans on residential properties in the Special Flood Hazard Area (SFHA). As you are aware, as part of the Joint Final Rule released by the federal regulatory lending agencies, beginning on January 1, 2016, loans made, increased, renewed or extended on properties in the SFHA where flood insurance is available through the NFIP must have an escrow account in place to pay for flood insurance premiums and fees with the same frequency as loan payments are made. This change, brought about by Section 100209 of BW 12 and subsequently amended by Section 25 of HFIAA, modifies the long-standing escrow requirement for these loans that had required escrow for flood insurance if escrow was in place for other purposes such as hazard insurance and property taxes.
As outlined during a webinar hosted by the Regulators last Fall, the new escrow requirement does not apply to the following—(i) loans secured by residential real estate if extension of credit is primarily for business, commercial or agricultural purposes, (ii) loans in subordinate position to a senior lien, (iii) property covered by a flood insurance policy such as through a condominium or homeowners association (e.g. RCBAP), (iv) home equity line of credit, (v) non-performing loan, or (vi) loan with a term not longer than 12 months. Notably, a loan previously exempt from this escrow requirement at the time of closing may subsequently be subject to it if conditions change, such as if a lender learns that a previous subordinate lien is now in the primary position or if a condominium association drops its RCBAP. For more information, consider the transcript of the flood insurance webinar including the Regulators' responses to questions.
The new escrow requirement does not apply to lending institutions that qualify as a small lender under the regulations, meaning that the lender has total assets of less than $1 billion as of December 31 in either of the two prior calendar years and before July 6, 2012 the lender was not required under Federal or State law to escrow taxes or insurance for the term of the loan nor had a policy to consistently and uniformly require an escrow account to be established. The lender must continue to qualify under the $1 billion asset limit year after year in order to continue to receive an exception from the escrow requirement.
In order to notify borrowers about the new requirement, the regulations require language in the Notice to Borrower in Special Flood Hazards to inform borrowers that the lender may be required under federal law to escrow flood insurance premiums and fees. Within the Joint Final Rule is a new sample version of the Notice to Borrower (appearing in Appendix A of the regulations) which includes the escrow language. As a reminder, lenders must use a new version of the Notice to Borrower for loans made, increased, renewed or extended on or after January 1. The escrow language in the new sample notice appears flexible enough to permit the same version of the Notice to Borrower to be utilized for all loans even if the new requirement does not currently apply.
The regulations require a new disclosure to be provided to borrowers of loans outstanding as of January 1 informing these borrowers of the option to escrow flood insurance premiums and fees, even if not required. This "option to escrow" notice must be provided by June 30, 2016 and a sample version of this notice is available as Appendix B in the new regulations.
Questions have arisen about the applicability of the new escrow requirement to existing loans on properties that are impacted by FEMA's flood map changes. In the preamble to the Joint Final Rule, the Regulators indicate that re-mapping is not a triggering event under the regulations, thus the re-mapping event itself does not necessarily subject a loan to the new escrow requirement. For example, if as of December 31, 2015 a loan is outstanding and is secured by a property not within the SFHA, and later on March 2, 2016 FEMA revises the community's flood map and the property is now within the SFHA, if nothing else occurs with respect to the loan which triggers the escrow requirement under the regulations then the new escrow requirement would not apply. In this scenario, however, the new "option to escrow" notice might be applicable.
With the January 1 implementation, each of the regulatory changes set forth in the Joint Final Rule is now in effect. We might expect the agencies to publish additional resources and guidance as a result. For example, last month the FDIC announced a revision to their Compliance Examination Manual including the section on flood insurance. Later in the month, the FCA released a memorandum on private flood insurance announcing the limited suspension of enforcement actions, under certain conditions, against Farm Credit System Institutions which accept private flood insurance as satisfaction of the mandatory purchase requirement pursuant to BW 12. While new regulations related to private flood insurance are not part of the Joint Final Rule, the regulators have indicated that this topic will be covered in future rulemaking. As a reminder, clients can monitor the implementation of the various requirements of BW 12 through our Guide to BW 12 (see blue banner "Guide to BW 12"). To obtain a password to our Guide, or for additional information related to the topics in this article, contact our Compliance Department .
Finally, as with any regulatory change, consult with your Compliance or Legal department, or your regulator, regarding this change and its impact on your business, policies, processes, training, and forms.
National Property Tax Delinquency Declining
In a recent post on the CoreLogic Insights Blog, you can read about the trend in property tax delinquencies. The following excerpt from Matt Cannon, director analytics, provides an overview of where property tax delinquencies may be headed. To view the full article, be sure to visit the blog posting here.
Real estate taxes in the United States are assessed by various taxing authorities and are generally based on the value of the property, including the land. The taxes may include county, city, town, borough, school or a special assessment, such as a Municipal Utility District (MUD) tax. Different locations can have different types of property taxes. Homeowners with a mortgage typically pay property taxes in one of two ways: the property owner can make payments into an escrow account throughout the year with the funds in the account being used to pay the taxes when due; or, with a non-escrow account, a homeowner pays the taxes directly to the taxing agencies.
Property tax delinquency is an important issue for mortgage lenders and servicers who need to track and pay taxes in a timely manner. Mortgage servicers need to disburse taxes to the taxing authorities on escrowed loans from borrowers' escrow accounts. For non-escrowed loans, mortgage servicers directly monitor delinquent taxes and may request proof of payments from borrowers. Tax delinquency due to servicer/borrower neglect can result in penalties to the servicer/borrower. More importantly, tax agencies have the option of foreclosing on a property if tax delinquency is not addressed within a pre-specified time window set by each local area. In the foreclosure process, tax liens usually have a higher lien priority than mortgage liens. Furthermore, since property tax payments are often correlated with mortgage payments, property tax delinquency may be associated with an increased risk of future mortgage delinquency. Unpaid property taxes could indicate that borrowers are struggling financially even if mortgage payments are paid on time. Similarly, mortgage delinquency may foreshadow property tax delinquency.
Delinquent Property Tax Data and the Importance of Accuracy
Property tax delinquencies are always an important factor to consider when monitoring portfolio risk. While delinquent property taxes represent a significant challenge for lenders and investors, the TaxWatch® solution from CoreLogic can help provide additional insight into tax delinquencies.
Tax status monitoring of your loan portfolio is critical to successful delinquency management. The TaxWatch solution provides tools to help mitigate the risk associated with home equity loans and loans in default or foreclosure. Additionally, TaxWatch optimizes your due diligence process by identifying risk due to delinquent real estate property taxes in portfolios targeted for sale or acquisition.
With TaxWatch, servicers can:
- Identify and monitor tax delinquency risk quickly and accurately
- Improve decision making to minimize penalties and collateral losses
- Increase workflow productivity
- Enhance GSE compliance
- Prioritize work queues
CoreLogic has built a database of more than 148 million parcels, which is routinely updated to include recent payments and new delinquencies. Flexible access options enable your teams to obtain data through a one-time periodic match, batch process, or interactive query via web portal. With TaxWatch you can:
- Track tax payment status on:
- Loans in first lien position on a periodic basis
- Second liens which may have moved into a first lien position
- Single property or via batch mode for loan portfolios
- Review the status of real estate property taxes on loans moving into default
- Review the tax status on loan portfolios for sales and acquisitions
- Anticipate default through predictive tools
To learn more about the TaxWatch solution, click here.
In early January, the Housing and Insurance Subcommittee of the House Financial Services Committee is holding two hearings related to flood insurance. "Opportunities and Challenges Facing the NFIP" was held Tuesday morning on January 12. "How to Create a More Robust and Private Flood Insurance Marketplace" will be held Wednesday morning on January 13.
In response to the handling of flood insurance policy claims after Hurricane Sandy, the "Flood Insurance Transparency and Accountability Act of 2015" (HR 4107/S 2324) was introduced in November of 2015 and would require that any flood insurance claims-related reports and documents be provided to the NFIP insured prior to other parties and be certified by the preparer to contain no alterations. Also included in the legislation are provisions that would require FEMA to conduct an annual review of companies contracted with WYOs, modify the timeline for claimants to institute legal action against FEMA or WYOs for denied claims, provide a direct point of contact in the NFIP Flood Insurance Advocate's office for policyholders to discuss claim denials and appeals, and prevent denial of a claim based on the earth movement exclusion of the SFIP.
At the state level, South Carolina House bill 4495 related to flood insurance requirements was introduced last month. If enacted it would allow flood insurance to not be maintained by property owners (who otherwise may be required to carry it) if the property is not affected by a flooding event where a state of emergency is declared. The provision would apply retroactively for two years. As state legislatures convene for the new year, we will continue monitoring for legislative activity and proposals related to flood insurance.
Legislatures in two states remained in their respective 2015 regular session as we crossed in to 2016; Massachusetts and New Jersey. The New Jersey Legislature is currently recessed and is scheduled to adjourn its 2015 regular session on January 11, 2016; ending year two of its 2014-2015 session. Any New Jersey bills in play from 2014 or 2015 and not passed prior to the 2015 adjournment, will terminate upon adjournment. New Jersey will commence its 2016-2017 session January 13, 2016. Massachusetts, on the other hand, is one of 25 state legislatures along with DC and Congress in the midst of a 2015-2016 dual year run. In these 25 states any bills introduced in 2015 and not acted upon in the 2015 regular session will carry over to the 2016 regular session. Massachusetts' 2015 regular session adjourned on January 5 and its 2016 regular session began the next day. Thirty-one (31) additional states are scheduled to convene their 2016 regular session beginning in January. A majority of state legislatures (36 in all) were conducting interim committee meetings as 2015 ended. Twenty-four (24) states are actively pre-filing bills for their respective 2016 legislative sessions. North Dakota and Texas are not scheduled to meet in regular session in 2016. Virginia (along with New Jersey) begins a 2016-2017 dual year legislative term.
There was no legislative activity of significance to the tax service reported during December in those states remaining in active session for 2015.
The following table summarizes the remaining Legislative Alerts published in the Weekly Tax Bulletin through December.
||WTB Alert / Update Date(s)
||In committee (15-16 carryover bill)
||HOA Limited Priority Lien
||In committee (14-15 carry over bill ; set to expire)
||Local Tax Enabling Act
||In committee (15-16 carryover bill)
If no action is taken for New Jersey S175/A477 prior to the end of the NJ Legislature's 2015 Regular Session, the measure will expire. The Massachusetts and Pennsylvania bills will carry over to 2016 along with the bills in the table following.
Deferred Bills / Carryovers to 2016 (Alerts previously removed from WTB)
||WTB Alert / Update Date(s)
||Deferred in committee to 2016
||Out of session; will carry over to 2016
||3rd Party Lien Assignment
||Out of session; will carry over to 2016
||3rd Party Lien Assignment
||Out of session; will carry over to 2016
||Expedited Foreclosure of Vacant Property
||Measure held in committee for further study
As committee activity resumes in the upcoming 2016 sessions and these deferred bills are once again considered, alerts will be republished in the WTB should there be any further activity of significance to report.
Lien Priority bills (PACE and HOA Super-Lien bills) along with Lien Assignment and Abandoned/Blighted Property Accelerated Foreclosure bills continued to trend as hot legislative topics this past year; though a relative few actually advanced to any point of consequence in the 2015 sessions. In fact there was little legislative activity of impact to the tax service passing in 2015. Perhaps with so many states set to convene year-two of a 2015/2016 legislative term, we may begin to see some of these carry-over bills being actively considered in 2016.
A bill was introduced to amend Michigan's 2010 PACE Act, currently limited to Commercial/Industrial PACE. H.B. 5116 proposes to authorize participation by residential property owners and eliminate requirement for mortgagee consent. The bill was introduced December 3, 2015 and referred to the House Committee on Energy Policy. Though this bill was introduced very late in Michigan's 2015 Regular Session, it automatically carries over to the 2016 Regular Session; year two of Michigan's current two year (15-16) legislative term. Michigan's 2016 Regular Session begins January 13th.
Another bill of potential consequence that we will be watching closely in 2016 is Pennsylvania's H. B. 1482, a potentially impacting bill that could have implications to the collection of school taxes in the state. Although there has been no action taken since its introduction in August 2015, the bill carries over to 2016. Similar property tax elimination measures have been floated in Pennsylvania over the last several years without success. And while this bill's predecessor (2013's House 1189) did ultimately pass the House, it failed to gain traction in the Senate. We will continue to monitor this bill closely as the 2016 session gets underway and will report any further activity of significance.
We continue to actively monitor these and any other potentially impacting bills as the 2016 regular sessions begin. Please continue to monitor the "Legislative Updates" section at the beginning of the Weekly Tax Bulletin document.
Tax Regional Service Centers
CoreLogic Tax Service operates three Regional Service Centers (RSCs). Tax offices may contact any of our centers listed below to learn how process automation with CoreLogic can help reduce costs and improve operational efficiency:
- Western Region – includes Alaska, Hawaii, and Guam.
Westlake, Texas: 800.225.4707
- Central Region – includes Puerto Rico and Virgin Islands
Elgin, Illinois: 800.969.9620
St. Petersburg, Florida: 800.969.4829
- Eastern Region
Rochester, New York: 800.969.8787
Exton, Pennsylvania: 800.229.3477
Note the California CoreLogic Field Operations Tax Office is moving from Concord to Oakland. If you have any questions, please feel free to contact our Customer Service team at WesternCustomerService@corelogic.com or 800.225.4707.
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 understand that both the Standard Flood Hazard Determination Form and FEMA's Elevation Certificate have expired and that FEMA has not yet posted new forms. Why do these forms have expiration dates, and what do we do until FEMA issues new ones?
A: These federal forms, approved for official use, have expirations dates to ensure that FEMA periodically reviews the content for accuracy, applicability and currency. After a new form is drafted and submitted for public comment, the Office of Management and Budget (OMB) reviews it to make sure it is consistent with applicable regulations, policies and budget considerations before a final version is issued.
Because the entire process can take time, a form may expire before the updated version is released. In such cases, FEMA will issue guidance. As we noted in a prior Industry Alert, FEMA, via its website, has directed continued use of the Standard Flood Hazard Determination Form (Exp. May 30, 2015) until such time that the new form is released. As noted above FEMA has recently made the new version of the Elevation Certificate available.
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 do property tax exemptions impact the accuracy of Good Faith Estimates (GFEs) in the closing process?
A: The topic of property tax exemptions may seem simple. Sometimes, however, the subject is the cause of confusion during the loan origination process. As a borrower applies for a loan, the lender will typically query property tax data to obtain estimates required for closing cost calculations. In many cases, one or more exemptions may be part of the available tax data procured from one or more sources.
In addition to exemptions based on homestead, senior citizen, military veteran and disabled status, some areas may also provide exemptions covering renovations or energy incentives. Local jurisdictions may also have additional considerations. For example, per Proposition 13 in California past tax amounts may limit impact to future tax amounts; therefore, it is important to check the status of all available exemptions and other considerations on a given parcel.
Because a previous owner may qualify for one set of exemptions and the new owner may not, lenders should procure accurate and complete property tax data to ensure a comprehensive view of estimated closing costs. Failure to incorporate accurate tax data into the closing may negatively impact the borrower experience.
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.
This communication is for informational purposes and is not intended to (nor does it) provide legal advice.
The information herein should not be used or relied upon in regard to any particular facts or circumstances
without first consulting a qualified legal professional.
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