A 2009 ruling in favor of National Real Estate Information Services Inc. (NREIS) in an unauthorized practice of law case brought by the Real Estate Bar Association for Massachusetts Inc. (REBA) has been vacated by the First Circuit Court of Appeals.

According to the June 21 order to vacate, the appeals court said it would let the Massachusetts Supreme Judicial Court decide what constitutes the practice of law in the state encompassing all the interconnected activities of a real estate conveyance and the issuance of title insurance, and whether or not non-attorneys can conduct “witness” or “notary” closings. The appeals court said the district court construed the sparse state case law and declared the practices at issue did not constitute the unauthorized practice of law.

This decision will impact who can capture title insurance premiums in Massachusetts. Last year, $198 million in title premiums were generated in the state.

In 2009, United States District Judge Joseph L. Tauro entered an order of summary judgment in favor of NREIS, enjoining REBA from enforcing its interpretation of the practice of law.

In the court’s decision, Tauro agreed with NREIS’ position that the definition of the practice of law as set forth by REBA was a violation of the Dormant Commerce Clause of the United States Constitution. The order to vacate also reverses the district court’s decision on NREIS’s dormant Commerce Clause counterclaim. NREIS claimed that requiring attorneys to conduct closings was an unconstitutional restraint on trade that would result in higher closing costs.

REBA had filed the original lawsuit in 2006 in an attempt to restrict the provision of title, settlement and closing services by Massachusetts attorneys only. The decision marked the first time a Federal District Court has ruled on the issue of unauthorized practice of law as it relates to settlement services.

Background

According to court documents, REBA has a history of attempting to curtail what it calls “witness” or “notary” real estate closings, in which all of the documents required to complete a real estate transaction are compiled by nonlawyer third parties and an attorney only witnesses the closing of the transaction.

REBA believes that the essential tasks involved in a real estate transaction are an “interconnected series of activities that must be performed in order to convey the various legal interests in … real estate,” and each of the activities must be overseen, if not personally conducted, by an attorney. REBA’s position is that some mechanical tasks, such as creating title abstracts, may be delegated to nonattorneys, so long as “the lawyer maintains a direct relationship with the client, supervises the delegated work, and has responsibility for the work product.” REBA also alleges that the issuing of title insurance policies is the practice of law because title insurance policies are issued based on the examination and legal analysis of the seller’s legal title in the property, which REBA asserts must be conducted by an attorney.

Consistent with its views, REBA has opposed bills in the legislature that would formally recognize witness closings in Massachusetts and has tried to persuade affiliated bar associations to petition the SJC to adopt, through rulemaking, REBA’s own definition of the practice of law into the Massachusetts Rules of Professional Conduct. REBA also filed and won two lawsuits in 1993 and 2001 in Massachusetts Superior Court to enjoin local companies, not run by lawyers, from providing real estate settlement services.

NREIS, a Pittsburg-based vendor management company, provides real estate closing services and acts as a title insurance agent in Massachusetts. In helping to coordinate a real estate closing, NREIS, at the lender’s request, may provide any of the following services in Massachusetts: (1) obtaining valuations of a property and third-party reports such as tax certifications and flood reports; (2) obtaining title searches from a third-party vendor; (3) drafting the settlement statement; (4) scheduling the closing with a Massachusetts attorney who will attend and transmitting the lender’s documents to that attorney for the closing; (5) disbursing settlement funds, held by NREIS in its own bank account until the mortgage has been executed by a borrower; and (6) ensuring that the transaction documents were completed properly and properly recorded. NREIS describes these activities as administrative and not legal.

According to court documents, the title search is conducted by a third-party vendor under contract to NREIS. One of those companies, Connelly Title, itself does not employ any lawyers and purports only to provide title abstracting services and no legal analysis. NREIS does not conduct its own review of the title abstract provided by Connelly Title.

When a lender-customer requests that NREIS provide a deed for a transaction, NREIS contracts with another third-party vendor, a Las Vegas-based company. That company is not a law firm.

As to the closings themselves, NREIS schedules the closing to be attended by a Massachusetts attorney, selected from a list it maintains of around seventy-four lawyers. Before the closing, NREIS sends the relevant documents to the attorney. NREIS does not provide any instructions as to how the attorney should conduct the closing.

NREIS also acts as a title insurance agent on its transactions when requested. When acting as an agent, NREIS does not review the status of the real estate title. It prepares the title insurance policy based on a title abstract provided by a third-party vendor, simply copying the contents of the abstract into the policy documents. NREIS issues polices for several companies that write title insurance in Massachusetts, including Stewart Title, First American, Ticor Title and Old Republic.

From ALTA http://www.alta.org/news

Massachusetts privacy law requires businesses to implement security controls to protect systems containing Massachusetts resident’s personal information from data loss. 

What is Mass 201 CMR 17? 

In an effort to protect Massachusetts residents from the rising incidence of fraud and identity theft from data loss, the State of Massachusetts has implemented aggressive regulatory requirements to protect personal information. The state now requires mandatory compliance with 201 CMR 17.00 – Standards for the Protection of Personal Information of Residents of the Commonwealth (also known as just 201 CMR 17, or the Massachusetts Privacy Law). Building on California’s landmark security regulation SB-1386, Massachusetts Privacy Law establishes a minimum standard to be met for the protection of Massachusetts resident’s personal information (PI) contained in both paper and electronic records. For the purpose of being compliant with the new Massachusetts data privacy law, PI is defined as a resident’s first name and last name or first initial and last name in combination with any one or more of the following data elements that relate to the resident: 

• Social Security number;
• Driver’s license number or Massachusetts identification card number;
• Financial account number, or credit or debit card number, with or without any required security code, access code, personal identification number or password that would permit access to a resident’s financial account; or
• A biometric indicator (finger prints, DNA, voice prints, etc.).

The Massachusetts data privacy law has set a new level in state security laws by regulating both private and public sector entities that handle Massachusetts resident’s sensitive data, regardless of where that entity is located. The law is intended to bring entities into alignment with both federal and industry security laws, including the Safeguards Rule under the Gramm-Leach-Bliley Act (GLBA) enforced by the Federal Trade Commission (FTC) and Payment Card Industry Data Security Standards (PCI-DSS) security standards overseen by the PCI Security Standards Council. Its process and technical controls are aimed at preventing criminal activity from causing data breaches of either paper or electronic records containing PI. The requirement of securing electronic records includes PI on databases, laptops, applications, portable devices, and just about any other system in which electronic PI data can be either in transit or at rest. 

Who needs Mass 201 CMR 17? 

All persons, corporations, associations, partnerships or other legal entities with systems containing Massachusetts resident’s personal information in transit or at rest are responsible for complying with the 201 CMR 17 regulations by March 1, 2010. However, the regulations alsor equire businesses to complete internal and external security risk assessments prior to the effective date. The regulation applies regardless of whether the entities or the data is either inside or outside state borders, and applies equally to private and public sector organizations. 

Penalties for non-compliance 

The penalties for non-compliance with 201 CMR 17 are enforced through Massachusetts General Law Title XV: Regulation of Trade, chapter 93A, section 4. Violators may be faced with a civil penalty of $5,000 for each violation, are required to pay the reasonable costs of investigation and litigation of such violation (including reasonable attorney’s fees), and are subject to additional civil action since 201 CMR 17 creates a baseline standard that allows plaintiffs in civil suits to argue that a business that lost data was negligent. Title XV also requires any data breach be reported to both the Office of Consumer Affairs and Business Regulation (OCABR) and the Attorney General. 

What you need to be Mass 201 CMR 17 compliant 

The new Massachusetts Privacy Law requires the following criteria be met: 

• An internal and external risk assessment of the human, physical, technical environment based on the criteria outlined in 201 CMR 17.
• the computer security provisions in the regulation use a risk-based approach that comply to the extent that it is technically feasible, meaning that reasonable means must be used to accomplish a required result if there is a reasonable technology is available.
• the results of the internal and external risk assessments must be documented in a Written Comprehensive Information Security Program (WISP).
• the scope of the WISP must be reviewed at least on an annual basis or whenever there is a change in business practices that may impact security controls.

The OCABR published the 201 CMR 17 Compliance Checklist as an aid to be used by either organizations themselves or their auditors when conducting their risk assessment. However, additional guidance on how and where to submit risk assessment results is expected from the state prior to the March 2010 deadline. 

Reference:  http://www.mass.gov/Eoca/docs/idtheft/compliance_checklist.pdf 

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The index is not as comprehensive as formal housing reports like new home sales or MBA mortgage applications, the index is more like a supplemental indicator for predicting housing trends.

The NAHB Housing Market Index is used to provide general insight to where the housing market is heading. Because new home sales reflect ‘big ticket’ items that require construction and investment, the housing market is often considered an indicator of the direction of the economy as a whole. Growth in the housing market usually means subsequent spending, generating demand for goods and services and the employees who provide them.

Initial claims for unemployment benefits fell by 22,000 to a seasonally adjusted 432,000 in the week ended December 26.

Jeffrey Gitomer is an off the wall, real world speaker and writer and an expert in sales and marketing. I follow his “rants” regularly and occassionaly I am compelled to share his take.