AGENTconnect - Issue 12 | June 2016 by First American Title - Agency Division

AGENTconnect THE COLORADO AGENCY NEWSLETTER

Issue #12 | June 2016

INSURING LAND TRUSTS IN COLORADO By: Sandy Plaven, Senior Underwriter

Land trusts were created from Common Law Trusts which have been used for centuries to preserve and protect title to and minimize taxes on property. Various states have statutes that permit forms of land trusts, the most notable is Illinois. A land trust has been defined as: A trust arrangement under which a trustee holds both legal and equitable title to land for the benefit of beneficiaries of the land trust. The interest of the beneficiary of the trust is personal property, the beneficiary retains the power to direct the trustee, manage the property, and draw income from the trust.

Another challenge is that the trust agreement is a private document; beneficiaries can assign their interest to someone else and none of the trust documents need to be recorded. This, by its very nature, is contrary with the basis of our industry which is to determine ownership based on the public records.

A land trust has been defined as: A trust arrangement under which a trustee holds both legal and equitable title to land for the benefit of beneficiaries of the land trust.

Unlike other states, Colorado does not have statutes in place regarding land trusts that, among other things, govern their use and requirements for the trustees. Although not illegal in Colorado, it can be very challenging when asked to insure a transaction involving a land trust or several land trusts in the chain of title, since the intent of the land trust is to hide the true identity of the property owner.

When asked to insure this type of trust, the entire trust agreement must be reviewed. The ability to identify each beneficiary of the land trust by name, address and define his/her interest in the land trust, as well as the trustee, must be determined. Additional information, disclosing all written assignments of any beneficial interest in the trust, will be required from the trustee. Contact your local underwriter when asked to insure this type of transaction since approval is determined on a case-by-case basis.

The information contained in this document was prepared by First American Title Insurance Company (â&#x20AC;&#x153;FATICOâ&#x20AC;?) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice. Readers should not act upon this without seeking advice from professional advisers. First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates. AMD: 06/2016

TRAINING TIPS to Help Employees Spot Fraudulent Emails There are many steps title and settlement companies can take to thwart email schemes and potential account takeovers. To help prevent a business email compromise in particular, PricewaterhouseCoopers LLP, encourages companies to train employees to identify suspicious emails that could indicate the email is from a hacked or spoofed account. Title and settlement companies can combat account takeover attempts by enhancing authentication and payment controls as well as implementing automated fraud monitoring systems, PricewaterhouseCoopers said in a report. Tips to Train Employees • Carefully review email headers, domain names in the “from” field of the email, and the “reply-to” field of emails. For more suspicious emails, employers should review email headers using analyzer software. • Scrutinize links contained within emails by hovering over the link with the cursor to expose the associated web address. If a suspicious address is revealed, further authentication must be conducted. • Spot behavioral anomalies in payment requests received via email. These anomalies include requests received at odd hours, payments requested to an unusual person, international wires or unusual payment amounts. Many financial services firms are implementing additional controls—such as telephone call backs—to confirm authenticity of higher-risk transactions. PricewaterhouseCoopers also advises that companies test employees by simulating business email takeover and phishing attacks, and adjust training programs to address identified weaknesses.

First American Title | AGENTconnect | Issue #12 | June 2016

Page 2

Rate Manual – Did You Know?

HOLD OPEN TITLE INSURANCE POLICIES By: Bobbi Espinosa, Colorado Associate Underwriter

Are you aware of the First American Title Hold Open Rate regarding a sale with a commitment to insure a resale? This is a beneficial option to a purchaser who knows they will be selling the property again within 1-2 years, and can potentially save the owner on title insurance costs. This rate could be a good selling point to investors who fix and flip properties, but it is not a requirement to use the rate. Essentially, the initial purchase will be “held open” and there will be no Owner’s Policy issued at the time of initial conveyance. In lieu of policy issuance, the Hold Open Fee (25% of the basic rate of the purchase price) is charged. The 25% Hold Open Fee is paid in addition to the applicable rate for the Owner’s Policy premium. This is considered the “first half of the Hold Open Commitment”. Once the owner’s place the property back on the market and have a buyer, the premium for the “second half of the Hold Open Commitment” will be the difference between the basic rate of the first half and the second half hold open purchase prices.

Example: A purchaser is interested in a property in Denver County with a purchase price of $200,000.00. The basic rate would be $1,247.00. (This rate is also applicable to any reissue or builder rate.) The Hold Open Fee is determined by calculating 25% of the basic rate ($1,247.00 x .25 = $357.00). The charges reflected on the first half of the Hold Open Commitment would be $1604.00 ($1247.00 + $357.00). When the owner decides to sell, the second half of the Hold Open Commitment is produced. The property is selling for $300,000.00 and the basic rate for an Owner’s Policy would be $1,436.00. The difference between the premiums of each half will be the Owner’s Policy Premium ($1,436.00 - $1,247.00 = $189.00) and is subject to additional fees for owner’s extended coverage and/or endorsements. Once this transaction is closed, a final Owner’s Policy is issued. The First American Title Hold Open Rate is effective for one year and can be extended an additional year for a $50.00 charge (Two years total). If the property does not sell again within the time frame, a final Owner’s Policy will be issued to the initial purchaser. See Section E.5 of the Colorado Rate Manual for additional information.

July 4

Have a safe and happy

Our offices will be closed Monday, July 4, 2016.

First American Title | AGENTconnect | Issue #12 | June 2016

Page 3

AgentNet® Underwriting Request Feature Utilizing the Underwriting Request feature in AgentNet enables agents to simplify processes and streamline communication by submitting Over Underwriting Limit, Special Pricing, Mechanics’ Lien Risk and other unusual risks directly from AgentNet. Simplify Processes • Electronically submit requests for underwriting authorization and approval that are currently requested via phone, email or fax • Complete necessary forms, upload documents and provide transaction-specific details with your request

Streamline Communication • Ability to select your preferred underwriter and collaborate directly from your AgentNet file • View all data exchange and determinations stored in the file • Receive secure, encrypted email notifications regarding status of request

TO VIEW TRAINING VIDEOS AND GUIDES

First American Title | AGENTconnect | Issue #12 | June 2016

Page 4