Agency Today – A Magazine About Growth and Prosperity™

AGENCY

TODAY

Issue 4 | May 2016

A M AGA ZIN E A BOUT GROW TH A N D PROSPER IT Y

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KEEP CALM AND BE CYBER SECURE BAD DEEDS MANAGING THIRD-PARTY RISK FIRPTA QUESTIONS ANSWERED COMPLIANCE: THE NEW MARKETING BEST PRACTICES TRAINING

AGENCY

TODAY

A M AG A Z I N E A BOU T GROW T H A N D PROSPE R I T Y

TM

Welcome Agency Today is a publication covering a broad range of topics focused exclusively on growing and strengthening your title business. First American Title is committed to providing you valuable content, new ideas and access to the brightest minds in our business.

We believe that in an age where so much can be lost in the digital interference of email, attachments and the internet that a well-crafted and thoughtful publication dedicated to your success is a great way to communicate our commitment to the independent title agent.

It is our hope this magazine finds a home in your collection of reference materials. We commitment to not only help you resolve everyday challenges but to help you achieve new levels of success in your business.

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Agency Today | Issue 4

CONTENTS FROM THE EDITOR On behalf of all of us at First American Title, thank you for your business and loyalty. It is with great pleasure we bring you the fourth edition of Agency Today—A Magazine About Growth and Prosperity™ produced exclusively for policy-issuing agents of First American Title.

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MESSAGE FROM THE DIVISION PRESIDENT

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FIRST AMERICAN: FINANCIAL STRENGTH

The focus of the magazine is to provide articles that help you “work on” your businesses rather than “work in” your businesses. We hope you enjoy this publication, but more importantly, we hope it provides value to further enhance your organization.

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All the best, Louis Pontani SVP, SALES AND MARKETING AGENCY DIVISION

AGENCY TODAY STAFF EDITORIAL Louis Pontani EDITOR IN CHIEF SVP, SALES AND MARKETING

Lynn Lewis EDITOR/LEAD COPYWRITER

ART AND DESIGN Sheli Cordero DIRECTOR, MARKETING & COMMUNICATIONS GRAPHIC DESIGNER

SMS ADVERTISING Elizabeth Sarber FAPRES/SMS

Agency Today - A Magazine About Growth and Prosperity™, published by First American Title Insurance Company.

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Evan M. Zanic, Esquire, Executive Vice President, Agency Division President

EXECUTIVE SPOTLIGHT

Shabnam Jalakian, Vice President, Chief Information Security Officer First American Financial Corporation

COMPLIANCE: THE NEW MARKETING By: Lou Pontani, Senior Vice President, Sales and Marketing, Agency Division, First American Title

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AGENTNET® AUTOMATIC POLICY REPORTING

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BAD DEEDS

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By: John Hollenbeck, Executive Vice President, First American Title

TOP 10 QUESTIONS ABOUT FIRPTA By: Wade Wallace, Underwriting Counsel, First American Title and Jennifer Bloodworth, Senior Underwriting Counsel, First American Title

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KEEP CALM AND BE CYBER SECURE

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MANAGING THIRD-PARTY RISK

25

FINCEN GEOGRAPHIC TARGETING ORDERS

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UNDERSTANDING THE ALTA SETTLEMENT STATEMENT

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STATE OF HOMEOWNERSHIP RESOURCE PAGE AND WHITEPAPER

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BEST PRACTICES TRAINING

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By: Michele A. Green, SVP, Senior Business Counsel-Agency Division

OCC BULLETIN 2013-29

By: Mark Fleming, Chief Economist, First American Financial Corporation

First American Eagle Academy®

AGENT SPOTLIGHTS Security Title of Davis County, Inc. Leading Edge Title Facey Goss & McPhee P.C.

Best Homes Title Agency, LLC Boston National Title Agency, LLC Title Mark, LLC

First American appreciates the articles contributed by independent vendors and the statements contained therein are solely those of the vendor and are not attributable to First American.

Agency Today | Issue 4

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Message from the

Division President I would like to thank our policy-issuing agents for their support and patronage in 2015. It was a great year, and 2016 is shaping up to be a great year as well. Two years ago, we set out on a journey that reorganized First American Title into customer channels rather than geographic channels.

Today, we have one Division and one leadership team united to serve one customer, our independent title and settlement agents. Over the course of my yearly travels, I have heard from many of you and the message conveyed is resounding similar, “First American Title Agency Division is closer to the customer.� Closer to the customer means better understanding of your needs, better service and better relationships, all of which is great for our business and yours.

In keeping with our focus on the customer experience, I recently made some internal changes that are not readily transparent to our customers but are worth noting. At the beginning of 2016, I expanded our senior leadership team in order to reduce the maximum number of states per regional leader from 15 to 5. Having fewer states under management by our senior leaders will allow us to continue to evolve and serve you, as well as increase our pace of execution.

The strategy for the year ahead is simple: create tools and processes for our people to consistently go above and beyond for our title agents, and do it faster than our competitors. We will continue to deliver value and service so that we can strengthen your trust and relationship with us. All of us in the First American Title Agency Division look forward to growing with you as our industry enters a new era of great promise and exciting opportunity.

Thank you for your business.

Today, we have one Division and one leadership team united to serve one customer, our independent title and settlement agents.

Thank you,

Evan M. Zanic, Esquire 4

Agency Today | Issue 4

Evan M. Zanic, Esquire Executive Vice President Agency Division President

CASH:

$1.0 BILLION

$4.8 BILLION

Billions

INVESTMENTS:

$5.2B

$5.2

$4.8B

REVENUE CAGR: 6.3%

$4.2 $3.8B INVESTMENTS CAGR: 12.6%

$3.2 $2.6B

$2.2

2011

2012

2013

2014

Agency Today | Issue 4

2015

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Executive Spotlight

SHABNAM JALAKIAN VP, CHIEF INFORMATION SECURITY OFFICER FIRST AMERICAN FINANCIAL CORPORATION

Shabnam Jalakian serves as Chief Information Security Off cer for First American Financial Corporation. A security and technology professional with over 20 years of experience, she has held executive positions in the f nancial services, consulting, banking and insurance f elds. Her areas of expertise include cyber security, information security, physical security, risk management, privacy and compliance. Shabnam graduated from the University of California -Irvine with a Bachelor of Science in biological sciences and holds a master’s degree in forensic sciences.

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Agency Today | Issue 4

Q

How did you get into the f eld of information security?

A

I started my career in f nancial services, specif cally in banking and investment management, and subsequently spent nine years in information technology and security consulting with Deloitte & Touche prior to joining First American.

Q

What are your other passions outside the f eld of information security?

A

I love watching hockey and I am a serious Anaheim Ducks fan! We have been Season Pass Holders for the Anaheim Ducks for 20 years. My family also loves to ski and we travel every year to a different ski destination. My 12-year-old son plays hockey and my 9-year-old son plays baseball; we spend our Saturdays between the hockey rink and the baseball f eld.

Q

What do you want to achieve in your new role at First American?

A

I want to further enhance the partnership between Information Security and various business units and Divisions. This cooperation will lend itself to not only keep First American and its assets and information secure, but also help drive more strategic value and increase revenue streams, as a direct result of better security practices.

Q

How have the Know Before You Owe regulations impacted the scope of your work?

A

The new regulations have intensif ed the regulatory compliance activities and efforts in IT and information security. The Corporate Information Security Off ce acts as liaison to any entity that audits any part of technology in the enterprise. We have seen a major uptick in auditing activities from regulators and also from our lender customers.

Q

What security strategies does First American have in place to ensure information assets and technologies are protected?

A

First American has established a formal information security program, led by the Corporate Information Security off ce, to continuously oversee and strengthen our security and privacy practices. This is accomplished by implementing fundamentally sound security policies as well as repeatable processes, bestof-breed technology solutions, and regular awareness training. Our off ce chairs an enterprise-wide Information Security Council, which consists of Information Security Off cers and coordinators designated within each of First American’s business segments and key departments such as IT, Human Resources, Legal,

and Audit. The Information Security Council provides guidance to the business segments within the First American family of companies to ensure the consistent and appropriate implementation of the security program.

The objective of information security is to support the business and maximize stakeholder benef t while protecting the information assets of both the Company and its customers. First American def nes information security as a program with various elements designed to ensure the continuous availability of business, to minimize the impact of security incidents on the business, and to prevent their occurrence altogether.

Security is also seen as a business “enabler” – permitting and encouraging the secure sharing of information.

Q

Many industry forecasts are suggesting there will be increasing breeches in security which may affect agents’ banking and escrow accounts. What steps do you recommend for an agent to mitigate risks and threats?

A

Implementing the requirements of the Pillar 3 of ALTA Best Practices would be a great starting point, and continuous enforcement and ref nement of a formal security program and associated user awareness are key in enhancing security for any agent.

Q

In today’s marketplace, security is viewed as essential to business growth and success. What challenges do you face and what challenges do you feel our agents face in maintaining the privacy and security of conf dential information?

A

In order to stay competitive, most companies want to be able to deliver their products and services faster and with more eff ciency; there are many emerging technologies, such as the Cloud, that hold much promise in this regard. However, with increasing regulatory scrutiny and everevolving security threats, we need to be vigilant in protecting conf dential information trusted to our care, as well as conf dential information that is proprietary to us. Balancing the need to move and deliver faster with doing so securely is what distinguishes companies with longevity from those that are most at risk of a serious breach.

Q

What career accomplishments are you most proud of?

A

I am the most proud of the professional relationships I have been able to form. These relationships are the very fabric of success in any position.

Agency Today | Issue 4

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Compliance: The

New Marketing By: Lou Pontani, SVP, Sales and Marketing-Agency Division

Business as usual, is unusual. The landscape has changed and success in this new environment requires f exibility, adaptability and a shift in the focus of marketing efforts to generate and maintain business.

Prior to the implementation of Know Before You Owe (aka TRID) and depending on your local real estate customs, the real estate agent was probably the predominant source of referrals to title agents and attorneys. Post October 3rd, the balance of power is shifting as a result of recent industry changes, which means the lender is now a much stronger voice in the residential real estate transaction.

By: Lou Pontani SVP, Sales and Marketing Agency Division First American Title

In 2015, I had the opportunity to engage in discussions with lenders. Based on those conversations and experiences, there is no question that our industry has changed and is still changing.

The new landscape has elevated the lender in residential real estate transactions due to the intricacies of the TRID forms, the increased need for collaboration between settlement agents and lenders, and the CFPB placing the responsibility on lenders to ensure every aspect of a mortgage transaction, including the services of third-party providers, is compliant with state and federal consumer f nancial protection laws.

We have heard things like, “follow ALTA Best Practices,” and “get ALTA Best Practices certif ed.” We’ve also seen instances of lenders using Agent Performance Scorecards to monitor actual transaction performance.

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Agency Today | Issue 4

For years, many of us have crafted our marketing to gain business from real estate agents and brokers. The messaging used in daily conversations, print materials, and digital mediums rarely spoke to the needs of the lender.

While each lender may be asking for different things, they are generally trying to satisfy the same f ve basic needs. I call these needs the FIVE Ps: 1.

2.

Performance Process

3.

4.

Professionalism Protection

5.

Proof

They want your company to perform at the level they desire, in a protected environment, with staff that is properly licensed and trained, and in some cases, they want third-party verif cation to support your claims that you are able to deliver all this.

Compliance is the new marketing.

OPPORTUNITIES TO ADD CONTENT The new landscape has created opportunities for you to make changes in your messaging and add completely new content to differentiate yourself from the competition. When creating website and social media content, marketing brochures and f yers, educational seminars and even your elevator pitch, it’s increasingly important to emphasize elements you might take for granted, but are of critical signif cance to lenders and consumers, such as: • • • • • •

Cyber Security Facility Security Employee Training Processes for Protecting NPI Hiring Processes/Background Checks ALTA Best Practices Certif cation

Consider repositioning your talk tracks to be less about me and more about them. Now, more than ever, What you do and Why you do it are features that will resonate with lenders and consumers. To give you some ideas, we took content we found in the marketplace and rewrote in this new style. You must, of course, be sure the representations you make are accurate!

Old Talk

New Talk

With off ces conveniently located in ____, ____ and ____, we Our convenient off ce locations are equipped with state-of-thehave been in business for decades. art technology and processes designed to protect customers’ non-public personal information.

We are committed to making your real estate transaction as In addition to being local experts, our seasoned staff is committed stress-free as possible. to stress-free operational excellence. We recently received our ALTA Best Practices Certif cation with an independent review of our policies and procedures from XYZ, CPA. We are local experts, formed by a group of highly experienced Our internal wire desk and funding processes have been vetted real estate lawyers and processing personnel. The aim is to and verif ed by a third-party CPA. provide quality real estate title services at reasonable fees to select customers, brokers, and lenders.

Carefully review the messaging in your marketing materials. Everyone loves a good story, but they seldom will take the time to search through paragraphs of company history to see if you are qualif ed to meet their needs. Make sure you are speaking to your customers, and not at your customers, by addressing the items of most importance to them.

As a settlement agent for the owner, our number one priority is protection: 1. Protecting your property ownership rights using an Owner’s Policy of Title Insurance 2. Protecting and safeguarding your privacy and non-public personal information, and; 3. Protecting the lender for your benef t by fulf lling their regulatory and compliance standards.

Agency Today | Issue 4

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Compliance: The New Marketing (continued) Cyber security and identity theft are two of the most prevalent threats in our industry and in our country today. Are you addressing these concerns with potential customers? It’s crucial you let them know you are vigilant about securing their personal information; by providing examples of the measures used to safeguard their transaction. Consider adding a web page dedicated to consumer protection and security. You may f nd it comes in handy as lenders feel their way through this new regulatory environment.

ARE YOU ALTA BEST PRACTICES CERTIFIED? For those of you who have achieved ALTA Best Practices Certif cation consider creating a customized Best Practices logo or seal for your f rm. The seal should include the date the certif cation was performed and the words ALTA Best Practices Certif ed. Create or update the logo each year as you go through the certif cation process. An easily-identif able seal will grab the attention of lenders and customers. You will f nd the logo or seal may be used across multiple mediums including print, email, and the Internet.

PACKAGING YOUR CONTENT There is no guarantee that if you build it, they will come. One of the most effective ways to garner attention is the use of a tagline or teaser to create urgency or a sense of not being in the know.

• • •

Top f ve risks commonly missed by lenders when working with a title agent Five must-know facts for selling real estate after October 3, 2015 Top three things a lender must know about their title agents

These types of attention-getters can be used to drive content and messaging; more importantly, while they are effective in content posting, they should also be part of your talk tracks with lenders and real estate agents.

In the new regulatory landscape, settlement agents will need to market themselves as compliant and trusted service providers.

Agents who understand the needs and wants of lenders, and successfully address their concerns, should be well-positioned to gain a competitive advantage in the marketplace.

AgentNet® Automatic Policy Reporting The convenient Auto-Reporting feature in AgentNet allows agents to automatically submit policy data, minimizing manual data entry and reduce reporting lag times.

One-Time Setup • Apply preferences to entire f rm or individual off ces • Report by f le daily, weekly, bi-monthly or monthly • Set how many days from policy date to report • Pay for single or multiple orders at the same time • Create custom distribution list for email notif cations Benef ts • Automates reporting process • Minimizes manual data entry • Identif es and holds f les for your review • Real-time tracking of open and closed inventory • Agents using Rates & Fees integration can report policies without leaving their system • Assists agents with ALTA Best Practice #5 regarding policy reporting and premium remittance

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Agency Today | Issue 4

One-time setup of reporting preferences from the Administration > Manage Auto-Reporting area in AgentNet. For more information, contact your local First American Title account representative.

O N E

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©2016 First American Professional Real Estate Services, Inc. and/or its afÿ liates. All rights reserved.

Agency Today | Issue 4

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The 2016 Baseball Season begins April 3, 2016 and runs thru October 2, 2016. The crack of the bat, the thrill of a home run, and the rousing rendition of Take Me Out to The Ball Game in the Seventh Inning Stretch are a few of the elements which make America’s pastime home to some of the most loyal fans in the sporting world.

John Hollenbeck is one of those fans … a Los Angeles Angels fan to be exact. “I love baseball. It’s such a complex game of skill, strategy, statistics, economics, emotion, instincts, communication and teamwork. It’s also fun.”

According to Coach Jim Dugan in A League of Their Own, “There’s no crying in baseball”; however in baseball and in title insurance, be on the lookout for the curve ball!

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Agency Today | Issue 4

Once upon a time,

By: John Hollenbeck, NTP Executive Vice President First American Title 2015-2016 ALTA President

in a land far away, Little Boy Derris was busy learning about right and wrong— good deeds and bad deeds—and the rewards and consequences attached thereto. Apparently he was a poor learner. By the time the little boy barely reached adulthood, he was convicted of robbery, according to a San Diego Tribune news account.

Later in life, at the ripe old age of 44, Little Boy Derris decided to steal a baseball stadium—Petco Park in San Diego, home of the San Diego Padres. (I can’t help but make the point that, as with Chuck Norris, the Los Angeles Angels could never be swindled in this way.)

To carry out his dastardly deed, he recorded this deed in the off ce of the San Diego County Recorder:

Once this crime was discovered, prosecutors charged Little Boy Derris with a felony and sought to put him away for a very long time. However, the judge decided that our little friend was not competent to stand trial, and instead committed him to Patton State Hospital.

I wish that all lived happily ever after. Obviously that’s not the case. Derris DeVon McQuaig is in big trouble, and apparently suffers from mental illness. In all seriousness, I wish him well.

The San Diego news article does not reveal the specif cs of the criminal charges brought against Mr. McQuaig. However, civilly, Slander of Title, a tort borne out of common law, immediately comes to mind.

Let’s look at Mr. McQuaig’s spurious deed from a different angle. In effect, it’s a bad deed. It is void. It transfers nothing. It is a legal nullity in every sense. In fact, the deed is not even in the chain of title. (The public record reveals that title to Petco Park is vested in the City of San Diego, not the “Assessor of City View Property,” as listed as the grantor on the bogus deed.)

Strictly as a legal matter, it seems to me that the City of San Diego has nothing to worry about here. It continues to own Petco Park. There is zero risk to it that Mr. McQuaig can use his bad deed to assert any claim whatsoever.

That said, what is the risk to a title insurer who encounters a bad deed—usually referred to as a “wild deed”—during a title search?

1. Is the wild deed in the chain of title? That is, when searching the grantor/grantee indexes in the County Recorder’s off ce, would a bonaf de purchaser f nd the wild deed? Under the laws of your state, does this even matter?

2. Not all cases are as clear cut as the Petco Park incident.

What is the wild deed trying to accomplish? Is there a simple typographical error making it a wild deed? Should the deed refer to Lot 7, for example, but instead refers to Lot 6? Or, is it the case that the maker of the deed is truly trying to establish some color of title to the property in question?

3. How old is the deed? Who is in possession of the property? Who is paying taxes?

4. What is the relationship between the record owners of the title, and the grantee on the wild deed? We should be curious about this.

5. From a legal standpoint, does the wild deed create a suff cient cloud as to impair the marketability of the title?

Maybe yes, maybe no. This will depend on the facts and state law.

Also, think about how a title policy works. Remember that the question is not always, “who legally owns title to the property?”

The policy also includes a duty to defend. That means that if somebody truly asserts an interest, a title insurer will likely be required to defend against the claim, even if it’s bogus.

With as little as I know about the Petco Park situation, I’d likely be ready to insure title in a sale or ref nance without consideration for Mr. McQuaig’s bad deed. It seems to me that the risk is minuscule. In other situations, my view could be different. It just depends on a number of factors.

Bogus deeds can be problematic in our industry, but there is nothing bogus about appreciating a sport that has a rich history and tradition. I encourage you to head to the stadium and experience a baseball game the way it was meant to be seen.

Play Ball and Go Angels!

Agency Today | Issue 4

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10FIRPTA TOP

QUE S TIONS ABOUT

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Agency Today | Issue 4

1. WHAT IS FIRPTA? United States tax law requires that all persons, whether foreign or domestic, pay income tax on the disposition of U.S. real property interests. Domestic persons or entities typically are subject to this tax as part of their regular income tax; however, the U.S. needed a way to collect taxes By: Wade Wallace from foreign persons on the sale Underwriting Counsel of U.S. real property interests. The First American Title Foreign Investor in Real Property Act (“FIRPTA”) was enacted to provide such a mechanism and requires that a buyer withhold and remit to the IRS a certain percentage of the sales price in anticipation of the taxes that will be due from the foreign seller on such transaction.1 FIRPTA applies in nearly all transactions, residential and commercial, in which a foreign owner of a U.S. real property interest sells By: Jennifer Bloodworth such interest. The amount withheld is Sr. Underwriting Counsel First American Title not the tax itself, but is payment on account of the taxes that ultimately will be due from the seller.

2. WHAT ARE THE WITHHOLDING REQUIREMENTS? Unless an exemption or reduced rate applies, FIRPTA requires that the buyer withhold f fteen percent (15%) of the sales price in all transactions in which the seller of a U.S. real property interest is a “Foreign Person.”

3. WHO IS A “FOREIGN PERSON”?

FIRPTA def nes a “Foreign Person” by def ning who is not a Foreign Person, so it is important to understand the following def nitions: a. A “Foreign Person” is def ned as any person other than a “United States Person.” b.

c.

A “United States Person” is any of the following: (i) a U.S. Citizen; (ii) a resident alien who has a Green Card; (iii) a resident alien who meets the Substantial Presence Test; (iv) a domestic (U.S.) corporation, partnership or other legal entity (except a “Disregarded Entity” as def ned by IRS Regulations), trustee or other f duciary; (v) a Disregarded Entity, the owner of which qualif es as a “United States Person” under (i), (ii), (iii), or (iv), above; or (vi) a foreign entity which has elected to be treated as a domestic corporation (as evidenced by acknowledgement copy of election furnished by IRS).

The Substantial Presence Test: Under FIRPTA, a Foreign Person is considered a U.S. Person for the calendar year of sale if they are present in the United States for at least:

i. 31 days during year of sale AND ii. 183 days during the 3 year period that includes year of sale and the 2 years preceding year of sale, but only counting: a. All days during year of sale; b. 1/3rd of the days during the f rst preceding year; and c. 1/6th of days during the second preceding year.

When counting days, you may not include the days that a Foreign Person is present in the U.S. as a representative of a foreign government (e.g. foreign diplomat), as a teacher or student under a “J”, “Q”, “F” or “M” Visa, or as a professional athlete in a charitable sports event. d.

A “Disregarded Entity” is any single-owner domestic business entity (such as a single-member limited liability company) other than a corporation, unless it has elected to be treated as a domestic association for tax purposes.

4. WHAT IF THE SELLER IS A DOMESTIC LLC? Single-Member LLC: A single-member domestic limited liability company, while a recognized legal entity, is considered a “Disregarded Entity” for tax purposes. Accordingly, if the seller is a single-member limited liability company, then you have to look to the identity of the sole member of the limited liability company. If the sole member is a “Foreign Person,” then the FIRPTA withholding rules apply in the same manner as if the foreign sole member was the seller.

Multi-Member LLC: A domestic limited liability company with more than one owner is not considered a “Disregarded Entity” and is taxed differently than single-member limited liability companies. Accordingly, the FIRPTA rules regarding withholding do not apply to multi-member domestic limited liability companies.

5. WHAT ARE SOME EXCEPTIONS TO THE WITHHOLDING REQUIREMENTS? While there are several exceptions to FIRPTA withholding requirements that eliminate or reduce the required withholding, the most common exceptions are discussed below. a.

Seller not a “Foreign Person.” One of the most common and clear exceptions under FIRPTA is when the seller is not a Foreign Person. In this case, the seller must provide the buyer with an aff davit that certif es the seller is not a Foreign Person and provides the seller’s name, U.S. social security number or taxpayer identif cation number (“TIN”), and address.

b.

Personal Residence Exemption. Under the Personal Residence Exemption, no withholding is due when (1) the buyer is acquiring property that will be used as the buyer’s residence, (2) the sales price is $300,000 Agency Today | Issue 4

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Top TEN Questions About FIRPTA (continued) or less, and (3) the buyer elects to waive withholding.

See additional requirements set forth, below, under “Reduced Rate of Withholding.” c.

Reduced Rate of Withholding: This new exception, which went into effect February 16, 2016, is similar to the Personal Residence Exemption, but provides for a reduced rate instead of a full exemption.2 Under this exception, a reduced withholding equal to ten percent (10%) of the sales price is due when (1) the buyer is acquiring property that will be used as the buyer’s residence, (2) the sales price is more than $300,000 but not more than $1,000,000, and (3) the buyer elects to waive withholding.

In order to qualify for, either, the Personal Residence Exemption or the Reduced Rate of Withholding, the buyer or a member of the buyer’s family must have def nite plans to reside at the property for at least 50% of the number of days the property is occupied by any person during each of the two 12-month periods following the date of closing. If the buyer fails to meet the occupancy requirements, the buyer may become liable to the IRS for the difference between the amount that was actually withheld, if any, and the amount that should have been withheld, plus interest and penalties.

Under this exception, the buyer is not required to make this election, even if the facts may support the exemption or reduced rate and the settlement agent should advise the buyer that, neither, the exemption nor the reduced rate automatically applies. Instead, if the buyer opts to invoke the exemption or the reduced rate, the buyer must make an aff rmative election to do so. This election should be in the form of an aff davit from the buyer setting forth the buyer’s decision and, if applicable, the facts that entitle the buyer to the exemption or reduced rate.

d.

e.

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Seller Obtains Withholding Certif cate. In some cases, the seller has applied for and received a withholding certif cate from the IRS that reduces or eliminates the withholding requirement. A buyer relying on this exception must obtain a copy of the Withholding Certif cate and retain a copy in buyer’s records for f ve (5) years.

Foreign Corporation or Single-Member LLC has “checked the box.” There is an exception for foreign corporations or single-member limited liability companies that are subject to FIRPTA withholding that have “checked the box” on the applicable IRS form to be taxed as a domestic corporation. Domestic corporations are not subject to the withholding rules under FIRPTA, so withholding will not be required in cases where entities otherwise subject to withholding have elected to be taxed as a domestic corporation.

Agency Today | Issue 4

Importantly, to take advantage of this exemption from withholding, the entity must f le Form 8832 with the IRS, obtain IRS approval, and provide evidence of this status to the buyer. The buyer will need to retain a copy of this approval in buyer’s records for 5 years.

6. ARE TINS REQUIRED FOR ALL PARTIES? IRS regulations require all buyers and foreign sellers of U.S. real property interests to provide their TINs, names, and addresses on withholding tax returns, applications for withholding certif cates, notice of non-recognition, and other related IRS documents when disposing of a U.S. real property interest.

While it is best practice to have the TINs for all parties at the time of closing, it is possible to close without the TINs under the following guidelines: 1.

If the buyer does not have a TIN, the buyer must remit the proper withholding forms within 20 days after closing; however, the buyer will also need to remit, to a separate address in a separate package, a properly completed application (Form W-7) for a TIN simultaneously with remitting the withholding forms. Please refer to the instructions for each form for further instructions and mailing addresses.

2.

If the seller does not have a TIN, the buyer must remit the proper withholding forms within 20 days after closing, but the seller’s TIN information will be left blank. While the TIN is not necessary for closing, it should be noted that the seller will have to obtain a TIN in order for the IRS to process the funds and, in fact, upon receipt of the withholding documentation, the IRS will follow up with the seller instructing the seller to apply for a TIN. For this reason, many settlement agents provide the friendly advice that the seller submit its separate application for a TIN by the time of closing.

Additional information can be found in the IRS publication entitled “ITIN Guidance for Foreign Property Buyers/Sellers,” which is available at www.irs.gov.

7. WHAT IF THIS IS A SHORT SALE OR THERE ARE OTHERWISE INSUFFICIENT PROCEEDS FOR WITHHOLDING? There are times, such as short sales, when the proceeds from the sale are insuff cient for withholding under FIRPTA. However, FIRPTA withholding requirements are based on the sales price, not the seller’s proceeds, so there is no automatic exemption for transactions in which the seller is receiving zero or insuff cient proceeds. In these cases, the seller will need to apply for an exemption or reduced withholding from the IRS. As with applying for a TIN, this process can take some time, so it is

imperative that the settlement agent raise these issues with the foreign seller as early as possible in the process.

8. WHAT IF LESS THAN ALL SELLERS ARE FOREIGN PERSONS? The analysis of whether the buyer must withhold funds under FIRPTA must be undertaken with respect to each seller separately, even if the seller is a married couple. Generally, withholding is required for each Foreign Person based on such person’s percentage of ownership. For example, if there are four joint owners, each owning a 25% interest, and one of the sellers is a Foreign Person, then the buyer is required to withhold only 25% of the required withholding. If the seller owns the real property interest as a married couple, the IRS deems each spouse to own 50%. In this case, if only one spouse is a Foreign Person, then withholding only as to such spouse’s one-half interest is required.

the closing date. However, if an application for a withholding certif cate is submitted to the IRS before the date of a sale and the application is still pending with the IRS on the closing date, the correct withholding tax must be withheld, but does not have to be reported and paid immediately. The amount withheld (or lesser amount as determined by the IRS) must be reported and paid within 20 days following the day on which a copy of the withholding certif cate or notice of denial is mailed by the IRS.

MORE QUESTIONS? If you have any further questions about FIRPTA withholding, please feel free to contact your local First American underwriter; however, please understand that First American cannot provide legal advice to any party regarding FIRPTA. This article is intended as informational only and should any party need legal advice, the settlement agent should advise such party to engage legal counsel.

9. WHO IS RESPONSIBLE FOR COMPLYING WITH FIRPTA? While the seller is the party subjected to the tax, it is up to the buyer to withhold the appropriate percentage of the sales price when purchasing U.S. real property from a “Foreign Person.” In the event the buyer does not properly withhold, the buyer may be liable to the IRS in an amount equal to the amount of taxes that should have been withheld, plus interest and penalties.

While the buyer has the ultimate liability to the IRS, the collection and disbursement of funds to the IRS as part of the closing process creates a responsibility and potential liability for the settlement agent if the matter is not properly handled and documented. Accordingly, it is important that your f le ref ect specif c written direction from the buyer if anything other than f fteen 15% is being withheld. For example, if a buyer elects to waive the withholding or withhold a reduced rate, settlement agents should obtain an aff davit from the buyer setting forth the buyer’s decision and, if applicable, the facts that entitle the buyer to the exemption or reduced rate along with an acknowledgment that the buyer has been given the opportunity to obtain independent tax or legal advice.

10. HOW IS THE WITHHOLDING SUBMITTED AND REPORTED? Generally, the funds withheld must be forwarded, together with IRS Forms 8288 and 8288-A, to the IRS within 20 days after

FIRPTA uses the phrase “amount realized,” which typically is the sales price; however, if you or any of the parties involved have any questions, the buyer should consult with legal counsel of buyer’s choosing to ensure that the proper f gure is being used when calculating the withholding amount.

1

2 This amount recently was increased from 10%.

According to the strict reading of the effective date for recent amendments to FIRPTA, the f fteen percent (15%) withholding applies to transactions in which the closing, or disposition of real property, occurs on or after February 17, 2016; however, it has come

to our attention that the IRS may be interpreting the language to mean that February 16, 2016, is the effective date. While this is ultimately up to the buyer to decide, we recommend using the date that the IRS will be using.

Agency Today | Issue 4

17

FIRPTA

Foreign Investment In Real Property Tax Act

What are the withholding requirements when a seller is not a U.S. Citizen or U.S. Resident?

DOES THE BUYER HAVE DEFINITE PLANS TO USE THE PROPERTY AS THEIR RESIDENCE?*

NO

YES

Buyer is required by law to withhold 15% of the purchase price.

What is the sales price?

NOTE: If the seller believes they may be eligible for an IRS Withholding Certif cate, they should contact a CPA or tax attorney regarding application form 8288-B in order to obtain a determination from the IRS whether a lesser amount is due.

*The buyer or a member of their family must have def nite plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the f rst two 12-month periods following the date of transfer.

When counting the number of days the property is used, do not count the days the property will be vacant.

$300,000 or less Complete buyer’s declaration for $300,000 residence exemption form.

More than $300,000, but not more than $1 Million Buyer is required by law to withhold 10% of the purchase price.

More than $1 Million Buyer is required by law to withhold 15% of the purchase price.

First American Title Insurance Company and its aff liates expressly disclaim any representations or warranties that the guidance provided herein will satisfy any statutory or regulatory obligations, or will guarantee or otherwise ensure compliance with any applicable laws or regulations, including but not limited to FIRPTA, or other federal or state statutes or regulations. Policy-Issuing Agent is solely responsible for ensuring that any services provided are in accordance with applicable law. It is Policy-Issuing Agent’s responsibility to review changes in laws, regulations and accounting practices that affect you and your business.

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Agency Today | Issue 4

D I G I T A L

O F F I C E

M A N A G E M E N T

S O L U T I O N

MAKING PAPERLESS A REALITY GreenFolders® empowers title and settlement agents, escrow companies, and law practices to overcome the limitation and hassle of paper ÿ les while safeguarding Non-public Personal Information.

Intuitive yet robust, GreenFolders® is fully customizable and will accommodate your unique work° ow. Whether you’re looking to go completely paperless or transition only a portion of your operations to a digital work° ow, GreenFolders® has a solution to suit your needs.

www.greenfolders.com POWERED BY SMS

801.747.2132

©2016 First American Professional Real Estate Services, Inc. and/or its afÿ liates. All rights reserved.

Agency Today | Issue 4

19

KEEP CALM and

BE CYBER SECURE The increased exposure of title professionals and their businesses to an ever-expanding landscape of security threats is one of the greatest challenges facing our industry today. The military adage, “the best defense is a good offense�, is a valuable strategy agents should consider when developing procedures and guidelines to safeguard information and funds.

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Agency Today | Issue 4

By: Michele A. Green SVP, Senior Business Counsel Agency Division First American Title

PROTECT YOURSELF FROM THREATS FROM WITHIN COMPANY POLICIES AND PROCEDURES: • As part of your hiring process, require a background check and drug screening of anyone who will have access to your information systems.

•

Institute wire-process security measures such as separating the job duties between wire origination and wire approval, and requiring multiple authorizations for each process.

•

Restrict details of large pending transactions to a “need to know” basis and not “common knowledge” in your off ce.

•

Implement procedures for immediately terminating access to your systems, escrow accounts and banking authority when someone leaves your employ.

YOUR RELATIONSHIP WITH YOUR DEPOSITORY INSTITUTION: • Develop a specif c schedule to review with your bank the individuals in your company who are authorized to make changes to account permissions.

•

Provide your bank with a list of requirements, such as key fobs, security questions, or complex/changing passwords, which must be followed in order to verify the identity of individuals initiating and conf rming wire transfers.

KEEP YOUR COMPANY SAFE FROM THE CYBER WORLD COMPANY POLICIES AND PROCEDURES: • Consider using a dedicated computer terminal to initiate and approve wires – one that is only connected to the internet when corresponding with your bank.

•

If using networked computers for your banking, have security measures in place to protect against invasion, such as encryption, f rewalls and anti-virus protection.

–

Restrict ability to connect to a wireless network.

–

Conf rm the security of your virtual private network (VPN) and restrict remote access to your off ce network.

–

At a minimum, access to your network should be password protected.

•

Prohibit the use of external devices such as USB drives and disks on network devices.

•

Utilize a reputable email platform in your business. If you are using one of the free email programs, have other multi-factor identif cation in place to prevent hacking, such as security questions or complex/ changing passwords.

•

Have a written Information Security Policy published and distributed to your employees.

–

Designate someone to be responsible for verifying execution of and compliance with the policy.

–

Train your employees on information and cyber security issues.

–

Monitor your network for security incidents.

–

Consider having a security-vulnerability audit performed on your systems and procedures.

–

Implement an incident response plan for network intrusions and virus incidents.

YOUR RELATIONSHIP WITH YOUR DEPOSITORY INSTITUTION: • Again, provide your bank with a list of requirements, such as key fobs, security questions, or complex/changing passwords, which must be followed in order to verify the identity of individuals initiating and conf rming wire transfers.

•

Utilize Payee Positive Pay/Positive Payee Match.

•

Have your accounts set up with a block on foreign wires and Automated Clearing House (ACH) transactions.

BETTER SAFE THAN SORRY! Title professionals can’t be too careful these days when it comes to cyber security, and the threats to information and funds can come from sources both internal to the business and from the outside cyber world. Sadly, these threats expose gaps and weaknesses in policies and processes, and can be devastating f nancially and to the reputation of businesses. Since there is no absolute fail-safe avoidance measure, all companies involved in the title and settlement services industry should be protected

by Cyber Liability Insurance.

These are suggested practices, not all inclusive. There may be additional well-reasoned steps recommended by lenders and industry experts.

Agency Today | Issue 4

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Managing ˜ ird-Party Risk OCC Bulletin 2013-29

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Agency Today | Issue 4

Three years ago, in the wake of the “Great Recession”, the Off ce of the Comptroller of the Currency (OCC) updated their risk management guidance for third-party relationships.

Today, with Dodd-Frank in full implementation, we are seeing the points outlined in OCC Bulletin 2013-29 grow in relevance when it comes to title agents and title insurance underwriters.

The lender responsibilities have increased signif cantly with the OCC expecting a bank to practice effective risk management regardless of whether the bank performs the activity internally or through a third party. They expect more comprehensive and rigorous oversight and management of third-party relationships that involve critical activities including, but not limited to, payments, clearing, settlements, custody or signif cant shared services such as information technology.

Highlights of OCC Bulletin 2013-29 •

A bank should adopt risk management processes commensurate with the level of risk and complexity of its third-party relationships.

•

A bank should ensure comprehensive risk management and oversight of thirdparty relationships involving critical activities.

•

An effective risk management process throughout the life cycle of the relationship includes: –

Plans that outline the bank’s strategy, identify the inherent risks of the activity, and detail how the bank selects, assesses, and oversees the third party.

–

Proper due diligence in selecting a third party.

–

Written contracts that outline the rights and responsibilities of all parties.

–

Ongoing monitoring of the third party’s activities and performance.

–

Contingency plans for terminating the relationship in an effective manner.

–

Clear roles and responsibilities for overseeing and managing the relationship and risk management process.

–

Documentation and reporting that facilitates oversight, accountability, monitoring, and risk management.

–

Independent reviews that allow bank management to determine that the bank’s process aligns with its strategy and effectively manages risks.

While banks will need to conduct their own due diligence with regard to selection of thirdparty providers, the OCC recommends that a bank should not rely solely on experience with or prior knowledge of the third party as a proxy for an objective, in-depth assessment of the third party’s ability to perform the activity in compliance with all applicable laws and regulations and in a safe and sound manner.

Agents who attain ALTA Best Practices Certif cation and obtain a Service Organization Control (SOC) report will be able to provide an additional level of assurance that their agency or law f rm can meet federal regulations and the risk-management requirements of their bank and lender customers.

To read the full content of OCC Bulletin 2013-29, visit: http://occ.gov/news-issuances/bulletins/2013/bulletin-2013-29.html

Agency Today | Issue 4

23

www.alta.org/homebuyer

Homebuyer Guide Resources More than 60 customizable tools!

Digital Content

Marketing One-Pagers

PowerPoint Presentations

Rack Cards

ALTA’s Homebuyer Guide gives you everything you need to educate homebuyers, real estate agents, builders and lenders about the benefits of owner’s title insurance. Take advantage of this ALTA member-exclusive resource and be a market leader in connecting with consumers.

Need help learning how to market directly to consumers?

Attend a Homebuyer Outreach Program Workshop.

For more information, go to meetings.alta.org/hop.

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Agency Today | Issue 4

1800 M Street, NW, Suite 300S Washington, D.C. 20036-5828 P. 202.296.3671 W. www.alta.org E. communications@alta.org

FinCEN

Geographic Targeting Orders ˜ e Orders created new reporting requirements that will a° ect residential real estate transactions in the Borough of Manhattan in New York City, New York, and Miami-Dade County, Florida.

The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury that collects and analyzes information about f nancial transactions in order to combat domestic and international money laundering, terrorist f nancing, and other f nancial crimes. FinCEN serves the interests of the f nancial, law enforcement, and regulatory communities.

On January 13, 2016, the Director of FinCEN issued Geographic Targeting Orders (“Orders”) to selected “Covered Business” entities that include First American Financial Corporation and any of its subsidiaries and title agencies.

The Orders created new reporting requirements that will affect residential real estate transactions in the Borough of Manhattan in New York City, New York, and Miami-Dade County, Florida.

FinCEN is concerned that all-cash purchases may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures. Title insurance companies play a central role that can provide FinCEN with valuable information about real estate transactions of concern.

The Orders do not imply any derogatory f nding by FinCEN with respect to the “Covered Business” entities. To the contrary, FinCEN appreciates the assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors.

On January 28, 2016 First American provided copies of the Orders to its Issuing Agent Network and, after reviewing the Orders, provided supplementary guidance on February 10, 2016. In addition to specifying the requirements imposed, the Order states that First American and First American’s issuing agents may be liable, without limitation, for civil or criminal penalties for violating any of the terms of the Order.

First American, along with other affected title insurers and the American Land Title Association, is in communication with FinCEN representatives to continue to clarify the requirements for compliance with the Orders.

If you have any questions regarding the FinCEN Orders, please contact your First American State Underwriter or Operations Counsel.

Agency Today | Issue 4

25

UN D ERSTAN DING THE

ALTA Settlement Statement This statement provides a more complete itemization of the charges than does the CD, in particular those that relate to recording fees and title insurance premiums.

ALTA has developed standardized ALTA Settlement Statements for title insurance and settlement companies to use to itemize all the fees and charges that both the homebuyer and seller must pay during the settlement process of a housing transaction. Settlement statements are currently used in the marketplace in conjunction with the federal HUD-1. The ALTA Settlement Statement is not meant to replace the Consumer Financial Protection Bureau’s Closing Disclosure, which went into effect on October 3, 2015.

Four versions of the ALTA Settlement Statement are available: – ALTA Settlement Statement Borrower/Buyer – ALTA Settlement Statement Cash – ALTA Settlement Statement Combined (SHOWN) – ALTA Settlement Statement Seller www.alta.org/cfpb/documents

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Agency Today | Issue 4

Seller debits/charges and credits/deposits

Buyer debits/charges and credits/deposits

American Land Title Association

FileNo./EscrowNo.:9876-16 Print Date & Time: 09/01/2016, 1:49 PM ABC Title Officer/EscrowOfficer:Zeus LLC Settlement Location: 1567 Celestial Way Anytown, TX 12345

ALTA Settlement Statement - Combined Adopted05-01-2015

ABC Title ZeusLLC ALTAUniversalID:78-9012 1567CelestialWay Anytown,TX 12345

PropertyAddress:1111DreamHomeLane, Anytown, TX 12345 Buyer:RobertL.Brown, Mary RBrown Seller: William T. Jones, Justine C. Jones Lender: Mangrove Lending SettlementDate:09/01/2016 DisbursementDate:09/01/2016 Additionaldatesperstaterequirements:

Debit

Seller

Description

Credit

Financial 680,000.00 SalesPriceofProperty Depositincludingearnestmoney LoanAmount

3,528.36

680,000.00 2,000.00 530,000.00

Prorations/Adjustments CountyTaxesfrom01/01/16 to 09/1/16 LoanChargestoMangroveLending Application Fee to Sunil Kumar Mortgage POC - B $200.00 OriginationFee UnderwritingFee toMangrove Lending Prepaid Interest ProcessingFee OtherLoanCharges AppraisalFeetoAppraiseit!

CreditReportFeeto Equifax POC - B $29.50 FloodDeterminationFeetoFloodServiceCompany TaxMonitoringFeeto Realty TaxService Impounds Homeowner'sInsurance 2mo @$56.66/mo

Copyright 2015 American La nd Title Association.

All rights reserved.

Borrower/Buyer Debit Credit

Page 1 of 3

3,528.36

5,300.00 295.00 1,905.90 500.00

450.00 11.00 68.00

113.32

File# 9876-16

Printedon(09/01/2016)at(1:49pm)

Agency Today | Issue 4

27

Page 2

Debit

Debit

Seller

Seller

Description

Credit

Credit

1,490.00 500.00 1,490.00 20,400.00 500.00 20,400.00 20,400.00 20,400.00

1,530.00

1,530.00 487,332.51 3,671.68 487,332.51 5,346.52 3,671.68 5,346.52 500.00

500.00

County Taxes -Mangrove Lending Aggregate Adjustment Description TitleCharges&Escrow/SettlementCharges County Taxes -Mangrove Lending Aggregate Adjustment to ZeusLLC Owner'sTitleInsurance Loan Policy ofTitleInsurance to Zeus LLC Escrow/ Settlement Feeto Zeus LLC TitleCharges&Escrow/SettlementCharges Owner'sTitleInsurance to to ZeusLLC ABC Title Commission to Zeus ABCLLC Title Loan Policy ofTitleInsurance to RealEstateCommission totoOmegaRealEstateBroker, Inc. Escrow/ Settlement Feeto Zeus ABCLLC Title RealEstateCommission to A1SellerListingBroker OtherCredit for HomeWarranty feeto AHS Home Warranty Commission RealEstateCommission to OmegaRealEstateBroker, Inc. Government Recordingto andA1SellerListingBroker Transfer Charges RealEstateCommission RecordingFees(Deed)toRecorder Other- Credit for HomeWarranty feeto AHS Home Warranty RecordingFees(Mortgage/DeedofTrust)toRecorder Recording Fees(POA)to Recorder Government Recording and Transfer Charges TransferTaxtoRecorder RecordingFees(Deed)toRecorder RecordingFees(Mortgage/DeedofTrust)toRecorder Payoff(s) Recording Fees(POA)to Recorder Lender:ABCBank Ltd TransferTaxtoRecorder PrincipalBalance-ABCBank Ltd Intereston PayoffLoan 08/01/16 to Payoff(s) @6.875000% - ABCBank Ltd Lender:ABCBank09/10/16 Ltd AdditionalPayofffees/Reconveyance PrincipalBalance-ABCBank Ltd Fee/RecordingFee/WireFee Intereston PayoffLoan 08/01/16 to 09/10/16 @6.875000% - ABCBank Ltd Miscellaneous AdditionalPayofffees/Reconveyance Homeowner's Fee/RecordingFee/WireFee insurancepremiumtoMVGInsurance Company HOAduesto HOA AcreInc. Miscellaneous Transfer fee to HOA AcreInc. Homeowner's insurancepremiumtoMVGInsurance Company SepticInspectionPaymentSpotlessSeptic Home Warranty to A HS Home Warranty HOAduesto HOAfee AcreInc. Transfer fee to HOA AcreInc. Description SepticInspectionPaymentSpotlessSeptic

Seller Debit Home Warranty fee to A HS Home Warranty Credit 544,699.07 Subtotals 680,000.00 DueFrom/ToBorrower Description Seller 135,300.93 DueFrom/To Seller Debit Credit 680,000.00 Totals 544,699.07 Subtotals 680,000.00 DueFrom/ToBorrower 135,300.93 DueFrom/To Seller 680,000.00 680,000.00 Totals

Copyright 2015 American La nd Title Association.

All rights reserved.

All rights reserved.

Agency Today | Issue 4

Debit 4,416.70

Credit

123.45 100.00 500.00 100.00 500.00 485.00

10.00 124.00 10.00 10.00 124.00 10.00

485.00

680.00 120.00 123.00 680.00 485.00 120.00 Borrower/Buyer 123.00 Debit Credit 485.00 695,211.92 536,136.81 159,075.11 Borrower/Buyer Debit 695,211.92

Credit 695,211.92 536,136.81 159,075.11

695,211.92

695,211.92

File# 9876-16

Page 2 of 3

Printedon(09/01/2016)at(1:49pm)

Page 2 of 3

Printedon(09/01/2016)at(1:49pm)

Copyright 2015 American La nd Title Association.

28

Borrower/Buyer Debit Credit 4,416.70 123.45 Borrower/Buyer

File# 9876-16

UND E R S TAND I NG T HE

ALTA Settlement Statement Title Insurance Premiums to First American Title

Recording Fees

Page 3

Acknowledgement We/Ihave carefully reviewed theALTA Settlement Statement and find it tobea trueand accuratestatement ofall receiptsand disbursements madeon my account or by mein thistransaction and further certify that Ihavereceived ABC Title a copy of the ALTA Settlement Statement. We/I authorize Zeus LLC to cause the funds to be disbursedinaccordancewiththisstatement.

Buyer

Buyer

Note: It is a best practice to obtain signatures from both the seller and the buyer/borrower on the f nal version of this document.

Seller

EscrowOfficer

Agency Today | Issue 4

29

NEW

State of Homeownership Resource Page and Whitepaper www.f rstam.com/economics/state-of-homeownership We’re excited to announce the launch of our new State of Homeownership resource page for insight and perspective from First American Chief Economist Mark Fleming on the economic and cultural trends shaping homeownership.

The page features a new whitepaper authored by Fleming, also titled “The State of Homeownership,” which explores declining homeownership, one of the most important economic issues facing our country today. The resource page also includes a brief video highlighting the discussion among industry experts, housing advocates and policy makers at a leadership forum hosted by First American last year.

“While homeownership and housing have not been center stage in the presidential campaign to date, there are few issues as broadly relevant to both ‘Main Street’ and ‘Wall Street’ as the state of homeownership in the U.S.,” said Fleming. “Understanding the trends that inf uence homeownership decisions today and in the future can help inform the discussions necessary to preserve homeownership opportunities for the next generation.”

The State of Homeownership - Microsoft Internet Explorer File Edit View Favorites Tools Help Back Address

"Understanding the trends that inf uence homeownership decisions today and in the future can help inform the discussions necessary to preserve homeownership opportunities for the next generation."

–Mark Fleming

MARK FLEMING CHIEF ECONOMIST First American Financial Corporation

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Agency Today | Issue 4

Search

Favorites

http://www.ÿrstam.com/economics/state-of-homeownership/

Go

Links

Now Available First American Eagle Academy

BEST PRACTICES TRAINING The First American Eagle Academy® Learning Center on AgentNet® offers training to assist agents in complying with their company’s written policies and procedures which may require training on Non-public Personal Information (NPI) and accounting practices. Offered exclusively to First American Title Agents, these new courses are available on AgentNet and provide education in alignment with ALTA Best Practices.

ALTA BEST PRACTICE 2

ALTA BEST PRACTICE 3

Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts allowing for electronic verifi ation of reconciliation.

Adopt and maintain a written privacy and information security program to protect Non-public Personal Information as required by local, state and federal law.

ALTA Best Practice 2: Managing Escrow Funds and Escrow Trust Accounts This training will help employees who handle escrow or trust funds ensure the account records are accurate and minimize the exposure to loss of funds.

ALTA Best Practice 2: Two-Way and Three-Way Bank Account Reconciliations This presentation is suitable for anyone who needs to know how to perform three-way reconciliations in compliance guidelines for Escrow Trust Accounting.

ALTA Best Practice 3: Privacy and Security This highly interactive one-hour course takes a look at security risks present in today's business environment and how to mitigate them. It provides settlement service providers a convenient means of providing information-security training to their employees.

After f nishing each course and receiving a score of 70% or higher on the f nal test, a Certif cate of Achievement will be issued to document successful completion. Courses may be eligible for CE credit in your state; see individual course description for details.

First American Eagle Academy is committed to providing our agents with the most current and comprehensive education available. Log on to AgentNet, select Eagle Academy CE/CLE Learning from the Helpful Links tab and explore the wide range of online courses that will benef t you and your business.

Agency Today | Issue 4

31

Agent Spotlight Question The title and settlement industry has just gone through one of the largest and costliest regulatory changes in its history. What was your most valuable lesson learned in the quest to comply with the new regulations?

Tris R. Filliez, LTA, CLC VP, Operations Leading Edge Title 243 West Park Ave. #102 Winter Park, FL 32789 O: 407.636.9866

tris@letpc.com | www.letpc.com

Although the regulations and guidelines addressing the compliance side of issuing title insurance have recently changed, title insurance continues to be one of the most substantially different insurance coverages offered. New compliance requirements will assist with lowering the risk of insuring the history of real property. The most valuable lesson learned through the new requirements is that adhering to the highest standard possible should always be our goal. While the way in which we perform our job has become more complex, our mission to our customer continues to remain the same. TRID is causing title insurers to adhere to the highest standard, which should always be the policy.

While ALTA Best Practices Pillars provide a roadmap for compliance to meet legal and market compliance, we need to always remember that our focus is service to the customer. Whether it is improving customer’s privacy protection, securing IT systems, or updating documents to comply with current regulations, the changes we are now embracing will lead to a more secure transaction, better disclosure to the consumer, and hopefully reduced risk for insurers, title companies, and consumers.

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Agency Today | Issue 4

Neil Sherman President Best Homes Title Agency, LLC 23938 Research Drive, Suite 100 Farmington Hills, MI 48335 O: 248.286.3800

nsherman@besthomestitle.com | www.besthomestitle.com

Compliance begins with a four letter word ... TEAM. What we learned through this transition is that it takes an entire village to effectuate change. Everyone played a signif cant role; from our operation’s staff implementing new forms, to our staff participating in endless escrow and technology training, to our sales people providing updated tools to our customers and additional training opportunities. We could only succeed if we did it together ... and we did.

Another thing we learned is that when we experience a monumental change such as TRID, look to your underwriter as your partner. First American Title worked closely with our executive management team to make sure that both our clients and we were ready for these changes. Our exceptional working relationship with our underwriter allowed us to f ourish through these changes and continue down a road of expansion and quality service.

Vicki Carter Owner / Escrow Off cer Security Title of Davis County, Inc. 1412 South Legend Hills, #110 Clearf eld, UT 84015 O: 801.825.1313

vicki@securitytitleutah.com | www.securitytitleutah.com

The title and settlement industry has def nitely gone through the largest and costliest regulatory changes in our history. During this process, I learned two valuable lessons in Security Title of Davis County Inc.’s quest to comply with these new regulations.

First; there is the value of a trained, competent, and seasoned staff. The majority of our employees have been with our company for 15 - 20 years. Employee longevity becomes extremely valuable when any industry goes through changes of this magnitude. Knowledge and experience were def nitely the keys to our success in this transition. We were able to focus primarily on the changes in the industry because we were already prepared for every other aspect of our business. Our company has operated for years with systems in place, so when the new regulatory changes were implemented, it was just a matter of modifying certain areas of our systems to continue moving forward.

Second; I learned the value and importance of a great partner in our underwriter, First American Title. We are a small company without the resources that a larger company would have. Our underwriter/Agency Manager was there for us in every aspect of these regulations and changes. We were provided with training and resources in a cost effective way. We were always able to not only compete, but to also become an expert in this transition for many of our clients. It was not uncommon for our clients to tell us they felt we were prepared for these changes and they could rely on us to handle their transactions as smoothly as we had done in the past. I attribute a lot of our success in this transition to these resources that were provided to us.

The year 2015 may have proved to be one of the largest changes in our industry, but it also proved to be our best f nancial year at Security Title of Davis County, Inc., and 2016 is heading in the same direction. I attribute the majority of this success to my amazing and competent staff and the support of First American Title.

Agency Today | Issue 4

33

Question Cyber criminals are turning their sights to title and settlement companies. What security best practices do you have in place to minimize your exposure to security breaches?

John A. Facey, III Facey Goss & McPhee P.C. 71 Allen Street, #401 | PO BOX 578 Rutland, VT 05701 O: 802.665.2720

jfacey@kenlanlaw.com | www.kenlanlaw.com

My f rm initiates and receives numerous wire transfers each week for clients and for the closings in which we are involved.

We have developed a number of procedures we hope will prevent wire fraud.

First, we require any lawyer who needs a wire sent to submit a written request to our bookkeeper. At that point, our bookkeeper sends a brief explanation to the partners of the need for the wire and who is involved in the transaction. She must obtain two approvals via internal email from partners to initiate the wire. Once this step is completed, and two partners have approved the wire request, there is a dual control to actually initiating the wire. If both our bookkeeper and f rm administrator are present, they both acknowledge to our bank that the wire is an authorized wire. If either the bookkeeper or f rm administrator is not in the off ce, either one of them in conjunction with any partner can initiate the wire.

We also require a dual control regarding the recipient of the wire. We require our clients provide us with written instructions for the wire, typically by email. We then check on the authenticity of the wire instructions with either a separate email or telephone call to the client conf rming the instructions we received were authentic.

Facey Goss & McPhee P.C. is a full-service law f rm based in Rutland, Vermont. Our fourteen attorneys offer clients a complete range of legal services with an emphasis on quality of work product, competitive cost and an overriding commitment to client service at a sophistication level comparable to larger urban law f rms. We practice in a wide variety of legal areas and our lawyers are highly capable and versatile. Our expertise ranges from commercial, real estate and condominium association law to litigation in all federal and Vermont courts, criminal defense, bankruptcy, immigration and estate planning.

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Agency Today | Issue 4

Bradley W. Solheim, Esq. Chief Manager Title Mark, LLC 121 West Main Street Waconia, MN 55387 O: 952.442.7777

bsolheim@titlemark.com | www.titlemark.com

Title Mark utilizes multiple best practice procedures and systems including: cloud computing, privacy software, f rewalls, email-screening software, encrypted emails, scanned and shredded f les, passwords for guest WiFi, restricted computers, positive pay, daily reconciliation, third-party account balancing, outside accountant monthly review of our processes, and disaster recovery plans. Staff members undergo background checks, adhere to a clean desk policy, and use complex passwords which are changed systematically and periodically. Computers are locked out from copying or removing data, our f les and doors are locked, and there are limits on the use of mobile devices and restrictions on work from home. Vetting procedures are in place to ensure high industry standards of shredding companies and technology vendors.

The greater concern is the human factor. The biggest issues are; opening an attachment to invite the worst of the invaders, opening an email which was suspicious only in hindsight, responding to requests to wire funds to a new location, or a hack giving us a location for the f rst time. Fraudulently taking advantage of staff who is working very intensely at the end of the month is the challenge we need to continue to address.

The bad guys will discover title agencies handle large sums of money. Right now, their efforts are crude, simple or effective enough for them. As soon as the bad guys go from hacking into retailers with thousands or millions of accounts, to operating more like bank robbers equipped with technological tools, we’ll have much more concerns. We must assume it is only a matter of time.

John Keratsis CEO Boston National Title Agency, LLC 129 West Trade Street, 9th Floor Charlotte, NC 28202 O: 704.373.4002

jkeratsis@bostonnationaltitle.com | www.bostonnationaltitle.com

Boston National Title (BNT) has been certif ed by multiple third parties to be ALTA Best Practices compliant. We’ve implemented numerous policies and controls to ensure our adherence to these best practices and data security in general.

Our security policies, data classif cation, retention and destruction policies, physical access policies and background investigations are all part of this adherence. We use encrypted email systems and document delivery systems that are password protected to ensure no NPI is going out over the open Internet. We use systems like Positive Pay and Rhyno as fraud prevention tools when dealing with our escrow accounts to ensure there is no fraudulent activity when we are disbursing funds. Our f rewalls are pen-tested on an ongoing basis to validate an effective defense against cyber criminals.

We carry a $10 million per instance Cyber Crime insurance policy to provide customers added protection and peace of mind.

Additionally, Boston National’s security policies, device usage policies, fraud prevention practices, and systems infrastructure all conform to the largest lenders’ security practices. These lenders routinely perform signif cant security assessments to test our system infrastructure and operational practices against their security standards. You simply can’t be a contracted vendor of these lenders without conforming to their security standards. BNT has invested a tremendous amount of time, resources, and money into ensuring we comply with our lenders’ requirements.

Agency Today | Issue 4

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