The Florida Legal Eagle - Volume 5 by First American Title - Agency Division

IN THIS ISSUE: PAGE

FROM THE EDITOR’S DESK LEN PRESCOTT VP, Florida Regional Counsel

Busy? I know you are. It seems we’ve all had an extended busy season this year! The last few months have found many of us overextended with too few hours in the day and far too many tasks at hand. To be sure, we are very grateful that business has been very good and the positive outlook for the rest of the year continues to strengthen. But how could the second half of 2016 be here already? Despite how it feels, we know time is not getting faster. But certainly, productivity expectations and stresses have sped up. Just take a moment and think about our lives as title professionals: the speed at which we are required to get things done, the stress of complex liability issues bumping into demands and deadlines, and the amount of information we are forced to consume on a daily basis. Multitasking as a survival skill? And when do we find the time to balance our personal lives or to be overwhelmed by the problems of the world? Traditional advice is to take breaks to find work-life balance. We do stress the importance of taking time off at First American Title. But if this is something to be added to our to-do list, taking a break (or not taking it) and the resulting additional demands when we return, add to our stress! A relatively new way of thinking is to replace the work-life balance with the thought of well-being balance. The key is to take care of yourself in a way that supports your work and life, without trying to separate the two. We are what we do, and our life certainly affects our work! If you enjoy and are proud of your work, then this is a very good thing. So eat well, sleep well, exercise and nurture healthy relationships. Be aware of your work habits and recognize when you need a break. But don’t worry about the impossibility of cramming more time and work-life balance into your life. With a change to well-being balance in mind, we will become better professionals, properly meet and exceed our customer expectations, and continue to take advantage of the great opportunities that our title market in Florida presents. We will combat pressure with commitment, integrity, service, leadership and teamwork. Here is where the productivity expectations and stresses meet our professionalism, inspiration, and passion. We love what we do, we do it well, and we do it together! Best regards,

Len Prescott

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TITLE Executive Spotlight: Evan Zanic Coffee and Espresso with the Underwriter Webinar Schedule The Property Professor Underwriting Q&A: Focus on Bankruptcy Legal and Industry Updates Closing Corner: Florida Notarial Knowledge FinCEN Geographic Targeting Orders Congratulations Michael Altes

Who Gets What? Gramm–Leach– Bliley and TRID Delivery of Closing Disclosure Forms to Parties Involved in Real Estate Transactions

Ten Reasons Why Secondary Market Is Rejecting Purchase of TRID Loans

Caution! Increased Liability Ahead! Why First Lien Letter Requests Must Be Denied

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Rumor or Reality? Cyber Liability Insurance Underwriting Spotlight: Bill Boyce Case Law Updates Wire Fraud Rapid Response Team Florida Statewide Underwriting Team

We Want Your Insight! Your insight is valued by the Florida Underwriting Team! If you would like to contribute to The Florida Legal Eagle newsletter, or if you have any comments or suggestions for topics that you would like to see in our newsletter, please submit your ideas to Brenda Yashinsky, Underwriting Assistant, at byashinsky@firstam.com. We look forward to your input!

First American Title | The Florida Legal Eagle 2233 Lee Road, Suite 202, Winter Park, FL 32789 407.691.5295 EXECUTIVE EDITORS: Len Prescott Alan McCall

Trish Ladan Chip Koval

The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) 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. ©2016 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF

t h g i l t o p e v i t u Exec S E van Z anic EVP, AGENCY DIVISION PRESIDENT

Little League Baseball® has been the foundation for developing leadership skill such as the value of good sportsmanship, teamwork and a winning attitude; but few can cite the experience as a catalyst for pursuing a career in the title insurance industry. We met up with Evan Zanic, Agency Division President, to ask him about his experiences, leadership style, and the opportunities and challenges in the ever-changing landscape of today’s title industry. WHO’S ON FIRST

How do you measure success?

How did you get into the title business?

Our corporate objectives are to develop our people, grow the Company and enhance the customer experience. I’d consider meeting those objectives, and having fun while doing it, a success.

I was born and raised in Pittsburgh, Pennsylvania and my fondest childhood memory is playing catch in the backyard with my dad and brother. My Little League baseball team was coached by my dad and his friend, a senior partner in a law firm. As I was finishing my freshman year at the University of Pittsburgh, my mother ran into him and asked if he had any openings at the law firm. He called a few days later and hired me as a messenger. I worked for the law firm throughout college, predominately summers and as my studies would permit, searching titles, clerking, and performing residential closings. Upon earning my law degree, I was hired and eventually became a partner in the firm and was heavily involved in the title agency. This experience proved to be a real asset in my career because I developed an understanding of the industry from many perspectives, which gave me a familiarity with what people go through on a daily basis.

Who is your role model, and why? Obviously my father, but professionally it would be Robert Hauser, Northeast Division President, who retired a number of years ago. Bob joined First American Title Insurance Company in 1997 after having tremendous success at another company. I have great admiration for him because he was more interested in finding and developing talent than he was in promoting his own self-interest. We have a solid base of knowledgeable professionals and strategies in place for recruiting talented individuals; my role is to develop their skills and competencies to ensure the future success of our company. STEP UP TO THE PLATE

How would you describe your leadership style? My leadership style is open and collaborative. No one person has all the answers and in many cases, all the right questions. As a customer-focused company, we are actively engaged in bringing our employees and agents together in collaborative events to allow voices from different knowledge bases and perspectives to be heard. This enables us to implement ideas, plan strategies, strengthen relationships and move forward together.

What song best describes your work ethic? Bachman Turner Overdrive: Taking Care of Business. GO THE DISTANCE

A leader must be equipped with a set of competences necessary to perform his role. Which would you say are the most important abilities?

Knowing the business and having good management skills are certainly critical components, but having good employee and customer relationships are equally as important. My new position did not require me to leave Pittsburgh and relocate to our Corporate Headquarters in Santa Ana, California. It does require an extraordinary amount of travel which gives me face-to-face opportunities all over the country. I’ve been in the trenches throughout my career and it’s important to me to remain accessible. Customers may enjoy meeting the senior leadership of our Company; it can enhance the relationship, and it also lets them know that from the top down, we care about our customers and are interested in knowing more about their business.

With the intense scheduling demands of your new position, what tools or habits do you use to keep organized? Anyone in a leadership position will attest to the fact that massive amounts of information and communication can at times be overwhelming. I make it a priority to respond to emails and phone calls promptly, keep my calendar current and take a lot of notes, otherwise things will be out of control. It’s not a question of how you do it, you must do it. At the end of the day, it comes down to common courtesy, principles and how you were raised. There is always that voice in my head that sounds suspiciously like my mother.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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E van Z anic EVP, AGENCY DIVISION PRESIDENT

HOME FIELD ADVANTAGE

Every day is game day in the title insurance industry. What offensive strategies does First American Title have in place to help our agents succeed? We are in the relationship business and the success of our agents is a top priority. In baseball and in business, the strength of the team can be a game-winning advantage that leads to success. First American Title Insurance Company has all the bases covered with its title insurance protection, underwriting expertise, streamlined processes, and unparalleled service delivered by knowledgeable professionals. We have the best people, work for the best company, and provide the best support to enable our customers to become successful.

If you were a small title agent, what three things would you focus on? Compliance. Service Levels. Compliance. Although I wanted to list compliance three times because I feel it is that important, I included Service Levels because compliance coupled with maintaining and improving the level of customer service will give agents a competitive advantage. The industry landscape is ever-changing and the ability to remain compliant with federal regulations is critical. In challenging markets, agents need tangible advice and innovative tools that will help them in their everyday business environment. Another area where I think we all need to focus is cyber security. We need to ensure that we have appropriate system securities in place as well as have policies and procedures to make sure that monies are disbursed appropriately. KNOCK IT OUT OF THE PARK

In five years, how will the Agency Division look? I am not sure exactly how it will look, but I know we will be #1 in the marketplace. I believe the most significant growth in the Company will occur in the Agency Channel because we have tremendous opportunities in the top four markets that control 43% of the business. Our consistent and relentless focus on enhancing the customer experience will help us achieve our goal.

What accomplishment do you consider to be the most significant in your career? When I started with the Company in 2001, market share in Pennsylvania was approximately 16%. At the end of the first quarter in 2016, market share was approximately 37%. Even though I have held numerous leadership positions throughout my career, I remain uncomfortable with the concept of people “working for me”; they “work with me.” It took a village to make it happen. The collective efforts of committed individuals led to our success. SAFE AT HOME

If you could have an uninterrupted dinner conversation with one person, who would it be? My grandfather…to let him know how well his family has done

in America. He arrived in America from Greece with $20.00 in his pocket and a belief that anything was possible. Our family’s success is clearly a result of the values and work ethic he instilled in us. My entire family lives here in Pittsburgh, and I am blessed to have my mother and father still with me. My wife, Dorothea, and I celebrated our 33rd wedding anniversary on July 3rd. My oldest son, Michael, graduated from medical school and is completing his residency in a local hospital. My daughter, Christina, is a practicing attorney at a Pittsburgh law firm. My youngest son, George, graduated from my Alma Mater, the University of Pittsburgh, with a degree in environmental studies and is working at First American with our National Production Services group.

What might someone be surprised to know about you? Throughout four generations, the male children in our family have rotated three names that are used in one form or another for the first and middle name. Grandfather: Dad: Dad’s Brother: Evan: Brother: Oldest Son: Youngest Son:

Evan Michael Michael Evan George Evan Evan Michael Michael George Michael Evan George Nicholas

What is the best piece of advice you were ever given and who gave it to you? My dad, Michael, gave me this advice, “Your ultimate ability to succeed in your chosen profession will depend on your ability to get along with people. If you are able to do that, people will forgive you when you make mistakes… and Lord knows, you are going to make mistakes.”

Any thoughts on the Florida agency? Florida is one of our most important agency states, if not our most important state. Did you know that we have more agency employees in Florida than any other state by a wide margin? I think that our Florida leadership group, which is led by Ken MacKay, SVP of our Southeast Region, is second to none. The Florida agency team, led by Craig Jontz, Chris LaChance, Emily Smith and Jamie Nail, are all longtime employees who understand the importance of customer relationships and the need to focus on how to best equip our agents to be successful in an ever-changing market. I started in the business as an underwriter at another company, so I know that underwriting is a critical component to the agent/underwriter relationship. Our Florida underwriting team, led by our Florida Regional Counsel Len Prescott, does a tremendous job in working with our agents to ensure that every deal that can and should be closed is closed. The last piece, that’s also of critical importance to us, is our ability to efficiently provide our agents with reliable title products. We’ve been investing in our title production capabilities for a while now and will continue to do so.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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&Espresso

with the Underwriter Upcoming Webinars: WHAT YOU NEED TO KNOW ABOUT THE NEW FinCEN GEOGRAPHIC TARGETING ORDER Wednesday, August 24th | 9:30am – 10:30am Len Prescott, VP, Florida Regional Counsel EVERY PICTURE TELLS A STORY – HOW SURVEYS ARE USED IN TITLE INSURANCE TRANSACTIONS Wednesday, September 14th | 9:30am – 10:30am Chip Koval and Bill Boyce, Underwriting Counsels OVERVIEW OF FLORIDA HOMESTEAD – OUR LEGAL CHAMELEON REVISITED Wednesday, October 12 th | 9:30am – 10:30am Mike Altes, Underwriting Counsel

Recorded Webinars On Demand: DRILLING DOWN THE UNDERWRITING ON FLORIDA OIL, GAS & MINERAL RIGHTS CLE Credit available Len Prescott, VP, Florida Regional Counsel » Access recording at: https://attendee.gotowebinar.com/ register/1456725734752619522 FIRPTA - IMPORTANT CHANGES FOR 2016 Wade Wallace, Underwriting Counsel » Access recording at: https://attendee.gotowebinar.com/ register/4278747672611558401 FinCEN – GEOGRAPHIC TARGETING ORDER FOR MIAMI-DADE, COUNTY AND COMPLIANCE Original Presentation February 16th and 18th Len Prescott, VP, Florida State Counsel » Access recording at: https://attendee.gotowebinar.com/ recording/7643452265775496961

| 2016 WEBINAR SERIES

UNDERWRITING COMMUNICATIONS – A REVIEW OF RECENT HOT TOPICS Trish Ladan, Senior Underwriting Counsel, Florida Associate State Counsel » Access recording at: https://attendee.gotowebinar.com/ recording/899572408619882500 EASEMENTS-INSURING AND EXCEPTING CLE Credit available Jennifer Bloodworth, Senior Underwriting Counsel » Access recording at: https://attendee.gotowebinar.com/ recording/4430140529911198723 THE VALUE OF OWNER’S TITLE INSURANCE Barbara Burke, Ph.D., Esquire, Legal Education Specialist » Access recording at: https://attendee.gotowebinar.com/ register/8099534088395899908 NOTARIES, ACKNOWLEDGMENTS AND JURATS Alan McCall, VP, Southeast Region Underwriting Counsel » Access recording at: https://attendee.gotowebinar.com/ register/3356823668132092419 BANKRUPTCY CLE Credit available Pat Newton, Senior Underwriting Counsel » Access recording at: https://attendee.gotowebinar.com/ register/2054323502853506307 WHEELS OFF – INSURING MOBILE HOMES AS REAL PROPERTY Greg Blomeley, Underwriter » Access recording at: https://attendee.gotowebinar.com/ register/7288672851696505857

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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THE

PROPERTY

PROFESSOR By: Alan McCall VP, Southeast Region Underwriting Counsel, Daytona Beach, FL

Dear Property Professor, There was a widower in Pierson, Florida, who owned a large algae farm. His name was Peter Demopolous, but everyone just called him Pete. His son’s name is Robert E. Peter Demopolous, but he goes by “R.E. Pete.” Apparently, Pete came down with “the palsy”. He wanted to avoid probate and a money judgment from a creditor that was about to be filed. So, he went on Legaldoom.com and used a homemade deed to pass title from Pete to R.E. Pete. After properly executing the deed, Pete sent it to old Mrs. O’Hanlon down at the bank so she could notarize it. She was supposed to give it to the son when Pete passed away. Sooner than expected, nature took its course and the palsy took Pete home to meet his maker. This morning, Mrs. O’Hanlon brought the deed into my office to be recorded.

Dear Perplexed, Unfortunately, closing is not going to be Tuesday. The deed is uninsurable. Since Pete did not appear before Mrs. O’Hanlon to acknowledge that the signature on the deed was his, it is not entitled to be recorded. But, not only is the deed not insurable, it may not even be a deed at all. Since the intent was to postpone delivery until after Pete died (and sorry to hear about the palsy), it was made with “testamentary intent.” That means the deed was actually intended to operate like a will. Worse, unless the instrument was executed like a will, it probably cannot be probated. If Pete had no will, then he died still owning the algae farm. In that case, it passed by operation of law (i.e. by intestacy) to all his heirs subject to claims of creditors. A probate will be required to pass marketable title under Florida law. R.E. Pete probably owns only 1/10th of the farm along with all of his nine brothers. And, if any of them are deceased, then their heirs would take the deceased brothers share per stirpes (i.e. divide 1/10th by the number of heirs for each deceased brother).

R.E. Pete called to order an owner’s policy for $8.6 million, which is the value of the algae farm, the improvements and a whole bunch of farm equipment, tractors, combines, algae harvester, a pond scum skimmer, and two tons of fertilizer. He is also getting a cash-out loan from Cyberleak Bank for $7 million and needs a loan policy. He needs the cash to see the world and buy Bitcoins. Seven of his brothers are fine with it. His other two brothers are up north somewhere and gave no forwarding address. I have Pete’s death certificate. Everything seems in order. Do you see any problems with me issuing the policies to R.E. Pete and the bank? They want to close on Tuesday

– Perplexed in Pahokee

After probate, we’ll need deeds to R.E. Pete from all the heirs. We’ll also have to pay off all judgment liens against Pete that were filed before he died, as well as, all liens against the heirs. And don’t forget the IRS who has a lien for estate taxes that arises on Pete’s death. The amount of the owner’s policy must be limited to the likely value of the land and improvements, excluding the personal property like farm equipment, the pond scum skimmer, and fertilizer. Likewise, the loan policy should be limited to the value of the land and improvements, even if Cyberleak is willing to include the personal property in the mortgage. Despite the amount of the mortgage, the value of the land is used to determine the loss that the title insurer would pay. Thanks for writing.

– Property Professor

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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Underwriting Q&A

Focus on Bankruptcy By: Patrick J. Newton, Esq., B.C.S. Florida Bar, Board Certified in Real Estate Law and Senior Underwriting Counsel in Naples, FL | John A. Balberchak, Senior Underwriter in Tallahassee, FL

AGENT CALLS TO INDICATE THAT THE OWNER OF HOMESTEAD PROPERTY IS QUESTIONING WHY WE HAVE CALLED FOR A SATISFACTION OF JUDGMENT BY HIS FORMER BANK PURSUANT TO A CREDIT CARD DEBT THAT WAS EXTINGUISHED BY HIS DISCHARGE RECEIVED IN HIS CHAPTER 7 BANKRUPTCY TWO YEARS AGO. WHAT NEEDS TO BE DONE TO REMOVE THE REQUIREMENT?

Provided that: (i) the homestead property was properly claimed as exempt on Schedule C –Property Claimed as Exempt; (ii) the debt of the Judgment was duly scheduled on Schedule F-Creditors Holding Secured Unsecured Nonpriority Claims; (iii) no objection to the claimed exemption was filed within the 30 day period following the conclusion of the meeting of creditors; (iv) the Judgment holder was duly noticed of the Bankruptcy proceedings in accordance with applicable Bankruptcy Rules; and (v) the debt of the Judgment was not a non-dischargeable debt as provided under 11 U.S.C. 523, issuance of Debtor’s Discharge eliminates the personal liability for the debt, and the property would be duly claimed as exempt from any lien of the Judgment. As a result, a requirement requiring the recording of an Affidavit by the Debtor or Debtor’s Attorney confirming the foregoing matters should be substituted for the requirement requiring satisfaction of the Judgment. Said Affidavit needs to include as an exhibit the following: (i) the Petition; (ii) Schedule C –Property Claimed as Exempt; (iv)Schedule F-Creditors Holding Secured Unsecured Nonpriority Claims; (ii) Certificate of Notice to Creditors naming Judgment Creditor; and (v) Case Docket excerpts confirming the matters set forth in the Affidavit.

OWNER HAS FILED CHAPTER 7 BANKRUPTCY AND IS IN THE PROCESS OF SELLING HIS HOMESTEAD PROPERTY WHICH HAS BEEN DULY SCHEDULED AS EXEMPT; HOWEVER, AN OBJECTION TO THE EXEMPTION HAS BEEN FILED WITHIN THE 30 DAY PERIOD FOLLOWING THE CONCLUSION OF THE MEETING OF CREDITORS. WHAT IS REQUIRED TO SELL AND CONVEY THE PROPERTY AND SATISFY THE EXISTING MORTGAGE ON THE PROPERTY?

Since an objection to the exemption has been filed, an Order denying the objection issued by the Court pursuant to a hearing on Debtor’s Petition requesting such denial which has been properly noticed to the party filing the objection in accordance with applicable Bankruptcy Rules and expiration of the 14 day appeal period following issuance of the Order without the filing of an appeal is required. In this regard, it is not uncommon for the Trustee to file an objection to the personal property claimed as exempt on Schedule C but not the homestead property, in such case, the exemption as to

the homestead property is not affected and the homestead property may be deemed as exempt and no Order from the Court is required. As to the existing mortgage, the Automatic Stay preventing enforcement and collection of the debt by the mortgagee became effective upon the filling of Bankruptcy; therefore, either an Order Authorizing Sale which authorizes the sale of the homestead and payoff of the Mortgage or an Order Granting Relief from Automatic Stay in favor of the Mortgagee is required. As a result, it is necessary to record an Affidavit by the Debtor’s Attorney confirming satisfaction of the foregoing requirements in accordance with applicable Bankruptcy Rules. Said Affidavit needs to include as an exhibit thereto those bankruptcy documents necessary to confirm the matters set forth therein including the Case Docket.

OWNER HAS FILED CHAPTER 13 BANKRUPTCY, THE CHAPTER 13 PLAN, WHICH HAS BEEN APPROVED BY COURT’S ORDER CONFIRMING PLAN PROVIDES FOR PAYMENT OF THE 1ST MORTGAGE OUTSIDE OF THE PLAN THUS PERMITTING THE PAYOFF AND SATISFACTION OF THE 1ST MORTGAGE. THE OWNER, PRIOR TO COMPLETION OF THE PAYMENTS UNDER THE CHAPTER 13 PLAN, WISHES TO SELL THE HOMESTEAD PROPERTY FREE AND CLEAR OF THE 2ND MORTGAGE AND PAYOFF THE 1ST MORTGAGE. WHAT IS REQUIRED TO INSURE THE SALE OF THE PROPERTY?

Debtor petitioned the Court for an Order stripping the lien of the 2nd Mortgage on the homestead property. The Petition was duly noticed to the Mortgagee of the 2nd Mortgage based essentially on the fact that the 2nd Mortgage is unsecured due to the fact that the value of the homestead property does not exceed the amount of the lien of the 1st Mortgage. However, the Order, upon review, indicates that it becomes effective upon the Discharge of Debtor which does not occur until completion of payments under the Chapter 13 Plan. As a result, prior to Debtor’s Discharge, an Order Authorizing Sale which authorizes the sale of the property free and clear of the 2nd Mortgage is required as to which the 14 day appeal period has expired without the filing of an appeal. Said Order needs to expressly set forth the legal description, identity of purchaser, purchase price and conditions, if any, of closing (any changes to the matters set forth in the Order requires a new Order pursuant to proper notice and hearing). As a result, it is necessary to record an Affidavit by the Debtor’s Attorney confirming that the Order Authorizing Sale was issued in accordance with applicable Bankruptcy Rules. Said Affidavit needs to include as an exhibit the Order Authorizing Sale and Case Docket confirming the lack of an appeal.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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Underwriting Q&A

Focus on Bankruptcy Q

OWNER IS SELLING PROPERTY HE OWNS AS INVESTMENT PROPERTY AND THE NAME SEARCH REFLECTS A RECORDED AFFIDAVIT BY OWNER AS DEBTOR CONFIRMING OWNER’S HOMESTEAD PROPERTY WAS DULY EXEMPTED FROM A PRIOR CHAPTER 7 BANKRUPTCY. DOES THIS INFORMATION, OR ACTUAL KNOWLEDGE OF A PRIOR BANKRUPTCY HOWEVER OBTAINED, REQUIRE ANY NECESSITY TO EXAMINE A PRIOR BANKRUPTCY FILE? Yes. Upon the filing of the Chapter 7 Bankruptcy, title to all non-exempt assets, real and personal, owned by the debtor at the time of filing becomes vested in the Trustee. As such, it is necessary to review a prior Bankruptcy file to determine if current property owned at time of Bankruptcy was listed on Schedule A of the Petition and expressly abandoned by the Trustee as being of inconsequential value to the estate or constructively abandoned (unsold by Trustee). If property was not listed on Schedule A, then the Bankruptcy must be re-opened and title obtained from the Trustee or abandoned by the Trustee. Also, assets acquired within 180 days of the filing of the Petition through inheritance, divorce settlement and other means specified in the Bankruptcy Code become an asset of the Bankruptcy Estate. Therefore, a prior Bankruptcy should also be examined to confirm that, if the subject property was acquired within said 180 period, it was included and administered as part of the estate. Otherwise, the Bankruptcy must be re-opened and title obtained from the Trustee or abandoned by the Trustee. A FORECLOSURE DOCKET REVEALS A “SUGGESTION OF BANKRUPTCY” FILED ON BEHALF OF THE OWNER/ MORTGAGOR, PRIOR TO THE EVENTUAL RENDERING OF A FINAL JUDGMENT AND THE RESULTING FORECLOSURE SALE IN THE ACTION. WHAT SPECIFIC EVIDENCE IS REQUIRED IN ORDER TO INSURE TITLE

LEGAL NEWS AND INDUSTRY UPDATES The Housing Market Is Suddenly Hot Again By: Paul R. La Monica | May 25, 2016

BEING CONVEYED BY THE LENDER TO A THIRD PARTY PURCHASER; AND WOULD THE ANSWER BE DIFFERENT IF THE “SUGGESTION OF BANKRUPTCY” WERE FILED AFTER THE FORECLOSURE SALE BUT PRIOR TO THE CERTIFICATE OF TITLE?

Once the Petition for Bankruptcy is filed, an automatic stay exists preventing any action against the debtor and their property for the enforcement of the mortgage. The stay must be lifted prior to any further pleadings in the foreclosure action through either: (i) Order Granting Relief from Automatic Stay; (ii) Discharge of Debtor; or (iii) Bankruptcy case is closed or dismissed. Any judgment or foreclosure sale in the action subsequent to the filing of the “Suggestion of Bankruptcy” without a lift of the automatic stay is invalid requiring issuance of a new judgment and/or sale, as applicable, and, if closed, the action must be re-opened. Unless the Judgment of Foreclosure expressly indicates that the right of redemption is not extinguished until issuance of the Certificate of Title, the filing of the “Suggestion of Bankruptcy” after the foreclosure sale but prior to the Certificate of Title does not prevent issuance of the Certificate of Title or otherwise affect the foreclosure.

IF A NAME SEARCH REVEALS A JUDGMENT RECORDED AGAINST AN OWNER THAT PREVIOUSLY FILED BANKRUPTCY AND THE PROPERTY BEING SOLD WAS ACQUIRED SUBSEQUENT TO THE OWNER’S DISCHARGE IN BANKRUPTCY, DOES THE JUDGMENT ATTACH AS A LIEN AGAINST SAID PROPERTY?

If the Judgment was duly scheduled and extinguished by the Discharge of Debtor, the Judgment cannot become a lien on property acquired subsequent to Debtor’s Discharge with non-bankruptcy assets. However, evidence of the foregoing should be recorded to eliminate any future questions as to the attachment of a judgment lien.

Student Loan Debt Takes Toll on Homes By: Diana Olick | June 13, 2016 As millennials grow older, get married, have children, they are seeking out bigger houses and better schools. That means the suburbs. They are also getting tired of paying higher urban rents and watching those rents rise.

New home sales hit their highest level since 2008 in April. Yes, 2008. The year the housing market, Wall Street and the entire U.S. economy went to you know what in a hand basket.

Down Payment Assistance Programs Save U.S. Homebuyers $17,700 Over Life of Loan By: WPJ Staff | June 13, 2016

Wells Fargo Is Offering Mortgages with 3% Down Payments By: Kathryn Vasel | May 26, 2016

According to Irvine, Ca-based RealtyTrac, U.S. homebuyers using available down payment assistance programs can save an average of $17,766 representing 41 percent of a year’s wages compared to buyers who do not use down payment assistance.

Wells Fargo introduced the yourFirstMortgage program Thursday that offers home loans for up to $417,000 with down payments as little as 3%.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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Florida Notarial Knowledge By: Stefanie Lollis Escrow Branch Manager, Winter Park, FL

There are many different circumstances notaries encounter. If you notarize frequently, you might come across issues that you aren’t sure how to handle, as the rules governing notaries are ever- changing. Here are some frequently asked questions involving the notarization of documents: IS IT PERMISSIBLE TO SIGN A NOTARIAL CERTIFICATE IN ANY COLOR OF INK? Yes, you may sign with any color ink. However, the notary seal must be affixed in black ink only. WHEN AFFIXING A NOTARY SEAL ON A RECORDED PLAT, HOW DO I PREVENT THE SEAL FROM SMEARING? A rubber stamp seal that is not self-inking can be used with different ink. Non-porous, permanent ink that dries through evaporation will adhere to Mylar without smearing. WHAT ARE THE REQUIREMENTS OF NOTARIZING FOR A PERSON WHO IS LEGALLY BLIND OR HAS A SEVERE VISUAL IMPAIRMENT? The notary must read the entire document to the person. You may also want to add a statement in your notarial certificate that you have complied with this requirement of the law. Unless you are an attorney, you may not advise the person about the contents of the document. However, you may re-read any portion of the document to the person.

CAN I NOTARIZE FOR A MINOR? Yes. There is no age requirement regarding who can make an oath, but the notary must make his or her best attempt to ensure that the minor understands what an oath or an acknowledgment is. Additionally, a notary should attempt to determine if the minor is making the oath freely and not being coerced. The notary may refuse to notarize if he or she believes the minor does not understand or is being pressured to make the oath. In this case, it may be best to suggest the minor seek legal advice. As far as identification for a minor, a passport is best. If a minor is over the age of 5, he or she can also seek an Identification card from the Department of Motor Vehicles.

WHAT SHOULD YOU DO IF YOU AFFIX YOUR NOTARIAL STAMP TO A DOCUMENT AND DO NOT GET A LEGIBLE IMPRINT? If you get an imperfect stamp/seal, you should affix the seal again as close to the first imprint as possible. Never affix over writing. It is also acceptable to stamp at an angle so that the stamp fits in limited space.

HOW DO YOU PROPERLY NOTARIZE A PERSON WHO SIGNS BY MARK? First, question the signer to make sure he or she understands the nature and effect of the document. If the signer is illiterate, read the document aloud. Ask for proper identification, perform the notarial act, and administer the oath or take the acknowledgment. Print the signer’s first name at the beginning of the signature line and the last name at the end of the line. Just below the line print the words “his mark” or “her mark”. Allow the signer to make his or her mark on the designated line. Complete the notarial certificate with the required information. It is recommended that you indicate that the person signed by way of mark. Two uninterested persons must witness the signing of the document and the notarization; their names and addresses must be clearly printed under their respective signatures.

Here’s Where Closing Costs Are Lowest in Florida By: Cindy Barth | June 10, 2016

New Bill Seeks Credit Reporting and Scoring Reforms By: Kenneth Harney | May 31, 2016

To determine which Florida counties have the lowest closing costs in Florida, SmartAsset calculated the costs using a 30-year, fixedrate mortgage on each county’s median home value and a 20 percent down payment. It then considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees.

The reform bill would require the credit bureaus to remove negative information related to mortgages that the CFPB or courts have found to be connected with deceptive or predatory lending or servicing.

Mortgage Rates: Down for the First Time in Four Weeks By: Lorraine Woellert | June 9, 2016 Mortgage rates fell for the first time in four weeks, averaging 3.60 percent, down from 3.66 percent. That’s a big drop. A year ago at this time, the average 30-year, fixed-rate home loan was 4.04 percent, according to Freddie Mac.

Thanks, Brexit! Why UK Vote is Likely to Boost US Home Sales By: Jonathan Smoke, CNBC | June 20, 2016 We’ve already seen an immediate impact of Brexit on the mortgage market as the event triggered major declines in rates. The average 30-year conforming rate is around 3.5 percent, the lowest in more than three years and very near the lowest average rates recorded in late 2012.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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FinCEN

GEOGRAPHIC TARGETING ORDERS On July 22, 2016, the Director of the Financial Crimes Enforcement Network (“FinCEN”), U.S. Department of the Treasury, issued a Geographic Targeting Order (“Order”) to selected “Covered Business” entities that include First American Financial Corporation and any of its subsidiaries and title agencies. We are required by the Order to provide a copy of the Order to you. We ask that you read the Order and become familiar with its content. The Order imposes new reporting requirements starting on August 28, 2016, if the specifics of the transaction meet the criteria of a “Covered Transaction” as defined in the Order. The penalties for non-compliance, which include civil and criminal penalties, apply to both First American and its issuing agents. WHAT ARE COVERED TRANSACTIONS? While the Order is more comprehensive than this summary, three of the specific criteria are: • that the property use is residential; • that the location is in any Borough of New York or a designated County of California, Florida or Texas; • that the sales price meets a designated threshold.

State

Covered Jurisdictions (Counties/Boroughs)

Sale Price Threshold

Los Angeles, San Diego, San Francisco, San Mateo, Santa Clara

$2 Million

Broward, Miami-Dade, Palm Beach

$1 Million

Bexar

$500,000

Bronx, Brooklyn, Queens, Staten Island

$1.5 Million

Manhattan

$3 Million

Please refer to FL-2016-0014 Underwriting Standard for requirements for compliance with the Order imposing the reporting requirements. • Underwriting Communication-FL-2016-004-Standard 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 Order. As your underwriter, it is important to us that you receive these valuable tools and guidance to comply with the Order. Keeping our agents up to date with important information is a priority and one more reason to do business with First American Title. To help your customers and business partners understand what is required and what it means to them, First American has created an easy-to-understand informational flyer that can be customized with your company logo and contact information. The flyer can be accessed in the Pass-Thru Marketing Program on AgentNet®. Please contact Len Prescott, 305.908.6252, or your local underwriter if you have any questions. Thank you for your consideration and commitment.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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MICHAEL A. ALTES, B.C.S. REAL ESTATE LAW First American Title congratulates Michael Altes, Underwriting Counsel, on receiving the Florida Bar Board Certification in Real Estate Law. Certification is the highest level

of underwriting risk, clearing title and insurability. His expertise covers multiple disciplines including commercial real estate development and financing, real estate litigation, zoning and land use, real estate titles, title insurance, and wills and probate. Michael has represented clients in both the public and private sectors, including governmental entities.

Board certified lawyers are Evaluated for Professionalism and Tested for Expertise. Michael met the stringent application criteria, was evaluated by judges and other lawyers as to character, ethics and professionalism, and passed the rigorous examination to officially earn board certification.

“We are very proud of Mike,” said Len Prescott, Vice President and Florida Regional Counsel. “Mike is extremely dedicated to providing the highest quality expertise and service to our agents and this distinction is a well-deserved recognition of his skill and professionalism.”

of evaluation by The Florida Bar of competency and experience in the area of law approved for certification.

Michael has been an Underwriting Counsel with First American Title in its Jacksonville office since July, 2012 and assists agents statewide in resolving questions

Please join First American Title in congratulating Michael Altes on this significant accomplishment in his 36-year legal career. Michael may be reached at 904.858.9206 or maltes@firstam.com.

Our office will be closed Monday, September 5th

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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WHO GETS WHAT? GRAMM–LEACH–BLILEY AND TRID Delivery of Closing Disclosure Forms to Parties Involved in Real Estate Transactions Seller:

What form of Closing Disclosure must a settlement agent give to a seller? The settlement agent is responsible for providing a Closing Disclosure to the seller; the question is whether the seller gets: a. A full Closing Disclosure with all buyer/borrower and seller information (including buyer/borrower

Nonpublic Personal Information (NPI)); b. A full Closing Disclosure with buyer/borrower information redacted as permitted by the Rule; or c. Only a seller 2-page Closing Disclosure.

Only a 2-page seller’s Closing Disclosure or a 5-page seller’s Closing Disclosure with the buyer/borrower’s information redacted should be delivered by the settlement agent to the seller unless the parties request otherwise. 1

Lender:

Must a settlement agent provide a copy of the seller’s Closing Disclosure to the lender? The settlement agent is responsible for creating and delivering a Closing Disclosure to the seller and the Rule mandates that a copy of the seller’s Closing Disclosure be given to the creditor. 2

Mortgage Broker:

May a settlement agent provide a copy of the buyer/borrower’s Closing Disclosure to a mortgage broker? Given the mortgage broker’s role in the transaction, they may be provided a copy of the buyer/borrower’s Closing Disclosure and the buyer/borrower does not have to consent to sharing the Closing Disclosure with the mortgage broker. 3

Real Estate Agent or Broker:

May a settlement agent provide a copy of the buyer/borrower’s or seller’s Closing Disclosure to a real estate broker or agent? 5-Page Combined Closing Disclosure In order to release the 5-page Closing Disclosure with both the buyer/borrower’s and seller’s information disclosed to a real estate broker, agent or other third party, the settlement agent should require: »» a waiver of the right to opt out of sharing of NPI from both the borrower/buyer and seller »» permission to release the Closing Disclosure from the lender

5-Page Closing Disclosure – Borrower’s Charges Shown and Seller’s Charges Redacted In order to release the 5-page Closing Disclosure with only the borrower’s information disclosed to a real estate broker, agent or other third party, the settlement agent should require: »» a waiver of the right to opt out of sharing of NPI from the buyer/borrower »» permission to release the Closing Disclosure from the lender

5-Page Closing Disclosure – Seller’s Charges Shown and Borrower’s Charges Redacted or 2-Page Seller Disclosure In order to release the 5-page Closing Disclosure with only the seller’s information disclosed or the 2-page seller’s Closing Disclosure to a real estate broker, agent or other third party, the settlement agent should require: »» a waiver of right to opt out of sharing of NPI from the seller. 4

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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WHO GETS WHAT? GRAMM–LEACH–BLILEY AND TRID

Delivery of Closing Disclosure Forms to Parties Involved in Real Estate Transaction

Legal Citation The Rule provides support for all three options: The buyer/borrower and seller are permitted under the TRID rule to both get the full 5-page fully completed Closing Disclosure. In the Preamble (TRID page 1065-1066) the CFPB states that: “the inclusion of the summaries of the consumer’s and seller’s transactions enable consumers to fully provide effective advance notice to home buyers of settlement costs”, and that “Often, costs associated with one transaction are accounted for or allocated between the parties and have a direct effect on the other transaction. For example, seller concessions from the real estate purchase contract can change the availability or terms of the loan transaction if the concessions are large enough to change the loan-to-value ratio and the amount of the consumer’s down payment.” In the Staff Interpretation relating to the seller disclosure requirement, the CFPB states “The settlement agent complies with this provision by providing a copy of the Closing Disclosure provided to the consumer, if it also contains the information under § 1026.38 relating to the seller’s transaction, or alternatively providing the disclosures under § 1026.38(t)(5)(v) or (vi), as applicable.” (Those disclosures being the ones with the buyer/ borrower’s information redacted.)

The seller could also receive a 5-page Closing Disclosure where the buyer/borrower information is blank. The Rule at 12 CFR § 1026.38(t) (5)(v) says that the form can be modified to separate the information of the borrower and seller. In that case the information disclosed to the seller can omit the following on Page 1: Loan Information, Loan Terms, Projected Payments, Costs at Closing; Page 2: Origination Loan costs (as paid by borrower) Other Costs (as paid by borrower); Page 3 Cash to Close calculation; all of the page 4 disclosures; and the Loan Calculations and Other Disclosures on page 5. Finally, the Rule at 12 CFR § 1026.38(t)(5)(vi) also permits the disclosure of the seller’s information on a 2-page seller only form (Model Form 25(I)) 12 CFR § 1026.19(f)(4)(i) requires that the settlement agent provide the seller with a disclosure ‘reflecting the actual terms’ of the transaction. Section 1026.19(f)(4)(iv) further requires that the seller disclosure also be given to the ‘creditor’ (a defined term meaning the person extending the credit and to whom the debt is payable. (12 CFR § 1026.2(a)(17)). Therefore the complete seller disclosure, whether as part of the full 5-page Closing Disclosure or the seller only 2-page Closing Disclosure, must be given to the funding lender. Under Gramm-Leach-Bliley (GLB), the seller has no right to refuse to share any information on the Closing Disclosure with the buyer/ borrower’s lender since 12 CFR § 1016.15(a)(7) has an exception to the right to opt out of the sharing of Nonpublic Personal Information (NPI, a defined term at 12 CFR § 1016.3(p)) where it is it is required by a federal regulation.

The TRID rule addresses the role of the mortgage broker only in terms of the issuance of the loan estimate, and the term ‘mortgage broker’ is not specifically defined within the TRID Rule. Rather there is a cross reference in Comment 19(e)(1)(ii) to 12 CFR § 1026.36(a) (2) where a mortgage broker is defined as “any loan originator that is not an employee of the creditor.” Consequently, the sharing of NPI (and thus the permissibility of the settlement agent delivering a completed 5-page Closing Disclosure to the mortgage broker) will be analyzed under GLB. While the general rule under GLB is that the entity in possession of NPI cannot disclose it to a nonaffiliated third party unless the consumer has the right to opt out of the sharing of the information (12 CFR § 1016.10), there are exceptions. With regard to sharing the Closing Disclosure with a mortgage broker, it is permitted under the exceptions in 12 CFR § 1016.14(a) – the disclosure is necessary to effect a transaction the consumer has requested (the processing of the mortgage loan transaction) and the disclosure is to provide a record of the transaction to the consumer’s broker (12 CFR § 1016.14(b)(2)(iii))..

The most aggressive reading of GLB section 1016.14(b)(2)(iii) would include real estate brokers and agents in the group of ‘agents’ that can receive information without the opt out rights. Since this analysis is under GLB, the seller is a consumer, and the real estate agent is his agent or broker. However, the real estate agent may be looking for a completed 5-page Closing Disclosure in which case the buyer/ borrower’s NPI is also included.

The more conservative approach is to rely on the provision in GLB Section 1016.15 which permits disclosure with the consent of, or at the direction of the consumer. Clearly the Closing Disclosure has buyer/borrower NPI and arguably it has seller NPI, so both consents would be required to use this section of the GLB. In addition, since the lender (creditor) is the ‘owner’ of the buyer/borrower’s Closing Disclosure; they have potential liability under both state and federal law in the event of a breach. Under this approach the settlement agent should require waivers of the right to opt out of sharing NPI from both the seller and buyer/ borrower and permission to release the Closing Disclosure from the lender.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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TEN

hile there are reports that the TILA-RESPA Integrated Disclosures (TRID) are making it longer to close mortgages, there may be a larger problem growing with investors on the secondary market refusing to purchase loans because of potential compliance issues.

REASONS WHY

In December, Moody’s reported that several third-party firms found TRID violations in more than 90 percent of the loans that were audited. Moody’s said that many of the violations were “technical” in nature, which included the need to use the same spelling convention or the absence of a required hyphen. Fannie Mae, Freddie Mac and the Federal Housing Administration have given lenders a grace period for technical compliance with TRID.

MARKET

While there’s reprieve from the GSEs and FHA, there’s fear that some lenders could get stuck with loans if investors refuse to buy them, causing potential liquidity problems, especially for independent mortgage banks. According to Inside Mortgage Finance, a major investor has been rejecting 90 percent of mortgages being offered to them by correspondent originators because of TRID errors.

SECONDARY

REJECTING PURCHASE

OF TRID LOANS TRID VIOLATIONS IN MORE THAN 90 PERCENT OF THE LOANS THAT WERE AUDITED

Many compliance issues appear to be items that should be easily corrected through industry education and correcting software systems. Marx Sterbcow, managing attorney of The Sterbcow Law Group, and Rich Horn, founding attorney of Rich Horn Legal, compiled the following 10 reasons why investors are rejecting loans: 1. Loan Estimate and Closing Disclosure are being issued with the same date. The date listed on the Loan Estimate and the Closing Disclosure should be the date that the respective document was issued. This is the date the disclosure was mailed or delivered to the consumer. This date will not change based on the delivery method. Thus, whether a disclosure was hand delivered to the consumer on January 14 or placed in the mail on January 14, the issue date would be January 14. The point here is that once a Closing Disclosure is issued, a Loan Estimate can’t be issued to udpate tolerance. When the documents have the same issue date, it’s impossible to determine which was issued and received by the consumer first. 2. Closing Disclosure: Title fees are not being disclosed in the proper format, which should be “Title – Description” (i.e. “Title – Settlement Agent Fee”). There have even been some issues with not having a space in between “Title” and the hyphen. The regulatory text has a space in between “Title” and the hyphen, so keep that in mind.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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TEN REASONS WHY SECONDARY MARKET IS REJECTING PURCHASE OF TRID LOANS cont.

3. Closing Disclosure: All contact information is not included on Page 5 (i.e. real estate agent/broker’s license number is missing). Keep in mind that if the contact person (the individual, not the entity) is not required to have a License ID, you can leave that cell blank. Also, remember, that you should be using the License ID cell for your licenses, not the NMLS ID cell. NMLS ID numbers are typically only obtained by lenders and brokers, so you typically should not have a reason to put your license number in the NMLS ID cells. 4. The Closing Disclosure on refinances does not allow a place to show subordinate financing. This is correct for the alternative Closing Disclosure. The CFPB’s Office of Regulations stated in a webinar that if the alternative Closing Disclosure is used, there is no place to show subordinate financing, and there is no requirement to do so. Essentially, each transaction will have its own cash to close. The settlement agent will need to figure out the “master” cash to close. 5. Closing Disclosure: The title company’s “file number” is not being included on page one of the disclosure. The file number is the settlement agent’s file number “for identification purposes.” There is not a lot of guidance about this number. The commentary only states that it “may contain any alpha-numeric characters and need not be limited to numbers.” So, basically, title and settlement agents could use any number they assign to the file in their own system to identify it, which can contain letters and numbers. 6. Lender/Bank sent the loan file to the investor with a copy of an executed third-party authorization to release non-public personal information form giving the Realtor access to the borrower’s Closing Disclosure.

7. Provide the seller’s Closing Disclosure: In sale transactions, the rule places the responsibility on the settlement agent to provide the seller with a Closing Disclosure. However, the rule also recognizes that in some instances the settlement agent may meet this obligation by either providing the seller with a seller-only Closing Disclosure or a combined buyer/seller Closing Disclosure. This can be done by either the lender or the settlement agent depending on the agreement between those parties. You should collaborate with your lender partners to determine who will prepare this document so you can ensure you meet your obligations. Many lenders have reported that the settlement agents they deal with are not providing the seller’s Closing Disclosure or instead are providing an alternate settlement ALTA® - American Land Title Association statement. The rule states that an alternate settlement statement cannot be used in place of the seller’s Closing Disclosure. 8. Disclosure of Simultaneous Issued Policies: Lenders are reporting that settlement agents do not understand the simultaneous issuance rules, and they are getting estimates that do not comply. 9. Optional designation: The “(optional)” designation is not being used correctly. Some lenders are using “(optional)” for separate insurance, warranty and guarantee, or event-coverage products disclosed under the “Other” category, such as credit life insurance, debt suspension coverage, debt cancellation coverage, home warranties and similar products. 10 . Closing Disclosure and Loan Estimate Fee Names: The fee names essentially should be the same between the Loan Estimate and Closing Disclosure. However, the title/settlement agent may change fee names—based on changed circumstance—if it was not the title/settlement agent that provided the original fees on the Loan Estimate. If the title/ settlement agent provided the fee estimates for the Loan Estimate, the same fee names should be used. 

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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CAUTION!

INCREASED LIABILITY AHEAD! Why First Lien Letter Requests Must Be Denied By: The Florida Underwriting Team

WHAT IS A FIRST LIEN LETTER?? First Lien Letters are letters requested by lenders wherein the closing agent guarantees that the insured mortgage constitutes a good and valid first lien on the subject property. Typically, the First Lien Letter is a separate form included in the lender’s closing package, with a signature line for the closing agent to sign. However, settlement agents must be vigilant, as this first lien guarantee language may also be included within a lender’s closing instructions.

they are authorizing the release of funds prior to their mortgage being recorded, which results in a “gap” between disbursing and the recording. But Lenders are protected from this risk in Florida by Florida Statutes, § 627.7841, which requires insurers to insure against the possible existence of adverse matters or defects in the title which are recorded during the period of time between the effective date of the commitment and the recording date of the mortgage except as to matters of which the lender has knowledge. Sometimes simply providing this information to the lender resolves their request.

WHY YOU MUST NOT SIGN A FIRST LIEN LETTER, EVEN IF YOU “KNOW” THE MORTGAGE IS OR WILL BE A VALID FIRST LIEN?

WHAT MAY YOU SIGN?

First Lien Letters are problematic for a number of reasons. First, title insurance is highly regulated in Florida, so the letter would need to be an approved form. However, the Florida Office of Insurance Regulation (formerly the Department of Insurance) has taken the position that a First Lien Letter is not an approved form and may not be issued. Because First Lien Letters are not approved forms of title insurance, the settlement agent has no authority to sign it, and the form itself is not the appropriate form for obtaining title insurance in Florida. Second, these requests may create additional liability beyond the coverage set forth in the title insurance commitment and policy. By signing a First Lien Letter, you may be directly insuring the validity and first lien priority position of the insured mortgage lien, and doing so without the necessary Exclusions, Exceptions and Conditions contained in the commitment and policy. Third, if you are signing it prior to closing, it places you in a position of making a guarantee of facts that often cannot be accurate at the time you are signing it. After all, at the typical time the lender has requested a First Lien Letter, no funds have been disbursed, and the mortgage has not been recorded. An unrecorded mortgage cannot be a valid first lien because it is not a lien at all until it is properly recorded in the Public Records. Finally, there is a risk that First Lien Letters may be interpreted as providing a legal opinion with respect to the validity and priority of a mortgage lien. Accordingly, unless you are an attorney, you may be committing the unauthorized practice of law by executing a First Lien Letter. It was with these considerations in mind that First American Title decided to issue Advisory FL-2016-0012 on July 6, 2016, advising our Issuing Agents and Offices that requests for First Lien Letters must be denied. While the scope of our agency agreements is limited to the functions of underwriting and the issuance of title insurance policies on our behalf and does not include closing or escrow services, noncompliance with this Advisory could impact on liability under our policies or closing protection letters, and should therefore be considered a directive when a First American Closing Protection Letter is issued. WITHOUT A FIRST LIEN LETTER, WHAT PROTECTION DOES A LENDER HAVE IN FLORIDA WHEN IT AUTHORIZES DISBURSEMENT OF ITS FUNDS? One justification that lenders have provided for their request is that

You may sign a statement guaranteeing that you will issue an ALTA Loan Policy 6-17-06 (with Florida modifications) insuring the lender’s first lien position. This removes the concern of your direct liability and allows you, First American Title, and the lender to rely on the title insurance policy that you are issuing. A sample statement would be: Once we obtain funding authorization, have completed the closing, and have disbursed the proceeds of the loan and recorded the loan, we will issue an ALTA Loan Policy 6-17-06 (with Florida modifications) in accordance with the Commitment for Title Insurance previously issued to you and subject only to your approved Exceptions. The policy form insures against loss by reason of the invalidity, unenforceability, or lack of priority of the Insured Mortgage, subject to the Exclusions, Exceptions and Conditions contained in the policy. Alternatively, if the transaction has already closed and you have already recorded before the lender requests a First Lien Letter, you can revise the letter to read: “We have issued an ALTA Loan Policy 6-17-06 (with Florida modifications) insuring that this mortgage is a valid first lien on the property…” If there is further push-back from a lender, a sample response would be: The policy must be issued in compliance with state regulatory conditions. Pursuant to Section 14 (a) of the policy form, it is, together with any endorsements, the entire policy and contract between the Insured and the Company. According to the Florida Office of Insurance Regulation, signing a First Lien letter or similar closing instruction may place the closing agent in the position of executing a specifically prohibited form of title guarantee separate from the policy. Accordingly, we must decline to comply with your request for a First Lien Letter. BUT WHAT IF YOU ARE DEALING WITH ONE OF THOSE RARE INSTANCES WHEN THE LENDER ABSOLUTELY REQUIRES ITS FORM OF FIRST LIEN LETTER AND WILL NOT ACCEPT THE ALTERNATE PROPOSED STATEMENT? In one last ditch effort not to lose the business, you may insert into the First Lien Letter: “This letter is executed in anticipation of the issuance of a final policy of title insurance pursuant to the captioned commitment (or “commitment dated _________”) and will merge into and be superseded by said final policy.”

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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Rumor or Reality?

Cyber Liability Insurance

By: Barbara Burke and the SE Region – Agency Division Education Team

In our last article, we looked at cyber liability insurance, what it covers, and how it relates to fidelity coverage. Even if you have a cyber liability policy, though, your company might still be denied coverage. Why? Because of actions taken by your employees! Read on! Actions taken by a company-insured might avoid coverage. We saw in “Cyber Liability Insurance - Part One” that the CFPB fined Dwolla, Inc. for claiming it had fantastic security procedures in place when, apparently, it didn’t. Would a cyber liability insurance policy have helped the company? Maybe, from the perspective of showing the CFPB that Dwolla was conscientious about taking care of its customers. On the other hand, a cyber liability policy might not have covered this claim if the policy had a ‘misleading advertising’ exclusion: • Misleading advertising arising directly or indirectly from any actual or alleged advertisement promoting your business activities which are false or misleading. Another cyber liability policy exclusion for actions taken by the insured is the failure of a company to maintain adequate and working equipment: • Internet infrastructure failure in respect of INSURING CLAUSE 1, SECTIONS D and E only, arising directly or indirectly from the failure of external networks, cables, and core Internet infrastructure servers. But, my main concern about cyber liability insurance is if these policies cover cyber security breaches based on an employee’s actions. Following the trend of banks shifting fraudulent wire transfer loss back to a customer if the customer was offered, but declined, a commercially reasonable security procedure1, would a claim be denied when an employee fails to follow company procedures about cyber fraud? What if a company has written policies and procedures about NOT opening attachments to unsecured emails, but an employee opens one that allows a virus into the computer system? What if a company requires employees to confirm a change of wiring instructions by phone and the employee fails to do so? If either of those employee’s actions results in cyber fraud loss, would that claim be denied under an exclusion in the cyber liability policy? To find the answer, I asked Bruce Lucas, from First American Property & Casualty Insurance Company, for input. One of the points Bruce emphasized was that there is a difference between my two scenarios.

In the first situation, the virus permitted a hacker to capture the key strokes of the employee, allowing the hacker to discover the User ID and password for the company’s bank account. The hacker then accessed the bank account and sent fraudulent instructions to wire funds to the hacker’s account. This claim could be covered by the company’s Fidelity Crime policy or Cyber Liability policy if cybercrime is included, because the hacker was the one who sent the fraudulent wiring instructions. In the second situation, the employee directed funds to be transferred to the hacker’s account. Here, the employee had the authority to initiate a wire transfer, so the fraud was not in the transfer of funds but in the previous information received by the employee. This crime would fall under a Social Engineering crime provision because the employee sent authorized wiring instructions, albeit to a fraudulent account. Standard business owners’ policies and E&O policies do not cover financial losses due to cyber losses or bank funds losses due to a cyber hack or attack. Therefore, ask your insurance agent about available coverage policy provisions for these types of actions, both fraudulent activity by a fraudster and conduct by an authorized employee but as a result of fraudulent conduct. CONCLUSION Will cyber liability insurance policies have an exclusion like our title insurance policy Exclusion 3(d) which avoids coverage for loss “created, suffered, assumed or agreed to” by the Insured? If an employee is found to have assisted with a cyber-security breach, by ignoring all of the many warnings or even, perhaps, his own employer’s written procedures, how long will it be before cyber liability insurers decline to cover loss from that action? The cyber liability insurance industry is relatively new, and coverage varies widely and significantly. Learn more about the coverages available for your company by contacting your insurance agent or Bruce Lucas, at 866.215.7814 or blucas@firstam.com. As a reminder, the number one reason for cyber breaches is, as IT folks say, between the chair and the keyboard. Train your employees!

1 Article 4(A), Section 202(c); Park Sterling Bank v. Wallace & Pittman, PLLC (2013); Choice Escrow and Land Title LLC v. BancorpSouth Bank (2014)

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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Underwriting Spotlight:

Bill Boyce Senior Underwriting Counsel, Largo, FL

While the president of the Texas Legends, a professional basketball team in the NBA Development League, and a VP of Sales and Business Operations for The Madison Square Garden Company, I had the privilege of sharing some key moments in the careers of basketball personalities. Specifically, Nancy Lieberman (Hall of Fame) became the first female head coach of a men’s professional basketball team, Spud Webb (NBA Slam Dunk Champion) accepted his first front office position as President of Basketball Operations, Del Harris (Kobe’s first NBA coach) accepted his last head coaching position, Eduardo Najera (1st person born in Mexico to play in the NBA) accepted his first head coaching position, Craig Hodges (NBA 3 Point Champion) accepted an interim head coaching position, and Craig Hodges went 0-3 against me in ping pong.

“I stayed on a mechanical bull for 8.1 seconds.”

I N WHAT AREA OF LAW DID YOU PRACTICE PRIOR TO COMING TO FIRST AMERICAN TITLE?

Most recently, I spent six years in the sports industry starting and operating professional basketball teams in the NBA Development League. Before that, I spent fifteen years practicing in the areas of commercial and residential real estate transactions, commercial loan documentation, litigation, foreclosures, and title insurance. I was fortunate to feel comfortable at the closing table and in the courtroom. I always felt that litigating made me a better transactional attorney and handling transactions made me a better litigator. My experience as a title agent gave me the knowledge, experience, and empathy needed to partner with agents and other stakeholders to develop effective and practical solutions to underwriting challenges. Soon, I left the bureaucracy to go back into the title insurance business. I was transferred to Atlanta where I was a regional counsel for the Southeastern states. I was traded to South Florida for two employees who wanted to move to Atlanta (and a player to be named later). In 1995, I became state counsel for Commonwealth in Orlando where I had grown up and gone to elementary and high school. In 2011, I moved to Daytona Beach about five miles from where I used to live when I attended Seabreeze Junior High School. This is what I mean when I tell folks that “I haven’t got very far in life.”

Q A

WHAT MADE YOU WANT TO WORK IN THE TITLE INSURANCE INDUSTRY?

Q A

WHAT BROUGHT YOU TO FIRST AMERICAN TITLE?

Q A

TELL US ABOUT THE EMPLOYEE CULTURE IN THE LARGO OFFICE.

I defaulted into the title industry by accepting an associate position in the Real Estate Department of Fowler, White – a big firm with about 130 lawyers at that time. The firm needed attorneys with signing authority, and I raised my hand because I thought it would be an easy way to earn fee (revenue) credits. I continued in the industry after I started my own firm because being an agent was a great way to diversify my business and add an income stream. I’m glad I stumbled into the title industry because real estate is a fun and dynamic sector and the title industry provides a tremendous opportunity to participate in this sector.

The biggest motivator was the opportunity to join a talented and pioneering underwriting team. Underwriting standards and guidelines are always evolving, and I am motivated to be part of the team that is inventing the future of this great industry.

We have a great team that is dedicated to excellent and timely underwriting for the benefit of our agents and other stakeholders. The culture empowers team members to make decisions independently while inviting collaboration when necessary. We’ve got a great mix of personality types from fast paced and outspoken to cautious and reflective, and from warm and accommodating to questioning and skeptical. The leadership is currently emphasizing EQ* development, which is creating opportunities for personal, professional, and team growth. * Emotional Quotient: A measure of a person’s adequacy in areas such as self-awareness, empathy and dealing sensitively with other people.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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CASE LAW UPDATES

Contracts Personal Liability – A signature block containing an official designation such as “president” or “agent” does not shield the signor from personal liability if the contract language indicates assumption of personal obligations. Frieri v Capital Investment Services, Inc., etc., Nos. 3D14-293 & 3D141442, 2016 WL 2941081 (Fla. 3d DCA 2016)

Summary Judgment Trial court inappropriately shifted the burden to the non-movant lender to produce evidence in opposition to a summary judgment motion when the borrowers had failed to produce competent, timely evidence in support of the summary judgment motion. Wells Fargo Bank, N.A. v Bilecki, Nos. 4D14-1015 & 15-67, 2016 WL 2894115 (Fla. 4th DCA 2016) Business Records Failure to object to a certificate of authenticity of business records prior to trial waives any objection the party has to the admissibility of the certificate. Wilmington Savings Fund Society, FSB v. Aldape, No. 5D15-369, 2016 WL 3030833 (Fla. 5th DCA 2016) Final Judgments Trial court lacks jurisdiction to award relief that was not affirmatively plead or tried by consent, and an appellate court may relieve a party from such final judgment or decree because it is void. Deutsche Bank Nat. Trust Co. v. Patino, No. 5D15-474, 2016 WL 3030834 (Fla. 5th DCA 2016) Procedure Subject Matter Jurisdiction – Entities incorporated under Section 17 of the Indian Reorganization Act of 1934 (25 U.S.C. § 477) have sovereign immunity unless such immunity is waived by the entity’s charter or by a contract pursuant to a provision within the entity’s charter allowing for waiver. MMMG, LLC v. Seminole Tribe of Florida, Inc., No. 4D15–235, 2016 WL 3265919 (Fla. 4th DCA 2016) Evidence A bank failed to reestablish a lost note because the bank’s sole witness lacked personal knowledge as to whether the note had been lawfully seized; the witness’ knowledge concerning the note came almost entirely from a third party affidavit that was attached to the complaint but was not received into evidence. Home Outlet, LLC v. U.S. Bank Nat’l Ass’n, etc., No. 5D15-2643, 2016 WL 3452532 (Fla. 5th DCA 2016)

Administrative Law Standing – Unless currently held by the Board of Trustees of the Internal Improvement Trust Fund, submerged lands conveyed by the State of Florida with restrictions and a possibly of reverter do not fall within the statutory definitions of Sovereignty Submerged Lands found in the Florida Constitution and the Florida Administrative Code. Herbits v. Bd. of Trs. of the Internal Improvement Tr. Fund, No. 1D15-1076, 2016 WL 3450460 (Fla. 1st DCA 2016)

Foreclosure Standing – Bank failed to prove standing to foreclose because it did not provide sufficient evidence establishing merger of predecessors, and thus, there was no evidence that bank’s predecessor had authority to transfer note to bank; mere testimony of a merger is not sufficient evidence to prove the extent of consolidation or that a specific asset was transferred. Segall v. Wachovia Bank, N.A., as Trustee, No. 4D14-4424, 2016 WL 3065599 (Fla. 4th DCA 2016) Standing – Where a plaintiff attaches a copy of a note to the complaint and the plaintiff later files the original note in the same condition as the copy attached to the complaint, the combination is sufficient to establish that plaintiff had actual possession of the note at the time of filing and thus has standing to bring the foreclosure action absent any testimony or evidence to the contrary. U.S. Bank Nat’l Ass’n v. Clarke, No. 4D14-3398, 2016 WL 3011679 (Fla. 4th DCA 2016) Standing – A lis pendens for the foreclosure of a first mortgage does not bar the foreclosure of a claim of lien if the lien is based on a declaration of covenants and restrictions that was recorded before the mortgage and the lis pendens; the declaration constitutes an “interest” for the purpose of Section 48.23(1) (d), Fla. Stat. Jallali v. Knightsbridge Vill. Homeowners Ass’n, No. 4D15-2036 (Fla. 4th DCA 2016) Substantial Compliance – Notices of default need only substantially comply, as opposed to a strict compliance standard, with the conditions precedent to foreclose under the mortgage. Green Tree Servicing, LLC v. Goins, No. 4D14-4722, 2016 WL 3065599 (Fla. 4th DCA 2016)

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

Substantial Compliance – A letter providing notice of foreclosure need only substantially comply with the requirements for notice in a mortgage, and a minor variation from the terms will not create a defect unless the notice varies “in a way that goes to the essence of the parties’ bargain.” Federal National Mortgage Ass’n v. Morton, No. 2D14–5165, 2016 WL 3265485 (Fla. 2d DCA 2016) Dismissal as Sanction – ATrial court is not required to apply the Kozel factors before dismissing a mortgagee’s claim without prejudice because those factors need only be considered when dismissal is with prejudice or the functional equivalent. Fed. Nat’l Mortg. Ass’n v. Linner, as Trustee, No. 2D15-1631, 2016 WL 3127410 (Fla. 2d DCA 2016) Bankruptcy Stay – Appellate court lacked jurisdiction to consider the borrower’s notice of appeal that was filed during pendency of bankruptcy stay, because such an appeal is a nullity. Hewett v. Wells Fargo Bank, N.A., as Trustee, No. 2D15-1074, 2016 WL 3065014 (Fla. 2d DCA 2016) Summary Judgment – Where lender’s affidavit in support of summary judgment failed to factually refute borrower’s legally sufficient affirmative defense of failure to comply with conditions precedent, there was a disputed genuine issue of material fact, and thus summary judgment was inappropriate. Brooks v. Bank of Am., N.A., No. 4D14-3337, 2016 WL 3011653 (Fla. 4th DCA 2016) Statute of Limitations – A separate five year statute of limitations applies to each default, and the dismissal of one foreclosure action with prejudice does not preclude the filing of a subsequent foreclosure action based on a different default. Deutsche Bank Trust Company v. Beauvais, 188 So. 3d 938 (Fla. 3d DCA 2016)

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Wire Fraud “I never thought it would happen to me!” By: Michele Green, SVP, Senior Business Counsel-Agency Division

THERE HAS BEEN A RESURGENCE OF AGENTS FALLING VICTIM TO INSTANCES OF WIRE FRAUD. In interviewing the affected agents, the responses have a number of common themes:

“I never thought it would happen to me.” “I knew the risks, but hadn’t adequately communicated to or implemented processes for my front line people.” “I’ve communicated with the employees about these risks; the First American Title flyer is up in our lunchroom, but they sent the wire anyway.” Falling victim to a wire fraud scheme or related fraud can be financially devastating to agents and their business relationships. Make sure you are insured properly against these risks and know that a fraud attempt absolutely can, and likely will at some point, be made against your business. Communicate with your employees loudly and often about these risks and be sure to establish procedures and protocols to guard against failures.

Help protect your agency by keeping these helpful tips near the desk of everyone in your office: Wire and other disbursement instructions received by email should be confirmed by telephone at a known or independently-confirmed number, NOT the telephone number at the bottom of the email you are trying to confirm. Be especially skeptical of any change in wiring instructions. Who really changes their wire instructions that frequently? Confirm the account to which you are wiring is in the name of the party entitled to the funds. Consider providing YOUR wire instructions via hard copy only, with a notation: With cyber crimes on the increase, it is important to be ever-vigilant. If you receive an email, or any other communication that appears to be generated from our office, containing new, revised or altered bank wire instructions, consider it suspect and call our office at a number you trust. Our bank wire instructions seldom change. Be leery of a new deal coming to your office out of nowhere. Example: “I have a sales contract and a deposit for property I am purchasing, and I was referred to your office. Will your office act as title and settlement agent for my transaction?” This conversation is typically followed by a subsequent request to wire out funds originally deposited by check. Be suspicious of emails from free, public email account domains as they are often a source of risk. Watch out for phishing emails with embedded links, even when they appear to come from a trusted source such as First American Title.

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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FIRST AMERICAN TITLE

RAPID RESPONSE TEAM The Florida Underwriting Department of First American Title is pleased to announce the formation of our Rapid Response Team. We understand that time is of the essence when working on real estate transactions, and a quick response from our underwriting department may be necessary to keep transactions on track, even when the need arises after normal business hours.

Team Members

The Rapid Response Team shares one email address (FloridaUW@firstam.com) and phone number (866.728.5207). Utilizing this communication method will save agents time and eliminate the need to make multiple telephone calls or send multiple emails if their preferred underwriter is unavailable.

GREG BLOMELEY VP, Underwriter Winter Park, FL

BILL BOYCE

Underwriting Counsel Tampa Bay, FL

The quality and responsiveness of the Rapid Response Team will increase our speed of service and allow us to provide timely underwriting support and assistance to our loyal and valued agents.

866.728.5207 FloridaUW@firstam.com CHIP KOVAL

Underwriting Counsel Gainesville, FL

WADE WALLACE

Underwriting Counsel Estero, FL

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

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FLORIDA STATEWIDE UNDERWRITERS Represents locations of FL underwriters

REGIONAL AND STATE UNDERWRITING COUNSEL TEAM Alan McCall

Leonard (Len) Prescott

VP, SE Division Underwriting Counsel D: 407.618.7935 | M: 407.312.9132 amccall@firstam.com

VP, FL Regional Counsel D: 305.908.6252 | M: 305.900.8427 lprescott@firstam.com

Patricia (Trish) Ladan

Michael Altes

Sr. Underwriting Counsel FL Associate State Counsel D: 407.691.5333 | M: 407.618.4205 pladan@firstam.com

Underwriting Counsel D: 904.858.9206 | M: 904.349.9435 maltes@firstam.com

John Balberchak

Greg Blomeley

Jennifer Bloodworth

William (Bill) Boyce

Charles (Chip) Koval

Pat Newton

W. Wade Wallace

Sherri Wedesky

Sr. Underwriter D: 850.296.3084 | M: 850.445.9323 jbalberchak@firstam.com

Sr. Underwriting Counsel Winter Park: 407.691.5296 Sunrise: 954.839.2959 M: 407.790.2057 jbloodworth@firstam.com

Underwriting Counsel D: 352.415.4765 | M: 352.240.2519 ckoval@firstam.com

Underwriting Counsel D: 239.676.3747 | M: 239.961.2110 wawallace@firstam.com Rapid Response Team: FloridaUW@firstam.com

First American Title | Florida Legal Eagle | Volume V, July/August/September 2016

VP, Underwriter D: 407.691.5210 | M: 850.445.9320 O: 407.691.5200 | gblomeley@firstam.com Rapid Response Team: FloridaUW@firstam.com Sr. Underwriting Counsel D: 727.549.3312 | M: 727.501.3454 wboyce@firstam.com Rapid Response Team: FloridaUW@firstam.com

Sr. Underwriting Counsel D: 239.330.3328 | M: 239.272.1856 pnewton@firstam.com

Underwriter D: 850.296.3170 | M: 850.766.7792 swedesky@firstam.com

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