Fall 2016 New Hampshire Spotlight

New Hampshire

Fall 2016

SPOTLIGHT CFPB

ADVANCED NOTICE OF PROPOSED RULEMAKING By: Carrie B. Cote, Underwriting Counsel

The Consumer Financial Protection Bureau (CFPB) published an Advanced Notice of Proposed Rulemaking in the Federal Register on July 31, 2016 to address questions surrounding the Know Before You Owe Rule (TRID).

The CFPB recently published proposed amendments to the TRID Rule in an effort to clarify outstanding questions raised by various industry participants including mortgage bankers, consumers and the American Land Title Association (ALTA). The proposed amendments to the Rule can be read in their entirety (all 293 pages!) by visiting: http:// www.consumerfinance.gov/policy-compliance/rulemaking/rules-underdevelopment/amendments-federal-mortgage-disclosure-requirementsunder-truth-lending-act-regulation-z/.

The CFPB hit on four areas it felt were the most in need of clarification, while also making it clear they were not inclined to change policy decisions that had been made several years ago when the original Know Before You Owe Rule was drafted. So what we are left with is three somewhat technical adjustments and the potential for some substantive guidance regarding information sharing.

Page

In This Issue

1-2

CFPB: Advanced Notice of Proposed Rulemaking

2

Agency Verification Letters

3

New Hampshire Fall 2016 Staff Appreciation Luncheons

3

Reminder - High Liability Authorization Approval

4

Improving Lender Title Policy Delivery - Addressing Missing Policy Requests

5-6

Top 5 Underwriting Questions

7-9

Top 10 Questions About FIRPTA

10

First American Title Pass-Thru Marketing Program

11

First in Service

12

Short and Simple Easy-to-Use Online Resources

13

Did You Know?

13

Know Before You Owe The Settlement Professional’s Guide

14 15

News Brief New Hampshire Contact List

Continued on next page

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

AGENC Y VERIFIC ATION LE T TERS

CFPB ADVANCED NOTICE OF PROPOSED RULEMAKING Continued •

First, the CFPB has proposed to implement Tolerances for the Total of Payments as disclosed on both the Loan Estimate (LE) and Closing Disclosure (CD) that would include the use of the Finance Charge currently not included in the calculation. This would require system updates for mortgage lenders, so they can adequately calculate and track discrepancies for this figure.

•

Second, the TRID Rule originally gave a partial exemption from disclosure requirements to certain housing assistance loans originated primarily by housing finance agencies. In the proposed rule, the CFPB elaborated on the exemption and partial exemption status of housing assistance loans as they relate to recording fees and transfer taxes.

Specifically, the CFPB clarified that recording fees and transfer taxes may be charged in connection with housing assistance loan transactions without losing eligibility for the partial exemption. The Rule would also exclude recording fees and transfer taxes from the exemption’s limits on costs. The CFPB feels these changes will encourage more lenders to partner with housing finance agencies and bolster the accessibility of these consumer-friendly housing loans.

•

Third, the CFPB is seeking to include Cooperatives under the definition of real property, thereby making finance transactions for the purchase or refinancing of Cooperatives subject to the TRID Rules. In some states, Cooperatives are viewed as personal property rather than real property, and have been exempt from the TRID Rule. This amendment would necessitate the use of the same TRID disclosures required for the financing of real property where the proceeds are related to personal, family or household use.

•

Lastly, and most applicable to the title industry, the CFPB proposes to include guidance regarding how lenders can share the CD with the borrower’s and seller’s real estate representatives. Currently, federal privacy laws provide the road map for what and how a consumer’s Nonpublic Personal Information (NPI) can be shared. The CFPB recognized in their press release regarding this proposed amendment that sharing the CD, formerly the HUD-1, with the borrower’s and seller’s real estate representatives is usual and customary for most parts of the country .Thus, the CFPB has proposed a method by which the lender, at its sole discretion, can provide a copy of the CD to the parties’ real estate representatives. It should be noted that the proposal states the decision to provide the CD to the real estate representatives is the lender’s and if the lender decided to share the CD, it would need to be modified and and may not be the same version the borrower and seller receive at closing.

By: Lori Rice, VP, Area Manager ME/NH/VT We’ve recently been receiving inquiries from agents about the availability of “good standing” letters. Lenders may request a “good standing” letter or its equivalent accompany an insured closing letter. There are two documents you may want to provide to your lenders, if requested, to verify your agency with First American Title: 1.

2.

Agency Verification Letter (AVL) – The AVL confirms that as of the date and time the letter is produced, the agent is an authorized policy-issuing agent of First American Title. The AVL can be produced in AgentNet® by selecting Agency Verification Letters on the Services tab.

Authorized Agent Program Certificate – the Authorized Agent Program is designed to complement a lender’s responsibility in managing their thirdparty title and settlement provider relationships. The Certificate can be produced from AgentNet by selecting the Pass-Thru Marketing option on the Agent Resource Center tab. Search for “authorized agent program” to customize the form for your agency.

PLEASE NOTE: The documents outlined above do not provide closing protection letter coverage.

As part of any Notice of Proposed Rulemaking, the CFPB is seeking input from a wide range of industry stakeholders. It has invited the public to submit written comments on the proposal by October 18, 2016, at which time the comments will be weighed before the final regulations are issued.

First American Title | New Hampshire Spotlight | Fall 2016

Page 2

Save the Date

NEW HAMPSHIRE FALL 2016 STAFF APPRECIATION LUNCHEONS All events take place 11:45am - 1:15pm PORTSMOUTH Wednesday, September 14th Paddy’s American Grille

CONCORD Thursday, September 22nd The Common Man - Capitol Room

27 International Dr., Portsmouth, NH 03801

25 Water St., Concord, NH 03301

MANCHESTER Tuesday, October 4th Puritan Conference & Event Center Suite A

KEENE Wednesday, October 5th Keene Country Club Tee Room

LITTLETON Thursday, October 20th Bailiwicks Fine Restaurant

245 Hooksett Rd., Manchester, NH 03104

755 West Hill Rd., Keene, NH 03431

106 Main St., Littleton, NH 03561

Reminder HIGH LIABILITY AUTHORIZATION APPROVAL The agency contract between First American Title and its title agents contains a provision which indicates the limit on the amount of insurance for a policy the agent is authorized to issue. This liability limit will vary from agent to agent. Below is an example of such a provision: “Limited Title Agent covenants and agrees with the Company that Limited Title Agent is not authorized to and shall not: Issue Policies in excess of $1,000,000.00 (One Million) without the prior written approval of an authorized officer or underwriter of the Company.”

As a result, a First American Title agent must obtain the approval of the New Hampshire State Office prior to issuing a policy which exceeds the applicable agency contract liability limit.

Please become familiar with your agency contract liability limit and, before issuing a commitment or policy which exceeds your agency contract liability limit, contact the New Hampshire State Office for approval. We will provide the approval on a standard form entitled High Liability Authorization Approval.

First American Title | New Hampshire Spotlight | Fall 2016

Page 3

IMPORTANT NOTICE

Improving Lender Title Policy Delivery Addressing Missing Policy Requests Lenders are increasing their focus on timely receipt of the lender’s title policy.

In 2015, First American Title received over 19,000 requests from lenders for copies of loan policies issued by agents. 2016 is on pace to surpass that volume. As an indication of the lending industry’s response to new pressures, these request come from lenders of all sizes and types.

How Is First American Title Helping?

Our goal is for lenders to consider First American Title title agents as the best. In keeping with this goal, we formed a dedicated team to handle missing policy requests. This team responds to lender policy requests and works with title agents. If the title agent has already provided a copy of the policy to First American Title, we will provide a copy to the lender without contacting the agent. If we are not able to locate a copy of the policy in our records, an email will be sent making the agent aware of the lender request.

What Can I Do As A Title Agent?

1) Recognize the increasing importance of timely policy delivery.

2) Review lender closing instructions for the exact location to send the policies. We frequently find that while the title agent has sent the policy, the lender, or the Compliance Division of the lender, can not locate it.

3) Upload policies using the Policy Upload feature in AgentNet®. This will allow First American Title to respond directly to a lender's request for a missing policy copy. Contact your Sales Representative or visit the User Guide tab in AgentNet for details.

4) Verify the accurate loan number appears on the face of the Loan Policy.

5) Check with your software vendor for available “event tracking” or operational reports for tracking aging policy delivery.

6) Know that any email you receive from our Policy Procurement Team has your best interests in mind.

Together, we can address lender needs and continue our position as having the best title agents in the industry. First American Title will continue to support our title agents and their lenders to maintain a strong focus on excellence.

First American Title | New Hampshire Spotlight | Fall 2016

Page 4

TOP 5

UNDERWRITING QUESTIONS

By: Carol E. Willoughby, VP, New England Regional Counsel and Timothy Boucher, Senior Underwriting Counsel

1.

My seller is the subject of a court ordered receivership in Superior Court. The mortgagee petitioned the Superior Court for appointment of the Receiver. What should I be looking at in order to insure title coming out of this mess?

A sale through a receivership in State Court is not something most of us deal with regularly, but it brings to light the analogous issues that arise in bankruptcy. Typically, we look for a Motion and resulting Order to Sell Free and Clear. Understand that all Orders are not created equal – specificity is a key component to an Order. So what do we look for in an Order to Sell Free and Clear? Here is a gold standard checklist. Actual content of an Order will, of course, vary depending on the circumstances, including whether the matter is in State Court, or in the Bankruptcy Court. You’ll see references below to the Bankruptcy Code that do not apply when in State Court.

1. Reference to Hearing on Motion,

Appearance of Parties and Disposition of Objections. [Note: Attention should be paid to any objections, the nature of same and how resolved.]

2. Reasonably discernable identification

of the property 3. Identification of record owner(s) 4. Statement that service of notice

complied with applicable rules/ statutes 5. Statement that service of notice (and

Motion) was made on: a. Debtor and debtor’s counsel b. All creditors and interested parties

(unless otherwise directed by court order)

c. Each entity known to assert a lien

or interest d. Creditor’s committee (if applicable) e. U.S. Trustee (if applicable) f. Any other party who has

requested notice 6. Statements that: a. Notice was sufficient, fair and

reasonable b. Proposed sale does (or does not)

comprise sale of all or substantially all Debtor’s assets. [Note: Debtor’s equity holders, if sale not of all assets] c. Sale in best interests of creditors,

interest holders and estate d. Marketing, advertising - sale

efforts were fair, reasonable and complied with court procedures e. Purchaser provided highest and

best offer

d. Statement that completion of sale

will vest title to the property in the purchaser free and clear of the liens, claims and interests of the affected parties – affected parties are barred from asserting claims against property of purchaser 9. If applicable, statement that

order is immediately effective notwithstanding Rule 6004(h) 10. Statement that Debtor in Possession

or Trustee (as applicable) has authority to act and carry out sale 11. If applicable, authorization of

Debtor in Possession or Trustee to execute and record any releases on behalf of the entity holding specified liens/interests if that entity fails to do so after demand and opportunity to cure 12. If applicable, statement that

recordation of the sale order shall operate as a release of all liens, interests and encumbrances that were removed in the sale order

f. Sale entered into without

collusion, at arm’s length and in good faith, is unrelated to Debtor and Trustee and is entitled to the protections of applicable statute 7. Authorization of specified payments

from closing funds (e.g. taxes, payoffs, commissions, etc.)

8. If Order authorizes Sale Free and

Clear under 363(f) the Order should: a. List each lien or interest to be

removed b. Identify the holder and value of

each lien/interest, and c. Specify the basis under 363(f) for

authority to Sell Free and Clear of interest by listing the applicable code subsection(s)

First American Title | New Hampshire Spotlight | Fall 2016

2.

My seller is a condominium association who took title to the property after the prior owner failed to pay their dues and assessments. What do I need to look at to make sure I have an insurable title following the transfer to my buyer?

The first question to ask is how did the condominium association obtain the title? By sheriff’s deed? By foreclosure deed? Your seller, as a condominium association, would have to sue the prior owner for non-payment of dues and assessments, obtain a judgment, carry out a sheriff’s sale, purchase the property at the sheriff’s sale, and record the deed from the sheriff. Remember, a sheriff’s deed is subject to a one year

Page 5

TOP 5

UNDERWRITING QUESTIONS

Continued

redemption period; any policy issued within one year of the recording of a sheriff’s deed must take exception for the redemption right of the prior owner.

Issuance of a title insurance policy for property, title to which derives from a sheriff’s sale, requires authorization at the New Hampshire State Office.

Some condominium associations enjoy a “right of foreclosure” in the declaration of condominium.

Unfortunately, there are mixed reviews on whether the record owner must affirmatively grant the right to foreclose, or whether it is sufficient as a covenant in the declaration. As such, any title derived through a foreclosure by a condominium association against a unit owner must be authorized by the New Hampshire State Office.

3.

I have a seller in Malaysia, but he’s a U.S. citizen; I don’t know what to do!

There are three options here, none of which includes hopping on a plane and charging the air fare to the seller.

Your New Hampshire-issued notary certificate has no jurisdiction beyond the borders of New Hampshire.

First, the seller can take any documents that require notarization to the United States Consulate, and execute them there. That is considered U.S. soil and our laws recognize the jurisdiction of the consul to take acknowledgments.

If a visit to the U. S. Consulate is not an option, let’s hope the foreign country is one which signed on to the Hague Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents, the (“Convention”). In

order to determine this, consult the status table for the Convention at the Hague Conference of Private International Law Website, www.hcch. net/index_en.php?act=conventions. status&cid=41. Note that certain nations have only subjected specific territories of the nation to the Convention, so take caution in reading the table, or consult with the New Hampshire State Office of First American Title for assistance.

If the nation has signed on to the Convention, simply prepare your acknowledgement as you would normally, and attach an Apostille certificate to it, a sample may be viewed at: www.hcch.net/upload/ apostille.pdf, or obtained from the State Office. The Apostille serves to certify that the signature is authentic and the person who has taken the acknowledgment is duly authorized to do so under that Nation’s laws. Record the Apostille as part of the deed.

If neither method outlined above works, the document will have to be authenticated judicially. Clearly this is a method of last resort, but if this is your only option, contact the State Office for guidance.

4.

My seller is a resident of Germany and does not have a U.S. taxpayer identification number. What do I do about withholding?

How timely! Read “Top 10 Questions About FIRPTA” in this newsletter on pages 7-9.

First American Title | New Hampshire Spotlight | Fall 2016

5.

I just came from a very stressful closing. The seller was elderly and did not speak – some kind of injury as a result of a stroke. His daughter was there and told him where to sign and appeared to make all the decisions. He seemed to understand some things, but not everything – although he didn’t indicate there was any problem. I’m not sure whether I should call the lender and put a hold on everything before recording.

This is an extremely timely topic. Our lender colleagues are similarly tasked with being alert to abuse of elders and dependent adults. See NH-2016-013 Standard Financial Abuse of Elders and Dependent Adults. There are red flags as to whether he is competent and understood and agreed to the transaction being undertaken. Further inquiry should be made in such a situation. Is there a durable power of attorney from the seller to his daughter that should be utilized? If there is a valid power of attorney, the appointed agent must be consulted. If no power of attorney is in place, investigation could involve a variety of sources.

There may be other family members who can fill in some questions. There may be a physician you could consult.

It may be a situation in which the gentleman was just not particularly comfortable with his disability in front of strangers. A private meeting with the gentleman, and perhaps his family members, may assuage concerns about his competency. Whatever the result, the notary cannot push forward blindly.

Calling the New Hampshire State Office as soon as possible is the best course of action, as well as calling the lender.

Page 6

10FIRPTA TOP

QUE S TIONS ABOUT

1. WHAT IS FIRPTA?

By: Wade Wallace Underwriting Counsel First American Title

By: Jennifer Bloodworth Sr. Underwriting Counsel First American Title

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 from foreign persons on the sale of U.S. real property interests. The 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 such interest. The amount withheld is 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 fifteen 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 defines a “Foreign Person” by defining who is not a Foreign Person, so it is important to understand the following definitions: a. A “Foreign Person” is defined as any person other than a “United States Person.”

First American Title | New Hampshire Spotlight | Fall 2016

b. 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 defined by IRS Regulations), trustee or other fiduciary; (v) a Disregarded Entity, the owner of which qualifies 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). c. 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 first 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 Page 7

Top TEN Questions About FIRPTA (continued) 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 affidavit that certifies the seller is not a Foreign Person and provides the seller’s name, U.S. social security number or taxpayer identification 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 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 definite 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 First American Title | New Hampshire Spotlight | Fall 2016

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 affirmative election to do so. This election should be in the form of an affidavit 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. Seller Obtains Withholding Certificate. In some cases, the seller has applied for and received a withholding certificate from the IRS that reduces or eliminates the withholding requirement. A buyer relying on this exception must obtain a copy of the Withholding Certificate and retain a copy in buyer’s records for five (5) years. e. 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.

Importantly, to take advantage of this exemption from withholding, the entity must file 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 certificates, 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

Page 8

Top TEN Questions About FIRPTA (continued) 1. 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 insufficient 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 insufficient 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 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 file reflect specific written direction from the buyer if anything other than fifteen 15% is being withheld. For example, if a buyer elects to waive the withholding or withhold a reduced rate, settlement agents should obtain an affidavit 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 the closing date. However, if an application for a withholding certificate 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 certificate 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

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 figure 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 fifteen 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

First American Title | New Hampshire Spotlight | Fall 2016

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.

Page 9

FIRST AMERICAN TITLE

Pass-Thru Marketing Program First American Title agents have access to over 100 pieces of professionally designed marketing material that you can use to secure your position as a valuable resource and industry expert.

Since its launch in 2011, the Pass-Thru Marketing Program has helped thousands of First American agents across the country educate their business partners and consumers about a wide-range of topics. From first-time homebuyers and the value of an Owner’s Policy to FIRPTA, TRID and cyber fraud, the PassThru Marketing Program has what you need.

Material can be customized with your company logo and contact information then downloaded for print, posting online or distribution by email.

• Consumer education • Agency education/job-aids • Industry reference material

• Bi-lingual marketing/education • Activity sheets/coloring books for children

• Holiday and note cards • And so much more!

Log into AgentNet® and access the Pass-Thru Marketing Program today!

Program not available in CA

First American Title | New Hampshire Spotlight | Fall 2016

Page 10

SERVICE UNDERWRITING – EXPERIENCED AND LOCAL »» Our in-state title attorneys are committed to providing guidance and assistance in a timely and efficient manner, regardless of location or complexity of the transaction. »» Underwriting and legislative advisories are provided to keep you informed about industry standards, changes and other important news. »» Industry leading national underwriter possessing substantial economic strength and resources.

TECHNOLOGY – IT’S EASY TO DO BUSINESS WITH US First American Title was built on a foundation of integrity and service more than a century ago, and we are committed to providing products and services that are valuable to our agents. With your success in mind, we are continuously focused on delivering an unparalleled level of service that enhances your productivity, complements your business strategies, and allows you to better serve the needs of your customers.

»» Innovative technology that integrates with leading closing software systems to provide valuable business resources, solutions, products and services necessary to simplify and streamline your processes while keeping a competitive edge. »» Closing Protection Letters (CPLs), eJackets, rate and fee calculators, electronic invoices and statements with remittance and payment tools, and more are available online through our AgentNet® portal.

EDUCATION – KEEPING YOU INFORMED »» Current and comprehensive continuing education is available online 24/7 and locally in many states.

Put your trust in the professionals who put you first. Contact your local First American Title representative today.

First American Title | New Hampshire Spotlight | Fall 2016

»» Live webinars to keep you informed about industry changes, including TRID, ALTA Best Practices and much more.

Page 11

Short and Simple

Easy-To-Use Online Resources TRID Resource Center

www.firstam.com/trid-agent Informational videos explaining the history of TRID and what it means to you, your customers and your business, along with ways to keep transactions smooth and timely, this website will be one more valuable tool to educate your entire network.

Ownership Information Center www.firstam.com/ownership

Designed to help homebuyers and sellers be better prepared for the closing process and to learn about the value of title insurance and the importance of having an Owner’s Policy. With informative sections covering buying a home, escrow and title insurance, the new Ownership Information Center combines brief articles, videos and infographics in a way that makes it interesting for new homebuyers to explore and become better informed.

First American Comprehensive Calculator (FACC) http://facc.firstam.com

Now includes a Loan Estimate/Closing Disclosure option so you can easily provide quotes for TRIDrelated purchase and refinance transactions.

Closing/Consummation Date Timing Calculator

https://closingdates.firstam.com Calculate the Closing Disclosure mailing date based on consummation date or determine the earliest consummation date based on mailing date. Calendar includes rescission dates and can be printed and emailed to clients.

First American Economic Center www.firstam.com/economics

Current economic trends, research and unique perspectives from First American Chief Economist, Mark Fleming.

First American Title | New Hampshire Spotlight | Fall 2016

Page 12

DID YOU KNOW The Policy Rate Type and Jacket Type in the Title Policy screen do not match in e-Closing.

TARA Users: When you update your AgentNet® password, you will also need to update your TARA password.

Select Manage > My Profile Manage AgentNet Login/Passwords Click the Firm Name Enter Password > Click Save a. Above are two default screens. If you want EAGLE policies you have to change the Policy Rate Type to reflect EAGLE Loan or Owner. If you want standard policies, you have to change the Jacket Type to reflect ALTA Loan or Owner Policy. You can have an EAGLE Owner and a Standard Loan Policy, however the Policy Rate Type and the Jacket Type under the respective sections must match.

Please be sure to update your password in TARA immediately after changing your password in AgentNet. Are you completing a refinance CD and can’t figure out where the Appraised Property Value field is? It’s hiding in the File Info tab under Title Reference.

b. Is the residential ALTA Endorsement/Waiver box selected in the Title Policy screen in e-Closing?

Know Before You Owe THE SETTLEMENT PROFESSIONAL’S GUIDE The Consumer Financial Protection Bureau (CFPB) has compiled several resources to help title and settlement agents navigate changes the TILA-RESPA Integrated Disclosures (TRID) Rule brought to the mortgage transaction and closing process. Use the link below to view and familiarize yourself with these resources: http://www.consumerfinance.gov/policy-compliance/know-you-owe-mortgages/settlement-professionals-guide/?utm_ source=GovDelivery&utm_medium=email&utm_term=08242016_a1&utm_campaign=RegImp

First American Title | New Hampshire Spotlight | Fall 2016

Page 13

News Brief RESIDENTIAL SECTOR

COMMERCIAL SECTOR

Tiny Houses Are Trendy, Minimalist and Often Illegal

Pokémon Go’s AR Technology: Implications for Commercial Real Estate

Sarah Hastings’ 190-square-foot home was on 3 acres of farmland next to a small garden in Hadley, Massachusetts. Now it’s in storage.

By: Rebecca Beitsch, PBS News Hour, July 6, 2016 Read more: http://www.pbs.org/newshour/rundown/tiny-houses-are-trendyminimalist-and-often-illegal/

Millions of Spenders Are Ready to Come Back From the Mortgage Crisis Millions of Americans lost their homes to foreclosures or short sales during the housing crisis. Fortunately for the economy, time heals most wounds -- and credit reports.

By: Victoria Stilwell, Bloomberg, July 7, 2016 Read more: http://www.bloomberg.com/news/articles/2016-07-07/america-s-postforeclosure-consumers-are-ready-to-rejoin-economy

U.S. Treasury Expands Hunt for Money Laundering in Real Estate The U.S. Treasury on Wednesday expanded its hunt for international criminals who launder money through real-estate deals by ordering title insurance companies to report all-cash buyers’ identities in parts of California and Texas, as well as greater swaths of New York and Florida.

By: Lucy Nicholson, Reuters, July 27, 2016 Read more: http://www.reuters.com/article/us-usa-corruption-realestateidUSKCN1072HU?il=0

The release of Pokémon Go, a location-based augmented reality game, this month brought with it an entirely new dimension for the commercial real estate business.

By: Diana Bell, National Real Estate Investor, July 27, 2016 Read more: http://nreionline.com/real-estate-services/pokemon-go-s-ar-technologyimplications-commercial-real-estate

Q2 Commercial Mortgage Originations Up 17 Percent Commercial and multifamily mortgage loan originations saw a 17 percent increase from the first to second quarter of this year, according to new data from the Mortgage Bankers Association (MBA).

By: Phil Hall, National Mortgage Professional Magazine, July 28, 2016 Read more: http://nationalmortgageprofessional.com/news/59683/commercial-mortgageoriginations-percent

Food Is Ruling Retail Real Estate, and Food Trucks Are Moving In For the first time nearly two decades, restaurant sales surpassed supermarket sales last year.

By: Diana Olick, CNBC, July 22, 2016 Read more: http://www.cnbc.com/2016/07/22/food-is-ruling-retail-real-estate-and-foodtrucks-are-moving-in.html

Everything You Need To Know About Ransomware Cordray: Fixing Title Premium Disclosure Improbable Responding to a letter from 74 members of Congress, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray indicated the bureau will not address the portion of the TRID rule that requires consumers to receive incorrect fees for title insurance premiums on their mortgage disclosures.

By: American Land Title Association, July 19, 2016 Read more: http://blog.alta.org/2016/07/cordray-fixing-title-premium-disclosureimprobable-.html

All the Reasons It’s So Much Harder to Buy a Home than It Was for Your Parents Lawrence Yun, chief economist of the National Association of Realtors in Washington, has a natural inclination to promote the health of the housing market, since NAR members depend on home sales to make a living.

By: Michele Lerner, The Washington Post, July 28, 2016 Read more: https://www.washingtonpost.com/realestate/all-the-reasons-its-so-muchharder-to-buy-a-home-than-it-was-for-your-parents/2016/07/27/3d010358-42be-11e6bc99-7d269f8719b1_story.html

First American Title | New Hampshire Spotlight | Fall 2016

Ransomware is one of the most feared security threats today and it is fast becoming one of the most profitable areas of cybercrime for attackers.

By: Travis Smith, BetaNews, July 19, 2016 Read more: http://betanews.com/2016/07/19/everything-need-know-ransomware/

Traversing the Private-Money Path As the influence of private-money lenders has grown in the past decade, so have the types of lenders that fit the private-money definition.

By: Don Pelgrim, contributor Scotsman Guide, August 1, 2016 Read more: http://www.scotsmanguide.com/Commercial/Articles/2016/08/Traversing-thePrivate-Money-Path/

Bubble Trouble: 5 Ways Banks and Borrowers Can Avoid Real Estate Risk Without actually using the dreaded B-word, a U.S. federal regulator warned last week of rapid commercial real estate growth accompanied by looser underwriting standards.

By: Ely Razin, Forbes contributor, July 21, 2016 Read more: http://www.forbes.com/sites/elyrazin/2016/07/21/what-banks-and-borrowerscan-do-to-minimize-the-risk-of-a-commercial-real-estate-bubble/#3db2b7b11f7f

Page 14

N E W

H A M P S H I R E

contac t

lis t

PHONE & FA X O: 603.227.9210 TF: 800.821.1005 F: 714.689.5303

MAILING ADDRESS First American Title 6 Loudon Road, Suite 406 Concord, NH 03301

Lori A. Rice Area Manager - ME/NH/VT C: 207.650.3194 lrice@firstam.com

Carol E. Willoughby, Esq.

Timothy Boucher, Esq.

VP, New England Regional Counsel D: 603.226.1613 C: 603.315.6952 cwilloughby@firstam.com

Sr. Underwriting Counsel D: 603.226.1614 C: 603.268.2565 tboucher@firstam.com

Elizabeth (Liz) Roosa

Sandra J. Eldon

Victoria H. Mulligan

Agency Representative C: 603.716.5387 eroosa@firstam.com

Agency Consultant C: 603.496.1230 seldon@firstam.com

OFFICE HOURS 8:30am-5:00pm Monday-Friday

WEBSITES New Hampshire Specific: www.firstam.com/title/NH AgentNet : https://agency.myfirstam.com ®

First American Title | New Hampshire Spotlight | Fall 2016

Sales Admin. Coordinator D: 603.226.1617 vmulligan@firstam.com

Page 15