Last Saturday, our friends at the Real Property, Probate and Trust Law Section of the Florida Bar approved revisions to Chapter 5 of the Florida Uniform Title Standards dealing with the Estates of Decedents.

The Uniform Title Standards are regularly relied upon by Florida’s courts and are viewed as the “Gold Standard” for determining what constitutes marketable title in Florida.    The Section devotes a great deal of time and effort to reviewing changes in Florida Statutes and case law, and keeping the Uniform Title Standards up to date, then makes them available to the industry free of charge.

We recommend each of our members make use of this excellent reference at http://www.rpptl.org/DrawNews.aspx?NewsArticleID=51.    The updated Chapter 5 should appear on their website in the next few days.

Update from Beverly McReynolds, FLTA Agent Section Chair

The hearing yesterday afternoon in Tallahassee went quite well. After comments were heard from members of the FLTA and other interested parties, Nancy Rowell of the DFS took a few minutes to clarify the position of the Department. Her comments were well received by the audience. Below in bold italics you will see comments from the DFS and further concerns raised by audience members:

CONCERN: “The imposed restriction on advertising and marketing is anti small business. Only those who could afford radio, television and billboard advertising can make the real estate community aware of their existence and services.”

DFS RESPONSE: It is in no way the intention of The Department to limit the ability of small title agents to lawfully market their services. They acknowledge that the language in the Rule is overly broad and they intend to work on it to make their position(s) clear, easy to comply with and reasonable. They may consider removing paragraph 4 (r) in its entirety or including a reference to the accepted $25.00 limitation on give aways to eliminate the confusion. They clearly stated that we can market our services at events targeting a number of real estate professionals and unrelated to specific properties i.e. Board events, educational seminars and other related industry functions. What they do not want to see is the promotion of a single client for a specific property with the goal of getting that individual order for title insurance.

CONCERN: “Because the Rule pertains only to title agents and not to underwriter direct operations, it will create an unlevel playing field in the marketplace.”

RESPONSE: They are sensitive to our concerns and Nancy has already reached out to the OIR about their adopting a similar Rule. We restated our desire that the OIR Rule be identical to and published simultaneously with the DFS Rule.

CONCERN: “By including “title agents and escrow agents” in the definition of interested parties, the Rule interferes in the employer/employee relationship. For example, if taken literally, a title agency could not reimburse its associates for their cell phone usage.”

RESPONSE: They had no intention of interfering with employer/employee relationships and will work on the definition of “interested party” in order to remove that concern. They also acknowledged that parts of the proposed Rule could be interpreted to interfere with underwriter/agent relationships. Certain items insinuate that underwriters could not hold seminars or provide services for their agents. They understand these things are necessary for the benefit of the industry and the consumer alike.

CONCERN: “A blanket objection to Affiliated Business Arrangements is imposing a second layer of interpretation to an already complicated RESPA rule making compliance more difficult if not impossible.”

RESPONSE: The Department has no intention of eliminating properly formed affiliated business arrangements. What they are seeking in this Rule is clear authority to shut down sham joint ventures. Several audience members questioned whether that could be achieved through a simple reference to ventures created for the purpose of generating kickbacks within this Rule. Further discussion was requested.

Because of the outpouring of concern by the industry, they have agreed to keep the record open until October 1, 2010, so that all interested parties will have the opportunity to submit comments. They were very clear that they want to hear what we have to say and will keep an open mind.

Again, all comments are to be directed to:

Ms. Lorna Noren

Special Investigator

Bureau of Investigation Agent and Agency Services

Florida Department of Financial Services

200 East Gaines Street

Tallahassee, FL 32399-0320

Or Lorna.Noren@myfloridacfo.com

Re: Unlawful Inducement Rule 69B-210-010

We will continue to monitor the progress of this proposed Rule and keep you posted on the progress. Thank you to those of you who have already submitted comments and those who will be doing so prior to the October 1 deadline.

Beverly McReynolds

FLTA Agent Section Chair

Today’s most prevalent closing transaction, the short sale, is a dangerous minefield for the title agent.  If the title closing business wasn’t risky enough, the short sale has increased the risk factor almost exponentially.  This article will discuss some of the land mines the title agent should consider when working on a short sale transaction.

Negotiating the Short Sale – Effective January 1, 2010, it is unlawful for any person to “act as a mortgage broker” in Florida without a current, active Florida mortgage broker’s license.  Sec. 494.0025(2), Fla. Stat. (2009).  The definition of “act as a mortgage broker” is defined in Section 494.001, Florida Statutes, as: “… for compensation or gain, or in the expectation of compensation or gain, directly or indirectly, accepting or offering to accept an application for a mortgage loan, soliciting or offering to solicit a mortgage loan on behalf of a borrower, NEGOTIATING OR OFFERING TO NEGOTIATE THE TERMS OR CONDITION OF A NEW OR EXISTING MORTGAGE LOAN on behalf of a borrower or lender, or negotiating or offering to negotiate the sale of an existing mortgage loan to a noninstitutional investor.”  {Emphasis added.}    There are two basic exemption categories:  (1) a Florida Bar licensed attorney may “negotiate the terms of a mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client”; and (2) a person making a mortgage loan using his or her own funds who does not hold himself or herself out to the public as being in the mortgage lending business.  Therefore, with respect to the title agent’s business, unless you are a licensed mortgage broker or attorney representing a client in the negotiation of a short sale, you are prohibited from negotiating a short sale.  Whoever knowingly violates these statutes commits a felony of the third degree.  Each such violation constitutes a separate offense.  Sec. 494.0018, Fla. Stat.

The Florida Department of Financial Services, which regulates title insurance agents and agencies, had deemed that a title agent’s license is not authorization to negotiate short sales even before this statute took effect on January 1, 2010.   Hence, the DFS, backed by the provisions of these new statutes, maintains that a title agent should not perform any part of the negotiation with a lender to be paid off in a short sale transaction (including a refinance where the lender will be accepting less than what is owed).  Merely acting as a conduit between the lender and the borrower in transmitting copies of documentation could be considered negotiation by the DFS.  However, merely requesting estoppel information would generally not be considered negotiation.

Unlicensed Practice of Law – Could negotiating a short sale and/or completing documents over and above those customary for a common real estate closing be considered the unlicensed practice of law?  Is the nonlawyer title agent practicing law when he or she negotiates or assists in the negotiation of a short sale?  The Florida Bar’s Standing Committee on the Unlicensed Practice of Law is studying the issue of nonlawyers assisting buyers in negotiating and finalizing a real estate short sale.   Short sales are now in the cross-hairs of The Florida Bar.   One could argue that negotiating a short sale is the unlicensed practice of law inasmuch as the statutes referred to above (Sec. 494.025, Fla. Stat.) exempt Florida Bar licensed attorneys negotiating a short sale during the course and as a part of the representation of the client.  One should be reminded that the unlicensed practice of law is a criminal offense, a felony of the third degree.  Sec. 454.23, Fla. Stat. (2009).

No Errors & Omissions Coverage – A title agent’s errors and omissions policy may not cover the acts of negotiating a short sale.   Nor, would the negotiation of a short sale be a covered matter under a title insurance policy.   This would render the nonlawyer, non-mortgage-broker-licensed title agent virtually without any insurance coverage for his or her acts of negotiating a short sale.

Fraud Upon the Lender or Other Parties to the Transaction – Closing instructions and/or estoppel letters from the lender receiving a short pay may include language that allows that lender to renege on accepting the short pay and releasing the property from the mortgage if the lender felt it was misinformed and mislead into accepting a much smaller amount than the outstanding balance of the mortgage.   Some closing instructions or estoppel letters state that the lender may renege on giving a release of its mortgage if a subsequent “flip” transaction occurs soon after the short sale transaction.    Reversing the short sale transaction may be impossible, as un-doing a closed transaction is a nightmare that most agents do not want to experience.   Nor, would a title agent want to be accused of participating in a mortgage fraud scheme of misleading the short pay lender as to the financial conditions and factors of the short sale transaction.

These are some of the problems a title agent should consider.   The title agent is cautioned to walk lightly through the minefield of short sale transactions.

Speakers include:

• James C. Russick, SVP of Old Republic Title, co-author of HB 853, and FLTA Zone 4 VP
• Alan B. Fields, Chair of FLTA’s Government Affairs Committee
• Skip Straus, President of Enterprise Title and FLTA Zone 6 VP
• Beverly McReynolds, President of  North American Title Company and FLTA Agents’ Section Chair

Wednesday, June 2

• 5:30 – 7:00 p.m.
• Lennar/North American Title Training Facility
• 700 NW 107 Avenue, Second Floor
• Miami, FL 33172
• RSVP to Beverly McReynolds at bmcreynolds@nat.com or (305) 229-6517

or

Thursday, June 3

• 5:30 – 7:00 p.m.
• Attorney’s Title Insurance Fund
• 1770 NW 64 Street, Suite 600
• Ft. Lauderdale, FL 33309
• RSVP to Skip Straus at sstraus@strauseisler.com or (954) 431-2000

For more information, check out the FLTA website at www.flta.org

The legislative session is drawing to a close, but a number of important bills were filed that could affect the title insurance industry. HB 853 included recommendations from the Title Insurance Study Advisory Council. SB 260 would drastically change the rate structure.

Do you want to know what happened?

You are cordially invited to join

Pat Hancock, Esq., State Underwriting Counsel

Fidelity National Title Group and

President-elect of the Florida Land Title Association;

Alan Fields, Esq.

Chair of Governmental Affairs Committee

Florida Land Title Association;

Vincent J. Cassidy, President, Majesty Title Services, LLC;

Lee Huszagh, Esq.

Executive Secretary-Treasurer, Florida Land Title Association;

And

Frank Tricomi, Esq.

Underwriting Counsel, Fidelity National Title Group

Zone III VP, Florida Land Title Association

for a special presentation on the state of the title insurance industry.

Topics include:

o      Legislative update on bills that would impact the title industry

o      The Unlawful Inducement Proposed Rule from DFS

You have an unprecedented opportunity to learn what is going on with your regulator and the state legislature, regarding title insurance premiums, and other issues that will seriously impact your day-to-day operations and revenue.

License applicants who are required to provide a set of fingerprints will be affected by this delay. It is recommended they submit their fingerprints before this time to avoid a delay in receiving their license.

Do you want to know what is happening?

Zone VII VP Rosa Peck is hosting a Title Agent Town Hall meeting and you are invited!

Thursday, April 22, 2010

4:00 – 6:00 p.m.

Premier Executive Center

5237 Summerlin Commons Blvd

Fort Myers, FL 33900

Contact Rosa at rosapeck@fltitleconnection.com.

This makes 35 new members and a 34% increase in agent membership since the convention in November. Congratulations to our new members, and kudos to those members who are doing such a tremendous job at recruiting!