TDI Enforcement Actions John Rothermel Heidi Junge December 21, - - PowerPoint PPT Presentation

TDI Enforcement Actions

John Rothermel Heidi Junge December 21, 2017

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ATTORNEY INFORMATION

Because of opinions expressed by the Texas Department

• f Insurance (TDI) concerning rebates, legal credit is

available only to:  Attorneys who own title agencies that are Stewart Title Guaranty Agents  Attorneys employed by a title insurance agent licensed with Stewart Title Guaranty or Stewart entities  Fee attorneys who have an Escrow Officer license through a Stewart Title Agent or Stewart entity

We welcome any other lawyers to listen, but cannot provide continuing education credit to you.

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TDI Enforcement Actions and How To Avoid Them

John Rothermel

Senior Vice President Regional Underwriting Counsel Senior Underwriter

Heidi E. Junge

Assistant Vice President Underwriting Counsel Associate Senior Underwriter SW Regional Underwriting Office Stewart Title Guaranty Company

TDI Enforcement Actions

For a detailed look at enforcement actions: https://wwwapps.tdi.state.tx.us/inter/asproot/commish/da/c lips2017.asp Unfortunately, you have to scroll through the list since title is not well represented, but we will show a few here in this presentation:

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First Nationwide Title Agency of Texas, L.L.C. of Austin

– Order Number: 20175041 – Date of Order: 4/24/2017 – Action Taken: Fined $4,000 – Violation: Failed to timely submit annual trust fund account audit reports

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TDI Enforcement Actions

P-49. Annual Audit

• A. As provided in Article 9.39, Texas Insurance Code, every

title insurance agent and direct operation shall have an annual audit prepared, and before the 91st day after the date of termination of its fiscal year, shall send by certified mail, postage prepaid, to the Texas Department

• f Insurance one copy of such audit report with a letter of

transmittal, and each such agent, shall also send a copy

• f such letter of transmittal and audit report to every title

insurance company which it represents.

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P-49. Annual Audit

• B. If a title insurance company fails to receive an audit

report from any of its agents or direct operations before the 91st day after the date of the termination of the fiscal year of the agent or direct operation, the title insurance company shall report that omission to the department not later than the 30th day after the expiration of the 90-day period.

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Eastland Title Company of Hillsboro

– Order Number: 20175004 – Date of Order: 3/28/2017 – Action Taken: Fined $2,800 – Violation: Failed to timely submit annual trust fund audit reports

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TDI Enforcement Actions

G.2. Audit and Review Of Agent/Direct Operation Escrow And Trust Accounts

I. Definitions

• A. “Audit and review of Agent/Direct Operation

escrow and trust accounts” includes auditing of escrow and trust accounts, auditing of statistical reports, auditing of all other accounting records and review of complaints relating to Agents/Direct Operations.

• B. “Escrow and trust accounts” includes those

accounts which are subject to annual audit pursuant to Texas Insurance Code §§2651.151- 157.

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G.2. Audit and Review Of Agent/Direct Operation Escrow And Trust Accounts

II. Procedures Upon the request of the Commissioner of Insurance, the Board will authorize expenditure of funds from the guaranty fee account to retain, compensate and reimburse for reasonable and necessary expenses persons who will audit and review Agent/Direct Operation escrow and trust accounts. Such persons shall act solely under the direction of the Commissioner of Insurance, or his designee and make such reports as are required.

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P-27. Disbursement from Escrow or Trust Fund Accounts

This Rule shall implement Art. 9.39A, Texas Insurance Code.

• A. Definitions
• 3. "Trust account" or “escrow account” means an

account maintained at a financial institution for holding and disbursing funds to be paid to and on behalf of parties to a transaction and which are subject to annual audit pursuant to Art. 9.39, Texas Insurance Code.

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P-27. Disbursement from Escrow or Trust Fund Accounts

• B. General Provisions
• 1. Good Funds in an amount equal to all

disbursements must be received and deposited before any disbursement may be made. Partial disbursements, prior to the receipt and deposit of good funds, are not permitted. If a party to the transaction submits too much money, that

• verage which will not ultimately be a part of the

transaction may be refunded at or prior to settlement.

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P-27. Disbursement from Escrow or Trust Fund Accounts

• B. General Provisions
• 2. A record of all receipts reflecting the date on

which the funds are actually received must be entered on the books of the trustee before any disbursements are made.

• 3. The financial institution or branch of a financial

institution in which the trust fund account is maintained must be located within the geographic bounds of the State of Texas.

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P-27. Disbursement from Escrow or Trust Fund Accounts

• B. General Provisions
• 4. Even though funds are defined as good funds in

this Rule, a trustee is not required to disburse if reasonable business judgment would indicate that the funds may not be collected.

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P-27. Disbursement from Escrow or Trust Fund Accounts

• B. General Provisions
• 5. An Immediately Available Funds Procedure

Agreement (Form T-37) must be fully executed by the Financial Institution, the Federally-insured Lender and the Title Company prior to issuance of checks intended to qualify pursuant to subparagraph A.1.j. of this rule.

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P-27. Disbursement from Escrow or Trust Fund Accounts

• B. General Provisions
• 5. If the Federally-insured Lender has appointed an

Agent and delegated to the Agent some of the duties and responsibilities of the Federally- insured Lender, the Title Company must use an Immediately Available Funds Procedure Agreement (Agent Designation for Federally- insured Lender) (Form T-37A) which must be fully executed by each of the four parties to the Agreement including the Agent for the Federally- insured Lender.

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Minimum Standards, Specific Instructions and Report Forms For Audit Of Trust Funds Required Of Texas Title Insurance Agents, Direct Operations, Title Attorneys And Attorneys Licensed As Escrow Officers

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Specific Areas and Procedures

• 1. Determine that good funds for a transaction are received

and deposited before any disbursements are made in accordance with Article 9.39A and related Procedural Rule P-27.

• 2. Funds which remain in an account in a dormant condition

for a long period of time need to be closely scrutinized. Funds that are being misappropriated often find their way to these accounts in some manner, so appropriate auditing procedures shall be performed on these

• accounts. Current state law specifies certain criteria that

may require dormant funds held longer than three years to escheat to the state treasurer. All credit balances open three years or longer must be explained in detail on Exhibit E-1.

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Specific Areas and Procedures

• 3. Checks written out of an escrow account to the agency’s
• perating account or to another escrow account shall be

examined carefully, especially if the checks appear to be disbursements for anything other than normal charges to a specific guaranty file. Transfer of funds from one account to another is permissible providing both files contain proper authorization.

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Specific Areas and Procedures

• 4. Escrow receivables are the responsibility of the escrow

agent and constitute shortages in the account which are deemed to be violations of Article 9.39.

Restitution of every shortage shall be made within forty-five (45) days from the closing date of the bank statement of the account which reflects the transaction creating the escrow receivable.

All escrow receivables in excess of $200 shall be itemized and thoroughly explained on Exhibit E-2. Any irregularities such as bank overdrafts shall be thoroughly explained on Exhibit E-3.

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Specific Areas and Procedures

• 5. Some support for each disbursement must be in the

guaranty file, and it shall be determined that the disbursements were to logical payees.

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First Republic Title, L.L.C. of Houston

‒ Order Number: 20174997 ‒ Date of Order: 3/21/2017 ‒ Action Taken: Fined $15,000 ‒ Violation: Improperly paid, allowed, or permitted a thing of value for engaging in business of title insurance or for soliciting or referring title insurance business.

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TDI Enforcement Actions

Thing of value [Sec. 2501.003 (10)]

includes any payment, advance, funds, loan, service, or

• ther consideration.

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Thing of value (P-1.v)

includes any payment, advance, funds, loan, service, or

• ther consideration.

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P-53 Rebates and Discounts Prohibited.

• 1. For the purposes of this rule the following terms have the

following meanings.

a) “Authorized Person” means a person doing the business of title insurance under the authority of the Texas Title Insurance Act of the Insurance Code. b) “Producer” means a real estate broker, real estate agent, lender, mortgage company, mortgage broker, builder, developer, attorney, or architect who is not an Affiliate of an Authorized Person. A Trade Association is not a Producer; however, Paragraphs 2 and 3 of this rule apply to a Trade Association.

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P-53 Rebates and Discounts Prohibited.

c) “Affiliate” means:

i. an officer, director, agent or employee of an Authorized Person

• r a Producer;

ii. a member of the immediate family of an officer, director, agent,

• r employee of an Authorized Person or a Producer;

iii. a person who owns a Producer or Authorized Person; iv. a person who is owned by a Producer or Authorized Person; or v. a person who is under common ownership with a Producer or Authorized Person.

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P-53 Rebates and Discounts Prohibited.

d) “Business Expense” means a cost to operate or promote a business, including but not limited to costs of furnishings, postage, office supplies, advertising, electronic media, computer hardware, computer software, telephones, telephone charges, printing, copiers, fax machines, office equipment, vehicles, staff, employee compensation, and rent.

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P-53 Rebates and Discounts Prohibited.

d) An expense that a Producer is, in accordance with generally acceptable accounting principles, permitted to deduct for tax purposes is presumed to be a Business

• Expense. Without limiting this definition, the following

constitute the payment of Business Expenses of a Producer by an Authorized Person, subject to the provisions of paragraph 3 herein:

1. jointly, with a Producer, advertising real property not

• wned by the Authorized Person for sale or lease;

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P-53 Rebates and Discounts Prohibited.

2. Contributing to a Producer or paying any part of the Producer’s costs of any of the following: A. for sale or for lease signs; B. advertisements, in any media or form, that promote any

• ne property not owned by the Authorized Person for

sale or lease;

• C. boxes or similar items in which to store advertising

media;

• D. hosting an open house;

E. prizes, food, beverages, gifts, decorations, entertainment

• r professional services given at open houses; or

F. parties or receptions which promote a Producer or the Producer’s properties or activities of the Producer

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P-53 Rebates and Discounts Prohibited.

• 2. Except as provided by this rule, an Authorized

Person, directly or through an Affiliate, may not:

a) pay, contribute, share in the cost of or finance any part

• f the Business Expenses of a Producer;

b) pay, contribute, share in the cost of or finance any part

• f the expenses of an event or activity of a Trade

Association that exists for the primary benefit of Producers and in which a majority of members are Producers; or c) solicit or engage in a title insurance transaction(s) involving land located in more than one state which includes land located in Texas if:

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P-53 Rebates and Discounts Prohibited.

1) the policy premium charged or solicited to be charged by the Authorized Person or Affiliate for any title insurance policy issued in the transaction(s) covering the land described in the policy outside the state of Texas violates the law of that other jurisdiction where the land is located;

• r

2) the policy premium for the land in the other jurisdiction is so discounted or reduced from the normal and customary charge as to constitute a thing of value in this state.

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P-53 Rebates and Discounts Prohibited.

• 3. Notwithstanding Paragraph 2, an Authorized Person
• r its Affiliates may:

a) join a Trade Association and voluntarily participate in a Trade Association’s activities provided that the level of such participation does not exceed normal participation (not more than two hours per business week) of a volunteer member of a Trade Association and is not activity that would ordinarily be performed by paid staff of a Trade Association; b) purchase advertising promoting the title insurance company or the title insurance agent at market rates from any person in any publication, event, or media;

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P-53 Rebates and Discounts Prohibited.

c) deliver to a party in the transaction or the party's representative legal documents or funds which are directly or indirectly related to a real estate transaction closed by the Authorized Person; and d) engage in legal promotional and educational activities that are not conditioned on the referral of title insurance business.

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P-53 Rebates and Discounts Prohibited.

4. Authorized Persons shall maintain auditable records documenting compliance with this rule. 5. In addition to any other sanction or penalty which the Commissioner may impose by law, after notice and

• pportunity for hearing, any person (including a Producer
• r Authorized Person) found to have violated this Rule is

subject to a civil penalty of not more than $10,000 for each act of violation and for each day of violation, unless a greater penalty is specified by the Insurance Code or another insurance law of Texas. The Escrow Officer, Title Insurance Agent or Direct Operation license or the certificate of authority of any person found in violation of this Rule may be suspended or revoked, after notice and

• pportunity for hearing.

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First Title of Limestone County, Inc. of Groesbeck, Texas

– Order Number: 20175016 – Date of Order: 3/31/2017 – Action Taken: Fined $4,000 – Violation: Misrepresented completion of continuing education requirements by employees

TDI Enforcement Actions

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P-28 Requirements for Continuing Education for Title Agents and Escrow Officers and Professional Training Program for Title Agent Management Personnel

• B. Provisions Pertaining to Professional Training

Program for Title Agent Management Personnel

• 7. Proof of Course Completion. All individuals who are

defined as management personnel in subsection B.1 of this procedural rule and not exempt under the provisions

• f subsection B.3 of this procedural rule shall maintain

proof of completion of a professional training course for title agent management personnel for a period of four years from the date of completion of the course.

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P-28 Requirements for Continuing Education for Title Agents and Escrow Officers and Professional Training Program for Title Agent Management Personnel

• B. Provisions Pertaining to Professional Training

Program for Title Agent Management Personnel

• 7. Upon request, the individual shall provide proof of

completion of the professional training course for title agent management personnel to the Department.

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Williams, Lesley Karen of Round Rock

– Order Number: 20175001 – Date of Order: 3/27/2017 – Action Taken: (SOAH Docket No. 454-12-2825.C) Fined $3,000 – Violation: Failed to follow title insurance requirements for documenting escrow accounts

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TDI Enforcement Actions

North American Title Company of Dallas

– Order Number: 20175000 – Date of Order: 3/27/2017 – Action Taken: (SOAH Docket No. 454-12-2825.C)Fined $15,000 – Violation: Failed to follow title insurance requirements for documenting escrow accounts; failed to timely pay premium for title insurance policies

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TDI Enforcement Actions

P-23. Division of Premiums between Title Insurance Agents and Title Insurance Companies

a) All agency contracts between title insurance companies and title insurance agents must provide for the division of premium between the title insurance company and its title insurance agent on the following basis: b) All agency contracts between title insurance companies and title insurance agents must provide for the division of premium between the title insurance company and its title insurance agent on the following basis:

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P-23. Division of Premiums between Title Insurance Agents and Title Insurance Companies

c) The sum of the Underwriter Portion of the Premium and the Agent Portion of the Premium shall be the Basic Premium for title insurance charged to the public. Wherever the words “Basic Premium”, “Basic Rate” or “Basic Premium Rate” shall appear or be referenced in any other rules, they shall mean the Basic Premium described in the preceding sentence.

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P-23. Division of Premiums between Title Insurance Agents and Title Insurance Companies

d) The amounts of the Underwriter Portion of the Premium and the Agent Portion of the Premium shall be set by the Commissioner in view of the experience of the title insurance companies as a group (excluding all agents affiliated with a title insurance company, all direct

• perations of a title insurance company, and all agents

unaffiliated with any title insurance company). e) The division of premium established by the Commissioner shall be the same for all agents unaffiliated with any title insurance company, all affiliated agents and all direct operations.

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P-23. Division of Premiums between Title Insurance Agents and Title Insurance Companies

f. During 2000, and thereafter until changed by the Commissioner, on all title insurance written by title insurance agents the division of premiums between title insurance companies and title insurance agents shall be as follows:

1. title insurance companies shall receive 15% of each title insurance premium, and 2. title insurance agents shall receive 85% of each title insurance premium; 3. provided, however, all Assessment Recoupment Charges authorized and approved by the Commissioner shall be apportioned only to certain underwriters pursuant to other orders and rules of the Commissioner, and shall not be apportioned pursuant to this Rule P- 23.

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P-24. Payment for Services Rendered by a Title Insurance Company, Title Insurance Agent, or Direct Operation to Another Title Insurance Company, Title Insurance Agent or Direct Operation

In negotiating the portion of the premium to be paid by a Title Insurance Company (“Company”), Title Insurance Agent (“Agent”), or Direct Operation (“Direct Operation”), including any of their attorneys who are licensed escrow officers (“Escrow Officers”) to another Company, Agent, Direct Operation or any of their Escrow Officers for: (i) furnishing title evidence, (ii) furnishing title evidence and examining title, (iii) closing a transaction, or (iv) closing a transaction and examining title, the payments shall not exceed the following percentages as applied to the portion of the title insurance premium remaining after payment of the underwriter's portion of the premium:

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P-24. Continued

(a) If the insured policy amount is in excess of $125,000 Furnishing title evidence, or furnishing title evidence and title examination by the Company, Agent, or Direct Operation furnishing the evidence 50% Closing the transaction, or Closing the transaction and title examination 50% (b) If the insured policy amount is 125,000, or less. Furnishing title evidence, or furnishing title ` evidence and title examination by the Company, Agent, or Direct Operation furnishing the evidence 90% Closing the transaction, or Closing the transaction and title examination 10% 47

P-24. Continued

In addition to these percentages, reasonable charges may also be made and paid for copies of documents. Any payment in excess of the sums calculated by use of the percentages specified in this Rule shall be deemed to be an unreasonable and excessive amount, unless the Company, Agent, or Direct Operation providing such services and the Company, Agent, or Direct Operation, paying for such services

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P-24. Continued

(i) under section (a) above enter into a prior written agreement not less than ninety (90) days prior to closing specifying and agreeing to percentages (but not services) different from those provided in this Rule or (ii) under section (b) above are licensed in the same county

• r in contiguous counties and enter into a prior written

agreement not less than ninety (90) days prior to closing specifying and agreeing to percentages (but not services) different from those provided in this Rule . All payments must be remitted no later than the thirtieth (30th) day after the date of recording by the county clerk

• f an instrument conveying an interest in the land.

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P-24. Continued

On and after January 1, 2013, the insured policy amount in sections (a) and (b) above shall be $150,000.00. This Rule, including the provisions pertaining to prior written agreements, and the percentages specified in this Rule apply to each Escrow Officer of a Company, Agent, or Direct Operation to the same extent and in the same manner as is applicable to the Company, Agent, or Direct Operation for which the person is acting as an Escrow Officer.

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P-24. Continued

Nothing in this Rule shall affect the division of premium between a title insurance company and its subsidiary title insurance agent when the title insurance company directly issues its policy or contract of title insurance company pursuant to Sec. 2704.002, Insurance Code. For purposes of this Rule, a subsidiary is a company at least fifty percent (50%) of the voting stock of which is owned by the title insurance company or by a wholly owned subsidiary of the title insurance company. The amendments to P-24 adopted on May 1, 2008, are effective July 1, 2008.

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Texas Southern Land Title, L.L.C. of Katy

– Order Number: 20174905 – Date of Order: 1/23/2017 Action Taken: Fined $4,000 – Violation: Failed to timely remit portions of title insurance premium due to title insurance company

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TDI Enforcement Actions

StarTex Title Company, L.L.C., and Buckalew, Ronald Lang of Sugarland

– Order Number: 20174908 – Date of Order: 1/23/2017 – Action Taken: (SOAH Docket No. 454-15-1585.C) Fined $10,000 – Violation: Failed to properly close an escrow transaction

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TDI Enforcement Actions

Reyes, Stephanie Lynn of Dallas

– Order Number: 20175102 – Date of Order: 6/7/2017 – Action Taken: (SOAH Docket No. 454-17-3800.C) Escrow officer license revoked; must pay restitution – Violation: Misappropriated, converted to own use, or illegally withheld money; engaged in fraudulent or dishonest acts or practices

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TDI Enforcement Actions

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Article: http://www.tdi.texas.gov/news/2017/tdi12082017.html

Contact Information John Rothermel

SW Regional Underwriter Senior Vice President Senior Underwriter

Stewart Title Guaranty Company San Antonio, Texas

210.590.1981 john.rothermel@stewart.com

Heidi Junge

Assistant Vice President Underwriting Counsel Associate Senior Underwriter

Stewart Title Guaranty Company San Antonio, Texas

210.590.1981 heidi.junge@stewart.com

To Receive CE Credit

Each individual seeking credit hours must send their own certificate request to: CEcertificate@stewart.com Please include the following information:

• Provide only this Presentation Name in the Subject Line of your e-mail – “TDI

Enforcement Actions” In the body of your e-mail:

• Name of Participant (as it appears on your Escrow Officer License);
• Presentation PASSWORD given at the end of the webinar;
• License Number Only (located on left side of Escrow Officer Certificate of License –

for example: License Number: 1234567-890123) For Attorney CLE Credit also include:

• Texas State Bar Number
• Affiliation with Stewart

– Employed by Stewart Title Guaranty Company; – an affiliate; or – a Stewart agent

For more details, see the CE and CLE FAQs at:

http://www.stewart.com/en/stg/texas/education/texas-tips/ce-cle-faqs.html

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Join us for the next Texas TIPS webinar!

January 18, 2018

Home Equity Loans Update

Charlie Craig

For Questions/Comments Email john.rothermel@stewart.com

• r

heidi.junge@stewart.com

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