Highlights From the New RESPA Regulations May 15 – 17 · HUD persisted and issued its final...

Feature PageDid You Know .................................22009 General Membership Mtgs. ..3LandAmerica Files Bankruptcy ....4Search Warranties vs. Subpoenas .7New FMLA Regulations Finalized 9Labor Law Corner .........................10Get Ready for R/E Rebound .......12Military ID's ...................................14DOJ v. NAR Settlement ................18eDemand Lien Payoff Requests ..19DOC Advisory Minutes ...............202009 Officers/Directors ................23IRS Regulates Accommodators ...24

In This Issue...

Publication of the Escrow Institute of California Holiday 2008

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SAVE THE DATE!

2009 Spring Conference May 15 – 17

Crowne Plaza Ventura Beach Hotel

Rooms & Rates:

King Bed with View - $119 per nightHotel Discounted Self-Parking - $5

Deadline for Room Reservations: Thursday, April 23, 2008

Reservations are to be made directly with the Reserva-tions Department by calling (805) 648-2100 or by call-ing the Hotel Reservations system at (800) 842-0800.

Indicate you are with the Escrow Institute.

Highlights From the New RESPA Regulations

As we previously transmitted to the Institute Mem-bership, the Department of Urban and Housing De-velopment (HUD) adopted and issued on November 17, 2008 its final 341 page RESPA regulations. To view the entire regulation, new Good Faith Estimate (GFE) and revised HUD-1 forms, and economic analysis from HUD, please visit http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm; or, http://www.hud.gov/respa

The issuance of the final RESPA regulation cul-minates six years of regulatory analysis, industry debate and consumer studies by HUD. During this time HUD held seven roundtables (which the Insti-tute was invited and participated in two sessions), spanning three HUD Secretaries, during which time two regulatory reform proposals were introduced, and one proposed rule was withdrawn after intense industry and Congressional opposition. The fact that HUD persisted and issued its final regulation points to the Department’s strong determination to reform RESPA, even against continued industry opposition and that 240 members of Congress signed a letter requesting HUD to pull this proposed rule.

The complicated draft regulation was introduced in March and generated over 12,000 public comments, the majority of which were opposed to the proposed regulation. The Institute submitted a comprehensive

to All Our Members, Affiliates and Friends from the Board of Directors

and the StaffGreetingsSeason’s

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Holiday 2008Escrow Institute News

Judy GoolerPresident

Board of Directors

Escrow InstItutE offIcErs

PJ GarciaVice President - National Affairs

Beulah StidhamVice President -

State AffairsMalia Monroe

Vice President - Education

Tricia VagtVice President - Membership

Dave BrooksTreasurer

Genia EngelstadSecretary

Tim EganChief Executive Officer

Escrow Institute News is the bi‑monthly publication of the Escrow Institute of California. While this newsletter is designed to provide accurate and authoritative information on the subjects covered, the Association is not engaged in rendering legal, accounting or other professional or technical services. Accordingly, the Association cannot warrant the accuracy of the information provided herein. If legal advice or expert assistance is required, the service of a competent, professional person should be sought.

Did You Know?That Madelyn Dunham, the cornerstone and grandmother of President-elect Barack Obama, was a trailblazer and pioneer who helped develop Hawaii’s escrow industry during the 1960s to early 80s, during the boom years in Hawaii real estate. Ms. Dunham rose to be one of the first woman vice presidents in a bank in Hawaii. At Bank of Hawaii, Ms. Dunham headed up the escrow division.

That on January 1, 2009 a new California Law goes into effect that will ban text messaging while driv-ing. The new law will prohibit writing, sending, or reading any text based message. Violating this law is punishable by a base fine of $20 for a first offense and $50 for each subsequent offense.

That your escrow company and possibly your clients may have escheated funds. One of our Insti-tute members brought his possibility to our attention when they were asked by one of their clients to check if a refund check may have been diverted to the State Controller (which it had not). While on the Controller’s website, our curious member checked to see if per chance her escrow company may have some “hidden assets” that may have been escheated (none were found), or if some surrounding escrow companies had any assets that the Controller was holding. To our members surprise of the half dozen or so escrow companies all but two had assets due them.

Bring yourself or one of your clients an early Christmas present by checking the Controller’s Un-claimed Property website at www.sco.ca.gov and reclaim those not so hidden assets.

Peace to you and your Family

this Holiday Season

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RESPA(continued from Page 1)

response which focused on the proposed “Closing Script,” that would have tasked settlement agents with the preparing the closing script, reading it aloud to the consumer at closing, and providing it in hard-copy format to obtain the consumer’s writ-ten acknowledgment. The inclusion of the closing script requirement drew the most industry opposi-tion, which HUD took into account in the final rule by abandoning the ideal of the closing script. Instead the Department developed a new page three to the HUD-1 that includes a scaled-down version of the information that was previously proposed for the closing script into a single additional page. Although settlement agents still will be responsible for pre-paring the new three page HUD-1, the Department included specific requirement that lenders must pro-vide the settlement agents with sufficient informa-tion to complete the new page three of the HUD-1.

The final rule will give lenders and settlement agents generally one year to adapt to the use of the new Good Faith Estimate (GFE) and HUD-1 forms. The Institute Office has received inquiries concerning the varying effective dates contained in the final regula-tions, and representations and materials that some have received from out-of-state software vendors that have represented that the new GFE and HUD-1 forms must be in use no later than January 16, 2009. The final rule states that on January 1, 2010 lenders and settlement agents must use the new GFE, in-cluding disclosure of yield spread premiums and the tolerance restrictions, along with the new HUD-1. While nothing precludes a lender or settlement agent from using the new GFE and HUD-1, prior to the effective date of January 1, 2010, it is important to note that such use will subject the lender and settle-ment agent to all of the new and expanded require-ments contained in the final RESPA regulation.

The Institute Board and staff have attempted to par-ticipate in and monitor affiliated industry groups and association meetings and discussions concerning the requirements and implementation of the final RE-SPA regulations. As part of this continued industry

monitoring was a recent Legal Webinar session with Phillip Schulman with K&L Gates, recognized as the premier legal expert for RESPA and his associate Holly Spencer Bunting. Please click here to read Mr. Schulman’s excellent summary of the major provi-sions of the RESPA regulation.

We will continue to report and update Institute Mem-bers as HUD and the real estate industry further consider the ramifications and impact of the final regulations.

2009 GENERAL MEMBERSHIP MEETING DATES

Thursday, January 8

Thursday, March 12

Friday - Sunday, May 14-17 (Spring Conference)

Thursday, July 9

Thursday, September 10(Board Elections)

Thursday, November 12

Our first meeting of 2009 we will have Valerie Faltas formerly from the L. A. County Assessor’s Office who will touch on Propositions 8 & 13, and Bob Thompsen a market and research analyst who studies the real estate market. So watch your e-mail for the notice and registration form!

Please check the website at www.escrowinstitute.org in the “Events” section for any updated information on location and program for these meetings.

http://www.escrowinstitute.org/pdf/news_Q4_08_Alert.pdf

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LandAmerica Files for Bankruptcy Protection

By Matt Carter – Wednesday, November 26, 2008 – Inman News

LandAmerica Financial Group Inc. has filed for Chapter 11 bankruptcy protection and plans to sell its title insurance underwriting subsidiaries to com-panies under the umbrella of rival Fidelity National Financial Inc., a week after Fidelity backed out of a planned merger of the companies.

Fidelity subsidiaries Fidelity National Title Insur-ance Co. and Chicago Title Insurance Co. have agreed to pay $298 million to acquire LandAmerica subsidiaries Lawyers Title Insurance Corp., Com-monwealth Land Title Insurance Co., and United Capital Title Insurance Co., LandAmerica said.

That’s more than twice the price tag of a previous plan for Fidelity to acquire LandAmerica and its subsidiaries in an all-stock deal originally valued at about $128 million. Fidelity announced on Nov. 21 that it was exercising its right to back out of the deal during a due diligence period.

If the latest deal is approved by the bankruptcy court and regulators, Fidelity would be acquiring the three companies that account for 85 percent to 90 percent of LandAmerica’s annual revenue, without taking on all of the parent company’s liabilities, which exceed $650 million, LandAmerica said in a bankruptcy court filing.

Although Nebraska regulators have determined that Commonwealth and Lawyers’ dwindling surpluses represent a “hazardous financial condition” and are seeking to place the underwriting companies in receivership today, they will be allowed to continue to write new business as their planned sale moves forward.

With Lawyers, Commonwealth and United Capital under its umbrella, Fidelity would become the na-

tion’s largest title insurance underwriter, controlling about 45 percent of the U.S. title insurance business, based on 2007 market share. The nation’s largest title insurance underwriter, First American Corp., had a 30 percent market share in 2007.

LandAmerica is a holding company, and a cash crunch stemming from investments by its 1031 ex-change subsidiary has left it unable to pay creditors, Chief Financial Officer G. William Evans said in a bankruptcy.

Only LandAmerica and subsidiary LandAmerica 1031 Exchange Services Inc. are seeking bankruptcy protection, the company said -- not dozens of other businesses under the company’s umbrella. Unlike a Chapter 7 bankruptcy filing, in which a company seeks to liquidate assets, the Chapter 11 process is intended to give companies some relief from credi-tors while they reorganize.

Other LandAmerica subsidiaries provide apprais-als, home inspections and warranties for residential real estate transactions, and perform services for mortgage lenders including real estate tax process-ing, flood zone determinations, consumer mortgage credit reporting, default management services, and mortgage loan subservicing.

Frozen investments

LandAmerica established the 1031 exchange com-pany in 1990 to facilitate tax-deferred exchanges of business or investment properties. The company would take the proceeds of sales of clients’ proper-ties and invest them until another “like kind” prop-erty is located.

Since 2002, LandAmerica 1031 Exchange Services has been investing some of those funds in auction-rate securities backed by federally guaranteed stu-dent loans, Evans said.

“Until earlier this year, banks pitched (auction-rate securities) to corporations and wealthy individuals as highly liquid and safe alternatives to cash,” Evans

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said. The company’s goal was “to maintain the full liquidity necessary to meet customer claims.”

The par value of those auction-rate securities is $201.7 million, Evans said, and the company has another $46 million invested in Treasuries to satisfy claims of 400 customers owed $191.7 million.

But after the market for auction-rate securities be-came frozen this year, LandAmerica 1031 Exchange Services has been unable to sell those investments “at any price near their par value,” Evans said.

LandAmerica Financial Group advanced $65 million to its 1031 exchange company to honor customer claims, but Evans said given the “severe liquidity constraints also confronting (the parent company), it was not in a position” to lend its subsidiary any more money.

As of today’s bankruptcy filing, Evans said, Lan-dAmerica Financial Group had liabilities “in excess of $650 million” including a $100 million revolving credit facility, senior notes totaling $150 million, and $225 million in convertible notes.

Evans said the housing downturn has reduced Lan-dAmerica’s revenue by more than 40 percent since the end of 2006, while provisions for title insurance policy losses increased from 5.2 percent of operating revenue to 21.1 percent.

Search for a suitor

In his affidavit, Evans also outlined the company’s attempts to avoid bankruptcy, which included discus-sions with Fidelity and four other potential suitors.

In September, LandAmerica’s board of directors decided to pursue “various strategic alternatives” in-cluding a sale of the company and hiring JP Morgan as a financial advisor, Evans said.

After considering “a large number of potential strategic and financial suitors,” LandAmerica signed nondisclosure agreements with five potential part-ners. The company made “extensive due diligence

materials” available to the parties, including a comprehensive electronic data room containing more than 2,700 documents.

In the end, Fidelity emerged as “the only suitor with the ability to engage in a strategic transaction” and provide the necessary liquidity to LandAmerica and its subsidiaries, Evans said. After two weeks of negotiations, on Nov. 7 LandAmerica executed a merger agreement with Fidelity.

After Fidelity backed out of the merger Friday, LandAmerica entered into “fragile and complicated” negotiations to sell its title insurance underwrit-ing subsidiaries to Fidelity. In a statement, Fidel-ity said Chicago Title will acquire Commonwealth for $158.6 million, and Fidelity National Title will acquire Lawyers and United for $139.4 million. The deal is expected to close as early as late December, the company said.

Evans said the negotiations were complicated by recent action by the Nebraska Department of Insur-ance, the regulator of Lawyers and Commonwealth. On Nov. 18, he said, the Department of Insurance determined that the companies’ reduced capital surplus placed them in a “hazardous financial condi-tion.”

That determination allowed the Department of Insur-ance to file court petitions that seek to place Lawyers and Commonwealth in receivership and give Direc-tor Ann Frohman some control over their operation. Hearings on the “petitions for rehabilitation” were scheduled for last week.

LandAmerica expects the orders will be entered quickly and serve as a “temporary administrative step” to facilitate the sale of the companies. Lawyers Title and Commonwealth will continue to operate and serve customers during the completion of the sale, LandAmerica said in a statement, and both underwriters are “entirely solvent.”

Analysts at Fitch Ratings on Monday downgraded the insurer financial strength ratings of LandAmer-


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LAnDAMERICA(continued from Page 5)

ica’s title insurance underwriters, noting that the statutory surplus at the companies fell from $426 million at the end of 2007 to $300 million at the end of September. The new “BB” insurer financial strength ratings “reflect the potential vulnerability” of the title insurance subsidiaries’ obligations, Fitch analysts said.

Open for business

Janette Adair, legal counsel for the Nebraska Depart-ment of Insurance, said Frohman “believes there is a lot of value in the underwriting companies,” and that the director is allowing them to continue to write new business.

Adair said there are three levels of receivership -- supervision, rehabilitation and liquidation -- and that the goal of rehabilitation is to give companies time to get back on their feet. Typically, the Department of Insurance appoints a deputy special receiver to work with the company in managing a company’s affairs.

“Once you have an order of rehabilitation, the big decisions (about the companies’ operations) would be approved by the court,” in Lancaster County, Adair said.

The United States Bankruptcy Court for the Eastern District of Virginia must also sign off on the deal, and the Federal Trade Commission could object to the extent of consolidation that would result.

If Fidelity does acquire LandAmerica’s title insur-ance subsidiaries, it and First American would together control approximately 75 percent of the title insurance business.

But Fidelity Chairman William Foley has said antitrust review of title industry consolidation usu-ally concerns control of real estate information and data at the county level. Because LandAmerica has

relied on First American’s title records, only a small percentage of the companies’ subsidiaries have their own title plants, and Fidelity does not expect anti-trust issues.

When Fidelity was planning to merge with Lan-dAmerica rather than acquire its title insurance sub-sidiaries, it envisioned $150 million in “synergies” by eliminating redundancies in corporate and admin-istrative overhead, direct and agency operations, and claims management and processing.

Editor’s Note: The main reason for the downfall of LandAmerica Financial Group, Inc. centered around the collapse of its subsidiary LandAmerica 1031 Exchange Services. Approximately $400 million in 1031 exchange funds were on deposit with the Ex-change Services. In its Chapter 11 bankruptcy filing, LandAmerica stated that it was holding much of the money for its investors in commingled accounts that were invested in auction-rate securities that have become illiquid, and therefore was not able to meet its obligations to hundreds of 1031 exchange cus-tomers. The higher-yielding auction-rate securities were backed by federally insured student loans. As of its bankruptcy filing, LandAmerica held auction-rate securities with a par value of $202 million.

Auction-rate securities let companies and mu-nicipalities to borrow funds as long-term debt with short-term features. Buyers were attracted to rela-tively high yields and an assurance that investors could easily exit. The auction-rate securities hit rock bottom in February when too few bidders were attracted to the securities. Wall Street Investment Houses then stopped supporting the market, which then caused the securities to dry up.

Reprinted with permission by Inman News – Novem-ber 26, 2008. For more information or for subscrip-tions, please call (510) 658-9252, Ext. 128 or visit www.inman.com

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SEARCH WARRAnTS VS. SUBPOEnAS

By Rose Pothier, Esq.

A police officer walks into an escrow office with a Search Warrant in hand and asks to see and then take with her an original escrow file. She has a police dog with her. All work stops while the Es-crow Officer contemplates what to do….can the police officer demand the file without prior notice? Can the police officer take the original escrow file with her? Is a Search Warrant like a Subpoena for documents? What about the dog?

It is important to understand the difference between Search Warrants and Subpoenas to understand how to comply with each.

1. Search Warrants. California Penal Code §15231 defines a Search Warrant as a written order issued in the name of the people, signed by a magistrate and directed to a peace officer “…commanding him or her to search for a person or persons, a thing or things, or personal property, and, in the case of a thing or things or personal property, bring the same before the magistrate.” Thus, under a Search Warrant, the peace officer is ordered and directed to search for the item(s) denoted in the document and bring them into Court.

Under Penal Code §1525, a Search Warrant can only be issued upon probable cause, supported by an Affidavit naming or describing the person to be searched [or searched for] and describing the property or thing(s) and place to be searched except under special circumstances of Penal Code §1526. Thus, escrow agents can expect the Search Warrants to list themselves as the person to be searched and a description of the item as a “file” or “escrow file” affecting real property or business described by a property address or business name and, perhaps the owners of the owners, buyers or

1 All references are to California Law unless otherwise stated.

sellers in the transaction. The information should be adequate to locate the escrow file.

The basis for the Court issuing a Search Warrant are listed at Penal Code §1524(a) and include, but are not limited to, those listed which may involve an escrow file at subsections (1) when the property was stolen or embezzled, (2) when the property or things were used as the means of committing a felony, (3) When the property or things are in the possession of any person with the intent to use them as a means of committing a public offense, or in the possession of another to whom he or she may have delivered them for the purpose of concealing them or preventing them from being discovered, or (4) When the property or things to be seized consist of any item or constitute any evidence that tends to show a felony has been committed, or tends to show that a particular person has committed a felony. The form of the Search Warrant is set forth at Penal Code §1529.

Under Penal Code §1524(c), there are special protections against Search Warrant intrusions, which do not include the files of escrow agents, but do include attorneys, physicians, psychotherapists, physicians and members of the clergy where such persons are not reasonably suspected of engaging or having engaged in criminal activity related to the documentary evidence for which a Search Warrant might be issued unless a procedure is followed including the Court’s appointment of a special master to go with the persons serving the Search Warrant. The provisions of this procedure are beyond this article, but may be studied in full at Penal Code §1523(c) and its subsections.

The peace officers have great power under Search Warrants including the power to break open any inner or outer door or window of a house or other place if refused admission under Penal Code §§1531 and 1532. Additionally, the Court may give direction in the Search Warrant for service be served at any time of the day or night per Penal Code §1533. There is no prohibition against peace officers bringing their canine deputies to search

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under a Search Warrant. Likewise, peace officers may cordon off an area being searched with yellow “crime scene” tape if they deem it appropriate to do so.

There is some urgency on the part of the peace officers to get what they are commanded to obtain as the Search Warrants and the proceeds therefore are to be returned within ten days under Penal Code §1534 although there is a provision for extension of that time.

Escrow agents may require the peace officer to give them a detailed receipt for the escrow file or any other thing(s) taken pursuant to a Search Warrant as provided in Penal Code §1535. The receipt should list the Escrow Number for the file as well as any particular items important to be referenced.

There is a procedure under Penal Code §§1536.5 and 1538.5 to recover the original escrow file and substitute copies of the file which requires the Court’s approval.

2. Subpoenas. California Code of Civil Pro-cedure §1985(a) provides that a Subpoena is the process by which the attendance of a person is commanded requiring attendance at a particular time and place to testify as a witness in a civil action. The subpoena may require the witness to bring documents and other things under the witness’s control. The witness must be personally served with the Subpoena and a copy of an Affidavit showing good cause exists for the production of the things and matters described in the Subpoena per CCP §1985(b) which must set forth the “ex-act matters or things” to be produced detailing the “materiality” thereof to the issues in the case as well as stating the witness has the thing(s) in his/her possession or under his/her control. Personal service is required under CCP §1987.5.

SEARCH WARRAnTS(continued from Page 7)

In California, an attorney may sign and issue a subpoena requiring a witness’s attendance at Court or a deposition under CCP §1985(c).

After being served with a Subpoena to appear at a given place and time, the witness and party serving the Subpoena may agree to the witness’s appearance at a different time and place under CCP §1985.1. The agreement has the same force and effect as service of the original Sub-poena and the witness must then appear at the new time and date. The witness is entitled to witness fees and mileage under CCP §1986.5.

If the witness is served with a Subpoena requiring the production of consumer records or records of an employee as defined in CCP §1985.3, the person issuing the Subpoena must provide the witness with evidence that the consumer or employee has been served with a notice that the consumer’s/employee’s records are being sought along with a copy of the Subpoena and the af-fidavit. The consumer’s or employee’s records and documents cannot be produced until the pas-sage of ten days if the service on the consumer or employee was personally served or fifteen days if served by mail. CCP §1985.3(c) 2 and 3.

If an Escrow Officer is served with a Subpoena and cannot appear, unless the deposing party grants permission for an extension, he/she may have to file a Motion to Quash service under CCP §1987.1. Consumers and employees whose personal re-cords are sought may also bring Motions to Quash under this section. The Judge will then review the Motion to Quash to determine whether to quash the service of the Subpoena in its entirety or to modify it based upon the matters then outstanding in the case. Under CCP §1987.2, the Court may, in its reasonable discretion, award attorneys’ fees to the person(s) making or opposing the Motion to Quash. Failure to appear when served with a Subpoena is legal disobedience and subjects the witness to sanction for contempt or arrest. CCP §§1991, 1991.1 and 1992 or CCP §1993.

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In summary, escrow agents should contact their legal counsel when served with Search Warrants or Subpoenas as the responses will be differ-ent depending upon the circumstances of the case and service at the time. Federal Search Warrants and Subpoenas as well as Adminis-trative Law requests for information should be reviewed by counsel before acting to comply.

Regarding the peace officer’s dog? It is a canine peace officer and not a pet, so do not reach out or otherwise act to treat it as you might your own dog. Generally, the peace officer serving a Search Warrant will wait while the Escrow Officer locates the file and, hopefully, copies it before taking the original and giving the Escrow Officer a receipt. Any questions about service of Search Warrants or Subpoenas should be directed to the escrow agent’s attorney.

Rose Pothier, Esq. with Pothier & Associates pre-pared this article entitled Search Warrants vs. Sub-poenas. You may reach Ms. Pothier at 2122 North Broadway, Santa Ana, California 92706 or at the of-fice at (714) 953-8580 or [email protected]. Pother & Associates are Affiliate Members of the Institute.

SEARCH WARRAnTS(continued from Page 8)

New FMLA Regulations Finalized

On November 17, 2008, the U.S. Department of Labor (DOL) published the final version of the new Family and Medical Leave (FMLA) regula-tions. The regulations become effective on January 16, 2009 – 60 days after publication in the Federal Register.

In January 2008, FMLA was amended, adding qual-ifying events, to provide employees with additional leave relating to military service and the caring for service members. Specifically, the amendments cre-

ated leave for a “Qualifying Exigency Relating to Military Service.” Eligible employees are entitled to up to 12 weeks of leave because of “any qualifying exigency” arising because the spouse, son, daughter or parent of the employee is on active duty, or has been notified of an impending call to active duty status, in support of a contingency operation. Until now, the DOL had not issued regulations defining “any qualifying exigency.”

In addition, the regulations create new poster and notice requirements. According to the DOL, there should be a new FMLA poster in December, which will be on CalChamber’s all in one poster for 2009. If you would like to read the regulations, we recom-mend starting at page 556 where the actual rest of the regulations begin.

What Should You Do?

• Be sure you have ordered the 2009 Labor Law Digest and Labor Law Administration to have the detailed requirements and compliance guid- ance imposed by these regulations at your finger tips.

• Review your policies and procedures to ensure you are in compliance with the regulations by January 16, 2009.

• Get the 2009 Employment Notices Poster to avoid fines for failure to post the new FMLA poster, as well as other requirements for 2009.

Reprint: California Chamber of Commerce”HR California Extra” newsletter – November 20, 2008

The Escrow Institute of California is a member of the California Chamber of Commerce, 1215 K Street, Suite 1400, Sacramento, CA 95814 – Website – www.calchamber.com

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Employee Who Quits Job May Be Eligible for Unemployment Insurance

Ellen S. Savage – Labor Law Consultant, California Chamber of Commerce

One of my employees quit to go to work for one of my competitors. After a few months, she got laid off from her new job and now she’s collecting unemployment insurance from my reserve account. How can she do that when she’s the one who decided to quit my firm?

Many employers believe they will have to pay unemployment insurance (UI) when an employee is fired or laid off. Surprisingly, there are many circumstances where an employee who quits a job can collect UI.

Any employer the employee worked for in the “base period” of the claim (see Base Period chart on next page) may be liable to pay benefits, even if they were not the last employer.

‘Good Cause’

Under California law, an employee who quits with “good cause” may be eligible for UI benefits. “Good cause” means the employee’s reason for leaving must be something substantial and compelling that would cause a rea-sonable person who genuinely wanted to remain employed to quit anyway.

Some examples include quitting to take a better job, to move a substantial distance when a spouse’s job is trans-ferred, or when the employer relocates and the new commute distance is unreasonable.

According to the California Employment Development Department (EDD), when an employee quits in order to accept a new job there is good cause for leaving if:

• There was a definite assurance of employment in another substantially better job that is at least as permanent as the job the individual leaves; or• A reasonable person who genuinely wanted to remain employed would have left to accept the other work.

Substantially Better Job

In determining whether the new job is substantially better, EDD looks at relative pay, opportunities for advance-ment, skills required, seniority rights, working conditions, location and permanency.

A 10 percent increase in pay generally would be considered good cause to quit, factoring in the basic wage, shift differentials, board and room furnished by the employer, guaranteed overtime, and fringe benefits such as vaca-tion pay and insurance.

Labor Law Corner


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An employee who quits her job for a substantially better job and then is laid off from the new job due to a lack of work may be eligible to collect UI from the first employer’s reserve account. The first employer’s reserve ac-count would be charged if wages were paid by the first employer during the base period for the claim.

An employee also would be eligible for UI benefits if she quit her job for a substantially better job and then, for reasons beyond her control, the new job did not materialize. This might occur when an employee quits her job based on being given a definite start date by the new employer, who then rescinds the job offer or delays the start date.

UI Eligibility Resources

For more information about what factors are used to determine UI eligibility, go to EDD’s ‘Benefit Determi-nation Guide” online at www.edd.ca.gov/UIBDG/. This is an excellent resource when responding to a former employee’s UI claim. Also available on EDD’s website is a helpful online publication called “Managing Unem-ployment Insurance Costs” at www.edd.ca.gov/pdf_pub_ctr/de4527.pdf

For more information about employer obligations under the UI program, go to the Benefits Library at www.HRCalifornia.com

Base Periods for UI Claims The base period is the 12If the claim begins in: months ending the previous:January, February, March September 30April, May, June December 31July, August, September March 31October, November, December June 30

Reprint: California Chamber of Commerce “Alert” newsletter – November 7, 2008

The Escrow Institute of California is a member of the California Chamber of Commerce, 1215 K Street, Suite 1400, Sacramento, CA 95814. E-mail: [email protected] Website – www.calchamber.com

In Passing...

It is with sad news to report that Terrie Bagaeff, sister of Debbie Armijo, Home Escrow Co, Inc. of Pomona, passed away suddenly on Friday, November 14th in her sleep. Terrie worked at Home Escrow for many years.

Should you wish to honor Terrie's memory, Debbie has asked for any monetary assistance for her sister's family. She knows "that money is tight for everyone but any little bit will help." Debbie can be reached at (909) 629-4107 or debbie@#homeescrow.net.

DOC Management ClassThursday, January 15, 2009

DOC’s Los Angeles Office For further information and to sign up, please go to www.escrowinstitute.org and click on “Events”or contact the EIC Office at 800-337-2769.

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Get ready for real estate reboundBy Bernice Ross

Will 2009 boom or will it be more doom and gloom?

Now you’re probably thinking: “A real estate boom in 2009? You’ve got to be kidding!” While the market may not exactly boom in 2009, there are a number of factors that may signal a dramatic improvement over the next 12 months. Here’s what’s happening that could make 2009 better than anyone anticipates.

1. The 10-year real estate cycle All markets are cyclical. While markets differ dramatically, a 10-year cycle is common in many places. The Southern California market provides an excellent illustration. In 1960, 1970, 1980 and 1990, the real estate market was at its lowest point plagued by excessive inven-

tory, foreclosures and short sales. By 1994, the market had stabilized from the downturn in the early 1990s. As market values were beginning to climb, the Northridge Earthquake hit. Extensive damage throughout the area sent the market into a tailspin. It took another three years for the market to stabilize again. The beginning of the next upswing began in earnest in 1998. The market peaked in 2005 -- seven years into the cycle -- and then began the current downward trend.

Given a 10-year cycle, California should be pulling out of the bottom and be on its way to a more normal market. This appears to be happening, despite the financial meltdown. The California Association of Realtors reported a 63 percent increase in sales in September. Radar Logic reports increases of year-to-year sales (2007 to 2008) ranging from a low of 16.3 percent in San Jose to a high of 74.3 percent in Sacramento. DataQuick reports that September sales were up from a low of 29.4 percent in Ventura County to a high of 106.1 percent in Riverside County as compared to September 2007. Mike Kelly of Keller Williams Sonoma reports that his market has only two months of foreclosure inventory and about four months of short-sale inventory. Foreclo-sures and short-sale inventory are rapidly being depleted in other areas of the country as well. As this inventory disappears, prices will stabilize and will eventually begin to rise.

2. Pent-up demand

Across the country, sellers and buyers have been telling their agents that they are waiting for the presidential election to be over before they buy or sell any real estate. Now that the presidential election is in back of us, the bailout is in motion and the most recent stock market plummet seems to have passed, look for a substantial uptick in buyer and seller activity. People still marry, have children, retire and have to relocate for their jobs. Many of them postponed selling or buying waiting for market conditions to improve. Look for this pent-up demand to make its way into the market in 2009.

3. The credit crunch eases

Credit is still tight. As one loan officer put it, “We’re back to qualifying buyers the way we did in the 1980s. If you don’t have a credit score of 740, forget it!” The bailout in conjunction with the new guidelines for FHA,


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Freddie Mac and Fannie Mae will result in more money in the system. Many credit unions are flush with cash and some are even making zero-percent-down loans to highly qualified buyers. As credit eases, buying and selling becomes easier. This will be particularly true in the jumbo market where highly qualified buyers are still having problems obtaining financing.

4. Inventory and days on market decline

The amount of inventory and the “days on market” statistics are the best harbingers of market changes. Prices always lag behind these statistics. When there is a strong seller’s market with upward pressure on prices, there may be only two or three months of inventory. Price stability normally occurs when there are six to eight months of inventory. Thus, when there has been a shortage of inventory, it can take 12 to 24 months before the market recognizes that there is an oversupply. The converse is true for a buyer’s market with downward pres-sure on prices. Unless you’re tracking inventory and days on market, you may not be aware of the shift until months after it started. Currently, inventory and days on market are dropping in many areas.

5. Demographics

In 2008, the size of Gen Y (born 1977 to 1994) surpassed the size of the Baby Boom generation. Gen Y wants to own real estate. Some researchers claim that there will be a boom in the Gen Y “Mommy Market.” While members of Gen X (1965-1976) are delaying both marriage and children, the typical Gen Y mom currently has 2.7 kids. This population explosion is being lead by Latina and Asian women. Gen Y is just now beginning to hit their early 30s, the time when they are most likely to buy their first home. On the other side of the coin, baby boomers (born from 1946-1964) are most likely to buy a second or a retirement home between the ages of 50 and 60. While builders have cut back substantially on the numbers of new homes being built, an increase in future demand and a limited inventory will result in higher prices.

The question is not whether there will be another real estate boom – there will be. The real issue is how long it will be before it starts. Watch your local market’s inventory levels and days on market to see what your future will hold.

Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of “Waging War on Real Es-tate’s Discounters” and “Who’s the Best Person to Sell My House?” Both are available online. She can be reached at [email protected] or visit her blog at LuxuryClues.com.

Copyright 2008 RealEstateCoast.com

Reprinted with permission by Inman News – December 12, 2008. For more information or for subscriptions, please call (510) 658-9252, Ext. 128 or visit www.inman.com

REBOUnD(continued from Page 12)

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Are Military Personnel’s Driver’s Licenses Automatically Renewed?

By Theresa A. Davis, Notary Public NNA Certified Notary Signing Agent

As a Notary Public and NNA Certified Notary Signing Agent, I occasionally run into difficult, unique, or interesting situations. Recently, I encountered a situation concerning an expired Indiana Driver’s License held by military personnel who had temporarily returned from Iraq. The purpose of our meeting was for him to sign his residential loan documents.

I noted that his Indiana driver’s license was issued in 2004 but had expired. Since his driver’s license had been issued within 5 years, I informed him that I could accept it as satisfactory identification per California Civil Code Section 1185.

During our conversation, he advised me that there is a “Federal law which automatically extends” the driver’s license of active duty military personnel and that each state must recognize and accept expired licenses issued to active duty personnel, no matter from which state it was issued. I informed him that I had never been instructed about such a law and that California has specific requirements concerning valid identification.

The gentleman was very adamant about the Federal law and stated that it was even recognized by a police officer that stopped him for a traffic violation. Furthermore, he stated that Federal law supersedes any state law mandated by California.

As his identification was acceptable at the time of signing, and the appointment was after regular business hours, there was no source available to me to confirm his information. However, due to California’s strict laws for obtaining proper identification, and significant penalties for failing to do so, I felt subsequent research and inquiries were necessary.

My research and inquiries revealed the following:

California Vehicle Code, Section 12817 provides:

“Persons in the Armed Forces

12817. A California driver’s license held by any person who enters or is in the United States armed forces shall continue in full force and effect so long as the service continues and the person remains absent from this State, and for not to exceed 30 days following the date on which the holder of such license is honorably separated from such service or returns to this State, unless the license is sooner suspended, canceled, or revoked for cause as provided by law. The license is valid only when in the immediate possession of the licensee while driving and the licensee has his discharge or separation papers, if he has been discharged or separated from the service, in his immediate possession. [Emphasis added]Amended Ch. 73, Stats. 1963. Effective September 20, 1963.”

California Department of Motor Vehicles Regulations:

The DMV’s website (http://www.dmv.ca.gov/dl/dl.htm) provides the following information concerning this is-sue:


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“Military personnel away from home

If you are out of state on active military service in the United States Armed Forces, your Cali-fornia driver license will continue to be valid beyond its normal expiration date. Section 12817 of the California Vehicle Code (CVC) authorizes the extension of your license. Call (916) 657-7790 to update your driving record and DMV will send you a DL 236 card to carry with your driver license. The DL 236 card states CVC Section 12817. It is important to update your record as this will pre-vent it from being purged. [Emphasis added.]

Ask the authorities in the state or country where you are on duty if they will honor your extended license. Of course, your license is not valid if it has been suspended, canceled, or revoked.

Your extended license is good for 30 days after you return to California. If honorably discharged, carry both your driver license and discharge papers during those 30 days.” [Emphasis added.]

For further explanation, I spoke with “Jerry” at the California Department of Motor Vehicles (916/657-7790) regarding the DL 236 card. Jerry provided the following information:

There are no Federal laws addressing expiration of a Military personnel’s driver’s 1) license.

Military personnel 2) may not obtain a DL 236 card if they are eligible to renew their license by mail. The DMV will send the renewal form to wherever they are based, even in Iraq or other foreign country.

If they are not entitled to renew by mail, Military personnel must obtain a DL 236 3) card prior to the expiration of their driver’s license.

At the time of application for a DL 236 card, they must present orders showing they 4) are on active duty or were on active duty prior to the expiration of the driver’s license.

At the time of application, they must present documents evidencing their out-of- 5) state status.

Upon the return to the State, they have 30 days to renew their driver’s license.6) If their driver’s license has expired, and does not have a military extension (the DL 7)

236 card), then it is not valid identification in California.

Jerry at the DMV instructed that a California Notary Public should ask for the following:Expired Driver’s license;•DL 236 Card;•Active military card. As stated in California’s “Notary Public Handbook” under •“Identification A(3)(d),” please note that the military card must contain all of the identification elements required in California Civil Code 1185. Some military cards, such as the “Common Access Card,” do not contain all of the necessary elements, such as a physical description and/or signature of the bearer; andOrders showing personnel has either been discharged, is on leave, or other •documents showing how long he has been or will be in the state.A Notary should request to see the Orders so he/she may determine how long •the individual has been “on leave,” or “discharged,” as they must renew their

MILITARY ID'S(continued from Page 14)


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license within 30 days of returning to the state.Note that CVC Section 12817 states: “The license is valid only when in the •immediate possession of the licensee while driving and the licensee has his discharge or separation papers, if he has been discharged or separated from the service, in his immediate possession.” [Emphasis added.]

California Secretary of State

Since I have always been instructed that California notaries are not allowed to accept a temporary driver’s license as acceptable identification, and to further inquire about the alleged “Federal law,” I contacted the Sec-retary of State, Notary Division (916/653-3595), for more information. After some discussion, I was transferred to and spoke with Bill Downs, Supervisor of the Notary Public Division, regarding these issues. Mr. Downs was kind of enough to do a little research and returned my call a couple of days later. At that time, he informed me of the following: no Federal Law: Neither he nor anyone in his office is aware of any federal law automatically extending the driver’s license of military personnel. California Driver’s Licenses: He said that if the military personnel’s driver’s license has expired, it may be extended by the DMV as provided in CVC Section 12817 (see above for DMV’s regulations regarding issuance of a DL 236 card). However, he also said the military personnel must present the DL 236 card with his/her ex-pired driver’s license and an active military I.D. card that is in compliance with Civil Code Section 1185. Out-of-State Driver’s Licenses: Although he could not speak for other state’s policies, he recommended not accepting an expired driver’s license (assuming no more than 5 years have passed from the issuance date) if they cannot present a state issued extension specifically for the military. If they can present a state issued military extension, they should also produce the expired driver’s license and active military I.D. card that is in compliance with Civil Code Section 1185.

States With “Military Expiration” On Driver’s Licenses: Some states, such as Washington (see http://www.dol.wa.gov/driverslicense/military.html), issue military personnel driver’s licenses that say “military” in place of an expiration date and they are valid as long as the person is in the military. In states such as Washington, Mr. Downs stated that this type of driver’s license would be valid provided they produce a valid military I.D. card that is in compliance with Civil Code Section 1185.

JOInT LEGAL ASSISTAnCE OFFICE - Camp Pendleton

In an effort to be thorough concerning any possible “Federal Law,” I called Camp Pendleton and requested to speak with a military lawyer. I was transferred to the “Joint Legal Assistance Office” and spoke with Captain Bill Ryan who said he knew nothing about a Federal law concerning this issue. However, he wanted to do a little research and get back to me.

A few days later, I received an e-mail from Captain Ryan, which stated:

“Ma’am, I went through the federal statutes and even called the folks at Headquarters Marine Corps

about the drivers license issue. We can find [sic], and they know of no FEDERAL law dealing



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with drivers licenses. All I could find were state by state laws dealing with the issue. Of course, a law in the state of Indiana probably does not require you to act under the Notary laws of Cali-fornia, but please don’t take that as my “legal advice” to you. Short answer is that no federal law that we know of requires you to accept an expired license from this or any other state.

v/r Captain Bill Ryan Judge Advocate Joint Legal Assistance Office Camp Pendleton, CA 760-725-6880”

THE BOTTOM LInE:

After speaking with representatives at the State level (Secretary of State, Notary Division, and the Department of Motor Vehicles), and the military’s “Joint Legal Assistance Office,” it appears that there is no Federal law specifi-cally addressing expiration of military personnel’s driver’s licenses.

Per the California Code, California DMV, and California Secretary of State, Notary Division, California notaries should require the following from military personnel whose driver’s license has expired:

Expired Driver’s license;•California DL 236 Card;•For an out-of-state driver’s license, a military extension from the issuing state;•Active military card that is in compliance with Civil Code Section 1185; and•Orders showing the military personnel has either been discharged, is on leave, or other docu-•ments showing how long he has been or will be in the state.In California, they must renew their driver’s license within 30 days of being state-side. This •is the reason a Notary should ask to see the person’s “leave” or “discharge” orders so as to determine how long they have been back in the state. Please note that CVC Section 12817 requires the “licensee” to have the “discharge or separa-•tion papers” in his immediate possession.

If they are not able to provide the above documentation, then they must present other acceptable identifica-tion per Civil Code Section 1185, such as a valid passport.

This article is only meant as a summary of information I have been provided. As I am not a lawyer, and there-fore cannot provide legal advice, please contact the appropriate agencies for further information, clarification or advice.

Theresa A. Davis, NNA Certified Notary Signing Agent - At Your Door Mobile Notarysm - aka Notary At Your Doorsm -Telephone: (858) 688-1917 / E-Mail: [email protected] / Website: www.atyourdoormobilenotary.com


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Judge Locks in DOJ v. NAR Settlement

Case draws to a close after 3-year battle

By Glenn Roberts, Jr. Thursday, November 20, 2008 – Inman News

Settlement of an antitrust lawsuit that the federal government filed three years ago against the nation’s largest real estate trade organization is now final.

U.S. District Court Judge Matthew Kennelly this week issued a final judgment to settle the U.S. v. National Association of Realtors case -- the lawsuit was originally filed in September 2005 and amended in October 2005.

The federal government had charged that the Realtor group approved policies governing the online sharing and display of property listings in-formation that were illegally restrictive, while the Realtor group countered that the policies did not violate federal antitrust law.

A proposed settlement was reached in May 2008, just weeks before a trial was set to begin. The Justice Department had initiated an investiga-tion of NAR policies in 2003.

The proposed settlement was amended slightly to address public comments received, and Judge Kennelly signed off on these amendments in is-suing a final judgment.

In a statement today, NAR President Charles McMillan said, “This is a great day for real estate and for consumers. This compromise is terrific news for the industry. We are pleased with the settlement so that we can all focus now on what matters most -- stabilizing the housing market and helping the U.S. economy recover.”

The final settlement provides that the Realtor group does not admit any liability or wrongdoing, NAR also noted in its statement.

Gina Talamona, a Justice Department spokes-woman, said in a statement, “We are pleased that the judge entered the settlement. The department believes that the NAR settlement enhances com-petition in the real estate brokerage industry giving consumers more choices, better quality service and lower commissions.”

Under the settlement agreement, NAR must adopt a “Modified Virtual Office Web site (VOW) Policy” that allows member brokers who partici-pate in multiple listing services to operate Web sites that carry property information from other brokers and does not allow other brokers to “opt out” from sharing property listings information with those VOW sites.

The settlement could potentially lead MLS participants to display a broader range of property information on MLS participants’ public-facing Web sites, though consumers will be required to register at VOW sites before gaining access to this more extensive set of information.

“The impact of the amended VOW policy is expected to be minimal, since most consumers do not use VOWs because these sites require online registration,” NAR officials said in a statement.

The settlement does not affect NAR’s policies for Internet Data Exchange (IDX) sites, which are powered by data-sharing agreements among bro-kers. Brokers participating in IDX sharing agree-ments can choose to withhold property information from other MLS participants.

NAR officials are required in the settlement to direct local Realtor boards to repeal the for-mer VOW policy and a separate hybrid policy dubbed the Internet Listing Display (ILD) if they had adopted those policies, and to direct those boards to adopt the Modified VOW policy within 90 days of the final judgment, which was issued on Tuesday, Nov. 18.


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NAR is directed in the final settlement to deny insurance coverage under any NAR insurance policy to boards that do not comply with the settle-ment and to report to the Justice Department “the identity of that member board and the rule or prac-tice it refused to rescind and cease to enforce.”

NAR must designate an “Antitrust Compliance Officer” by mid-December who has responsibility for “educating member boards about the antitrust laws and for achieving full compliance with this final judgment.”

And on a quarterly basis NAR must hand over to the Justice Department copies of any commu-nications “with any person containing allegations of any member’s board’s noncompliance with any provision of the Modified VOW policy or with this final judgment or failure to enforce any rules implementing the Modified VOW policy.”

NAR is also required to publish a prominent link on its Realtor.org Web site to a Web site that has published copies of the final judgment, a notice to repeal ILD and VOW policies, and a copy of the Modified VOW policy. And NAR must publish all of these items in an upcoming issue of its Realtor Magazine publication.

Laurie Janik, during an NAR annual conference earlier this month, detailed other provisions of the then-pending settlement before an audience of MLS officials, such as requirements that partici-pants in NAR-affiliated MLSs actively engage in the business of real estate brokerage or risk losing participation as of May 27, 2009.

Reprinted with permission by Inman News – November 20, 2008.

For more information or for subscriptions, please call (510) 658-9252, Ext. 128 or visit www.inman.com

eDemand Lien Payoff Requests

Franchise Tax Board Provides New Way to Order Demands

eDemand is a fast and easy way for escrow, title, and mortgage companies to electronically submit lien payoff demand requests to the Franchise Tax Board (FTB) for individuals or business entities.

If you are an individual taxpayer in a real estate trans-action, ask your escrow, title, or mortgage company to complete the lien payoff request. If you are not in a real estate transaction, you can pay the lien yourself.

To submit a request, you will need to provide the FTB your company information along with the seller, buyer, and lien information. For secu-rity reasons, you have 20 minutes to complete each page. If you take longer than 20 minutes, your session will end and you will need to start over.

After you submit a request, you will receive an email reply from the FTB that provides an estimated pro-cessing time for the request. Do not reply to the email.

If you need to request a partial lien release or lien subordination, see Partial Release of Lien and Subordination of Lien at www.ftb.ca.gov (click on Bills & Notices (tab at top), then to Lien (tab at top), then to Demand (in the left margin).

Before you begin, make sure you are using a com-patible browser and operating system. FTB recom-mends that you log out and close your browser when you are done to ensure the highest level of security.

Reprint: Franchise Tax Board – State of California

DOJ V. nAR(continued from Page 18)

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ESCROW ADVISORY COMMITTEE MEETINGSeptember 23, 2008

Department of Corporations Represented By:Louisa Broudy, Deputy CommissionerKathleen Partin, Special AdministratorAnn Davila, Escrow SpecialistPeggy Fairman, Counsel (Via telephone from Sacramento)Sherri Kaufman, Counsel (Via telephone)

Committee Members Present:Bill NelsonPJ GarciaJudy GoolerMatthew DavisMark EmmonsJeff BehmNancy Closson

Committee Members Absent: Erik Okland Jennifer Woodard Genia Engelstad Malia Monroe 1. Opening Remarks

Deputy Commissioner Louisa Broudy opened the meeting by welcoming everyone and then turned the meeting over to Kathleen Partin.

2. Follow-up items from the previous meeting were discussed as follows:

STATUS UPDATE-ESCROW COMPANIES HANDLING FRANCHISE DEPOSITS• Louisa mentioned that some time in the past Tim LeBas (former Deputy Commissioner and General

Counsel for the Department) had asked if escrow companies were interested in handling franchise deposits. Per Louisa’s notes, an attorney had inquired if escrow agents could handle this type of transaction. Presently banks and trusts handle these transactions. PJ stated that the industry was interested in handling these transactions. Per Louisa, legislation would be required to change the law to allow this. The Department’s Office of Law and Policy will be notified of the industry’s interest.

UPDATE-UNIFORM CLOSING INSTRUCTIONS-LETTER TO HUD• Louisa informed the committee that the Department had too short of a notice and was not able to

send a letter to HUD regarding the HUD Proposal and Uniform Closing Instructions. PJ inquired as to what could be done to facilitate process in the future. Louisa suggested that an e-mail to her would be the best. Judy Gooler and PJ stated that they would still like for the Department to review


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the Uniform Closing Instructions and RESPA Reform in order to be ready when issues come up again. Louisa will follow up on this to see what the Department can do.

ORIGINAL VS. ELECTRONIC SIGNATURES• Kathy stated that escrow companies can accept fax signatures and electronic signatures if they

choose to do so, but suggested that the escrow companies consult with their attorneys regarding this issue. If a company chooses to accept such signatures, this information has to be in the escrow instructions, the principals must agree on acceptance, and the instructions pertaining to this would have to be initialed, even if they are additional escrow instructions on a separate page. PJ asked if they could refuse to accept these types of signatures. Attorney Davis stated that the escrow com-panies could refuse to accept this business if they did not want it. He stated that each company has to way the pros and cons on this. PJ suggested that the Bulletin be used to inform companies of the Department’s requirements pertaining to such signatures.

3. Review of California Code of Regulations for Economic Impact

Louisa stated that the Department was asked by Agency to review all regulations for economic impact, especially on small businesses. This task fell to Ann Davila for the escrow regulations. One area focused on is the audited annual report and how much do the additional procedures (Section 1741.5) add to the audit. Louisa requested comments be sent to her. Jeff suggested that CPA’s and Examiners get together on this to discuss the issues, and that there possibly be a conference call be-fore the next meeting. Nancy Closson stated that the review on this matter should also be based on what EAFC is currently encountering. The Department will try to set up a meeting with CPA’s and Examiners.

4. Negotiation of Escrow Fees

As Genia Engelstad was not present, PJ summarized the issue. Are escrow fee discounts allowed for lenders in connection with REO escrows? Per Kathy, the Department’s concern regarding refer-rals would not apply to a lender. However, any discounts would have to be disclosed. Buyers would have to agree to pay part or all of the lender’s escrow fees if the buyer is charged more than the normal fee. Per the Department, volume discounts can be given when handling REO’s as long as the escrow instructions do not state the fees are to be split 50-50. Otherwise, the instructions have to be amended to inform the other party of the discount.

5. Deceptive and Misleading Use of “Escrow” in Names Used by DRE Brokers

As Malia was not present to discuss the issue, Kathy stated that DRE companies are filing DBA’s and using “Escrow” in their titles. Previously, the Department had been issuing letters to DRE com-panies regarding objection or no objection to names used based on whether the proposed name was too similar to a licensed escrow agent. However, the Department was not required by statue to ap-prove names, therefore the Department is no longer doing this. DRE had been notified of the change in procedure. Matthew suggested that the section of the law (17006 FC) dealing with exemptions be amended to stop this deceptive practice.


MEETInG MInUTES(continued from Page 20)

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6. DOC WebsiteLouisa stated that the FSD licensing listing comes up with one licensed Internet company (this will soon be changed as now there are two) licensed to do business over the Internet. PJ did not feel the statement on the Website was clear. She and Kathy will work on the wording.

The Department will work on making access to the California Code of Regulations easier. The Department will also add Escrow Institute as a provider of training along with the California Escrow Association in the Frequently Asked Questions.

7. Possibility for a Working Group to Discuss the License Fee Authorization Bill for 2009 The Committee is still interested in obtaining detailed information on the assessment fees and wants a

Profit and Loss Statement for the escrow program. However, Valinda was not available to attend the meeting to provide the information. The Committee wanted to know a time frame for receiving the numbers, as EIC will be looking into this and is forming a group to study the amount of the assess-ment.

8. Status of Escrow Bulletin Kathy stated that the Bulletin was almost totally written; however, because of budget constraints it had

not gone out. Now she needs to update it. She hopes to have it out by the end of October.

9. Enforcement Action Update Kathy passed out a summary of the disciplinary actions taken since the last Advisory Committee

Meeting. She also mentioned that a legislative proposal had been made to OLP to change wording regarding surrenders. Her proposal was to delete the reference to no violations so that companies can surrender even if they are not in compliance with laws that do not pertain to the integrity of the trust account. Kathy is also getting ready to do revocations for nonpayment of assessment.

10. Statistics Regarding Surrenders/Revocations Kathy passed out a handout showing the figures for the latest revocations and surrenders. The number

of companies licensed as compared to the prior year has remained pretty steady. The number of loca-tions has decreased, mostly due to branch location closings.

11. Open Discussion Matthew wanted to give the Department a “heads up” on how many companies are attempting to have

independent contractors only and pay only on a commission basis and provide no benefits. However, an escrow manager has to supervise these “employees.” Per Dan Bovill temporary employees, free-lance or part-time employees still file certificates with EAFC. Matthew stated that there is an AG Opinion that discusses the different classifications pertaining to DRE “employees.” He stated that companies are looking at different ways to stay in business and they may be breaking other laws.

Another issue discussed was escrow officers working from home or working off-site. Dan was under the impression that the Department did not license companies at their home address. Kathy stated that we do, but do not encourage it since if we have to take over the company, we may be locking them out of their home. Any location where an escrow is being processed must be a licensed location.

12. Next meeting tentative date is scheduled for Tuesday, December 9, 2008 at 10:00 a.m.

The meeting adjourned at 11:45 a.m.

MEETInG MInUTES(continued from Page 21)

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2009 Escrow Institute of CaliforniaBoard of Directors

OfficersPresident

Judy Gooler – Monrovia Escrows

Vice President – National AffairsPJ Garcia – Beach Pacific Escrow, Inc.

Vice President – State AffairsBeulah Stidham – Madrona Park Escrow, Inc.

Vice President – EducationMalia Monroe – Four Seasons Escrow, Inc.

Vice President – MembershipTricia Vagt – Covina Escrow Company, Inc.

TreasurerDave Brooks – Canon Escrow, Inc.

SecretaryGenia Engelstad – Elite Escrow Services of San Diego

DirectorsPJ Bremer – Cardinal Pacific Escrow, Inc.

Zoila Linda Chacon – The Escrow Solution, Inc.Judith Cunningham – Crestwood Escrow

Beth Lovelace – Aliso Escrow, Inc.Sunny Maden – South Hills Escrow Corp.

Paula Swallow – Discover Escrow CompanyMargaret (Maggie) Waller – Stone Creek Escrow. Inc.

Thank you to these industry colleagues for volunteering valuable precious time and resources to the Institute and its Members during these challenging times. Tim Egan

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IRS REGULATES ACCOMMODATORSRules issued on interest earned by accommodator and exchanger

By Michael C. Haas – Morton Alan Haas & Co.

The Internal Revenue Service issued new regulations concerning interest earned on accounts shared by ex-changors and accommodators in tax deferred exchanges.

1. Treasury Regulation §1.468B-6 sets forth rules under Internal Revenue Code §468B9(g) relating to taxation of accounts used during deferred exchanges (IRC §1031(a)(3).

2. These regulations became effective October 8, 2008.

3. Exchange funds are treated as being loaned from the exchanger (taxpayer) to the accommodator. Ac-commodator must take into account all income attributable to the exchange funds.

4. Exchange funds are NOT treated as being loaned to the accommodator if:

A. All earnings on the funds are paid to the taxpayer B. Earnings are attributable to the taxpayer’s exchange funds

a. If funds are in a separately identified account for the benefit of the taxpayer identified with the taxpayer’s name and TIN

b. A subaccount is treated as a separately identified account ifi. The master account under which the subaccount is created is established with a

depository institutionii. The depository institution identifies the subaccount by the taxpayer’s name and

TINiii. The depository institution specifically credits the earnings to the subaccount

If funds are held by the accommodator in a commingled account and all the earnings from the c. commingled account that are attributable to the taxpayer are paid to the taxpayer.

5. Where exchange funds are not treated as being loaned to the accommodator, then the taxpayer must take into account all income attributable to the exchange funds.

6. A 1099-INT must be filed to report the income attributable to the accommodator or to the taxpayer (or both) as is applicable to the earnings received by either the accommodator or the taxpayer.

Where exchange funds are treated as being a loan from the taxpayer to the accommodator, it is deemed that the interest paid by the accommodator to the taxpayer must be at least the rate of a 182-day Treasury Bill issued at the date most recent preceding the date of the funds are received from the taxpayer by the accommodator taxpayer.

Please call Mr. Haas at (818) 552-2384 or e-mail: [email protected] with any questions or comments.

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Highlights From the New RESPA Regulations May 15 – 17 · HUD persisted and issued its final...

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Transcript of Highlights From the New RESPA Regulations May 15 – 17 · HUD persisted and issued its final...