Wisconsin Eagle's Nest: Q1 2023

EAGLE’S NEST A WI SCONSI N AGEN CY N EWS LETTER

Q1 2023

Table of Contents Wisconsin Agency Team

Page 3

March News Brief Changes for Wisconsin LLCs

Page 4

Upcoming Webinars Sneaky Deals

Page 5

Closing Protection Letters and Junior Loan Policies

Page 6

Agency Service Center Resources Freddie Mac and Fannie Mae Extend ALTA Forms Date

Page 7

Agent Advantage Policy Typing

Page 8

Q1 2023 | PAGE 3

Wisconsin Agency Team Put your trust in the professionals who put you first.

Meet the key players who are committed to providing the necessary resources and underwriting guidance you need, and the service solutions that give you an edge.

To learn more about your WI Agency Team, visit www.firstam.com/title/agency/wi.

Product, Service, and Administrative Support

Matt Ballard

Ben Smaglick

SVP, Agency Division – Midwest Region

Agency Representative

mballard@firstam.com C: 617.721.9702

bsmaglick@firstam.com D: 608.345.3902

Underwriting Support

Marv Ripp

Steve Zablocki

VP, State Counsel

Underwriting Counsel

mripp@firstam.com D: 608.286.3202

szablocki@firstam.com D: 608.286.3224

David Martyn

VP, Midwest Agency Regional Underwriting Counsel (IN, MI, WI)

dmartyn@firstam.com D: 248.433.7633

PAGE 4 | EAGLE’S NEST

March News Brief We know how important it is to stay on top of current news in the industry. Sign into Agent Print Pro® below to view the latest edition of the News Brief, which contains residential and commercial news articles to share with your customers.

AGENT PRINT PRO >

Changes for Wisconsin LLCs

by Marv Ripp, State Underwriting Counsel

Effective January 1, 2023, there was a new law regarding business entities. This law has a few changes, primarily regarding Limited Liability Companies (LLCs).

Operating Agreements Operating agreements are not required as a condition to articles being filed with DFI. Of course, you should still set out a requirement, on sch B-1, for an operating agreement; but be aware that none is required. If there is only one member, we can use an affidavit as to just one member, especially for purchase mortgages. For refinances and sales, see who signed past mortgages for the LLC as a check against someone claiming to be the sole member.

Multiple LLC Members If more than one member of the LLC and no operating agreement, then all members must sign if conveying all of the property. If not all of the LLC property, then a majority of membership owners must sign and represent a majority of ownership interest.

Statement of Authority A Statement of Authority as to who can sign can be filed with the DFI. It is not required that such a statement be filed, but if it is and a certified copy is recorded at the Register of Deeds, then we can rely on it (unless we get conflicting information) for five (5) years from the date of DFI filing. It may be the exception rather than the rule that these statements will be kept current! There is probably not much chance you will recieve Statements of Authority on most files. A new filing can amend or cancel the Statement of Authority. Of course, it might be hard to find these Statements or changes to them in a tract search. It remains to be seen how effective and utilized this new law will be.

Q1 2023 | PAGE 5

Sneaky Deals

by Steve Zablocki, Underwriting Counsel

We’ve seen them: sneaky deals. Deals that contemplate getting around or avoiding an interest in real property. How do we feel about them?

We don’t like them. Unless law and ethics are on our side, we may likely deny the transaction. Other than wanting to avoid a claim, we also want to encourage an industry where the standards of practice are aboveboard, straightforward, and honest. We often mirror that with our decisions to insure.

Upcoming Webinars Note: Seminar-specific phone numbers and passcodes will be sent out with registration reminders and materials for each seminar.

Access and Easements April 5, 2023 9:00am – 10:00am CST Entities & Interests in Property May 3, 2023 9:00am – 10:00am CST Water, Water Everywhere June 7, 2023 9:00am – 10:00am CST 1031 Exchanges July 12, 2023 9:00am – 10:00am CST The Title Commitment August 2, 2023 9:00am – 10:00am CST

Take for example land subject to a recorded right of first refusal. The land is owned by an LLC and the land cannot be sold without first offering the property to another. What if the owner of that LLC simply decides to sell the LLC interest to another to avoid triggering the right of first refusal? We really would need to look at all parts of the deal.

Does the LLC own other land? Is there a legitimate purchase of an ongoing business? Would this transfer of ownership constitute a sale or transfer under the right of first refusal? Is it a sneaky deal or a subterfuge designed to evade the right of first refusal? What do we know about the interest holder? Would they sign a release or waiver to permit the deal to go forward? Is there bad blood between the parties? Whatever the case, this is one of those transactions that may or not be wholly legitimate.

There’s a good chance anyone looking at the LLC purchase will see this as an attempt to avoid the recorded right of another. As such, whenever you see something that might look like a sneaky deal, call your underwriter. It may be something that is appropriate. It may be something we have to decline insurance. Whatever the case, don’t let a sneaky deal sneak past you without talking to us.

PAGE 6 | EAGLE’S NEST

Closing Protection Letters and Junior Loan Policies (You Get What You Pay For)

by Steve Zablocki, Underwriting Counsel

A closing protection letter (also called an “insured closing letter” or “CPL”) creates a contract between the title insurance underwriter and lender or buyer where the underwriter agrees to indemnify the lender or buyer for actual losses caused by certain kinds of misconduct by the closing agent.

In most cases, the CPL insures against loss caused by: Any failure of the Issuing Agent to comply with the lender’s written closing instructions that relate to the disbursement of Funds necessary to establish the status of the Title to the Land; or the validity, enforceability, or priority of the lien of the Insured Mortgage Obtaining any document, specifically required by the Lender, but only to the extent that the failure to obtain the document adversely affects the status of the Title to the Land or the validity, enforceability, or priority of the lien of the Insured Mortgage on the Title to the Land Loss caused by fraud, theft, dishonesty, or misappropriation of the Issuing Agent in handling the Lender or Buyer’s funds or documents in connection with the closing, but only to the extent that the fraud, theft, dishonesty, or misappropriation adversely affects the status of the Title to the Land or to the validity, enforceability, or priority of the lien of the Insured Mortgage on the Title to the Land

An ALTA Residential Limited Coverage Loan Policy (or Junior Loan Policy or “JLP”) provides limited coverage on a residential mortgage. It is available for mortgages other than the financing of the acquisition of the property (mortgages other than purchase money mortgages). It includes up to $300,000 and is not available for a mortgage exceeding $300,000.

The Junior Loan Policy covers certain limited title risks including that the grantee identified in the policy is the last grantee of record, that all outstanding liens having priority over the insured mortgage are shown as exceptions on the policy and all pending unpaid taxes and assessments are disclosed.

Can you issue a CPL to a lender where you are only issuing a Junior Loan Policy? Usually, no. The JLP is not an insurance product in the conventional sense.

Rather, the JLP is simply an insured search. That is, you checked the public records and you’ve revealed items of title.

As a practical matter, issuing a CPL is not compatible with a JLP. You are not following closing instructions. You are not insuring priority. You are not insuring that the lender has first or even subordinate lien status as outlined in any closing letters. Further, you are not insuring that their mortgage is enforceable. Moreover, issues of fraud, theft of handing of funds is not insured.

If you are asked to issue a CPL where you are issuing only a Junior Loan Policy, give your underwriter a call.

Q1 2023 | PAGE 7

Agency Service Center Resources The Agency Service Center (ASC) is the single point of contact for all Technical and Business Support for all Agent facing technologies and Forms Vendor Management. To view self-service information, contact details and 2023 holiday hours, download the the flyers below.

ASC SELF SERVICE FLYER >

ASC CONTACT FLYER >

Freddie Mac and Fannie Mae Extend ALTA Forms Date

by Steve Zablocki, Underwriting Counsel

In case you haven’t heard, Freddie Mac and Fannie Mae extended the required date for use of the 2021 ALTA title insurance forms from January 1, 2023, to January 1, 2024. As a result, as of January 1, 2024, the 2006 ALTA policy forms will be decertified and no longer acceptable for Freddie Mac or Fannie Mae transactions.

As an accommodation, Mortgages with Note dates on or before December 31, 2023, can still use either the 2006 or 2021 ALTA policy forms.

If you have any questions or concerns regarding policy forms implementation, contact your underwriter.

Policy Typing Services Save time and increase efficiency by utilizing the Policy Typing service from Agent Advantage.

Our experienced professionals can assist with various processes and back-office production tasks that can be tailored to fit your needs.

Take advantage of our Policy Typing services to maximize the productivity and efficiency of your operation so you can spend more time on the core of your business — your customers.

QUESTIONS Sandy Shadrach GLOBAL PRODUCTION ANALYST

630.799.7035 sshadrach@firstam.com

Blaine Einzinger SENIOR PRODUCT MANAGER

385.347.3558 beinzinger@firstam.com

For pricing and details, contact your For pricing details, contact your First American representative.

First American representative. ©2023 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. www.firstam.com/agency First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes First American,forthe eagle logo, First American andlogo, firstam.com are Title, registered trademarks or trademarks of First American Financial Corporation and/or its affiliates. no responsibility errors or omissions.

First American,Title, the eagle First American and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.

AMD: 08/2021

©2021 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF