Volume 1, No. 7 - October 2010
Compliance Corner

We continue to see a pattern of noncompliance in the areas noted below. This section has been created to assist you in keeping your insurance business in compliance. The items are intended as reminders only and are not necessarily the exact text of the Florida Statutes or Florida Administrative Code. The legal cites have been provided for your further reference.

Public Adjusters and Conflict of Interest

A public adjuster may not participate, directly or indirectly, in the reconstruction, repair, or restoration of damaged property that is the subject of a claim adjusted by the licensee. A public adjuster may not engage in any other activities that may be reasonably construed as a conflict of interest, including soliciting or accepting any remuneration. A public adjuster cannot have a financial interest in any salvage, repair, or any other business entity that obtains business in connection with any claim that they have a contract or an agreement to adjust. [Section 626.8795, Florida Statutes]

Requirements of Title Agents and Agencies in Short Sales
The Florida Office of Financial Regulation regulates short sales and licenses the people who negotiate them as Loan Modification Specialists. A title agent who is not an attorney may process and do all the research necessary to close a short sale, but they are prohibited from negotiating the terms of the short sale as it is not covered in the scope of their license. However, a short sale requires a title agent and agency to perform certain tasks:

  • The agency must confirm the lender will accept the lower amount. The agency does not negotiate this amount, but confirms the amount is correct.
  • The agency needs to know what will become of the excess loan amount. Is it to be forgiven? Is there to be a new personal loan in the seller's name? The agency must verify that the full existing mortgage amount is satisfied in the court records.
  • The agency must submit the payoff quickly to the lender. The short sale estoppel letter from the lender will direct the agency when the closing must take place and when the funds must be received by the lender in order for the transaction to be accepted. If the agency fails to meet these requirements, then a claim may be the result.
  • The agency must follow-up and obtain the satisfaction as quickly as possible.
  • The agency must verify that the foreclosure proceedings (if any) were stopped.
    • If the foreclosure is not stopped it is possible that the property will be sold at the foreclosure hearing to the highest bidder. That means there could be another person listed as the owner of the property prior to the short sale closing, which will result in two people claiming ownership. This is a certain claim against the title insurance commitment.
    • If you have questions about the sale date, you should contact the clerk of the court in the county where the property is located. The clerk will have the most up-to-date information regarding the foreclosure proceedings.
  • The satisfaction must be recorded to clear the title for the new owner.
  • The new mortgage must be promptly recorded; usually this occurs when the satisfaction is recorded. The satisfaction is recorded first, which gives it a lower clerk’s number than the new mortgage lien.
  • The agency must record the fees for the short sale transaction in the proper section of the HUD-1, which is not the title section.
  • The title agent is not responsible to verify the person negotiating the sale is properly licensed by the Florida Office of Financial Regulation, but it is recommended so the agent can ensure they are not assisting in a possibly fraudulent transaction.

Payment of Commissions to a Deceased Agent
A licensed or registered insurance agency may legally split, or share, commissions on a sale, but cannot pay new commissions to an unlicensed or non-appointed agent, living or deceased. Legal commission sharing between an agent and an agency is typically arranged through a contract between the parties, in which the producing agent assigns his or her commissions to the agency paying the agent's share of the commission. When paying commissions to a deceased agent, only payment of renewal or deferred commissions is legal as they are no longer licensed or appointed. The deceased agent may have had a contractual arrangement with the agency or insurance company to pay renewal commissions after his or her death. Payment of renewal commissions to an agent's estate is not uncommon. However, any contract that indicates the agency would directly pay a deceased agent for new business is in violation of the Florida Insurance Code. [Sections 626.753(1)(a), 626.794(1), and 626.838, Florida Statutes]