TDI Audit Review - Stewart...Jan 17, 2019  · Attorneys employed by a title insurance agent...

Welcome to today’s webinar!

TDI Audit Review

John Rothermel

January 17, 2019

In order to obtain a CE Certificate or CLE Credit, you must listen to the webinar for a minimum of 55 minutes obtain the password (provided at the end of the

presentation) follow the instructions as given

2

ATTORNEY INFORMATION

Because of opinions expressed by the Texas Department

of 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.

3

TDI Audits Review

John Rothermel Senior Vice President

Regional Underwriting Counsel

Senior Underwriter SW Regional Underwriting Office

Stewart Title Guaranty Company

5

Information taken from the Texas Department of Insurance

(TDI) Summary of Operations Report for the 4th Quarter of

Financial Year 2018 (June to August) presented to Texas

Title Insurance Guaranty Association Board of Directors

10/29/2018.

6

Compliance Audits and Escrow Audits Reports

QTR FY 18 FY 17 FY 16 FY 15 FY 14

Field audits completed 65 265 289 266 308 286

Field audit reports processed 67 269 296 252 317 276

Section 2651.151 audit reports received 61 586 558 555 553 566

Section 2651.151 audit reports reviewed 40 553 572 576 542 565

7

Analysis of Title Insurance Agencies Licensed

as of 8/31/2018

Breakdown of Comprehensive Audit Status

Agencies audited

within last 2 years

Agents last audit

was 2-3 years ago

Agents last audit

was over 3 years ago

# of (new) Agents Never

Audited Region # of

Agencies

NTX CTX WTX HOU STX

217 120 96

131 35

189 103 90

109 29

14 9 3

18 5

4 0 0 0 0

10 8 3 4 1

Totals: 599 520 49 4 26

% of Total: 86.8% 8.2% 0.7% 4.3%

8

REVISED Goal: In order to comprehensively audit every

agent at least once every 2 years, we need to conduct 300

comprehensive audits per year, which amounts to 75 audits

per quarter.

Last 12 months—

(9/1/17 – 8/31/2018) – 265 audits (within 35 of goal)

Last 3 months—

(6/1/18 – 8/31/18) – 65 audits (within 10 of goal)

9

Experience Report Limited Reviews

Out of 63 comprehensive audits completed during the

quarter, 55 (85%) included a limited review of the agent’s

latest experience report. The following results were reported.

QTR FY 18

FY 17

FY 16

FY 15

FY 14

Number of experience reports reviewed 55 135 163 161 159 180

1. No material discrepancies noted. 52 124 147 160 155 172

2. Income and/or expenses reported in wrong categories

0 0 3 1 1 2

3. Total income and/or expense amounts reported didn’t agree with agency’s financial statements

3 11 13 0 3 6

10

Insolvency

VIOLATION OR DISCREPANCY QTR YTD

Financial statements indicated agent was insolvent or had cash flow problems.

3 9

11

Abstract Plant

VIOLATION OR DISCREPANCY QTR YTD

Agency unable to retrieve instrument information. Unable to verify legal plant.

0 1

12

Texas Insurance Code

VIOLATION OR DISCREPANCY QTR YTD

§ 101.102 – Conducted unauthorized business of insurance. 4 10

13

Texas Insurance Code

VIOLATION OR DISCREPANCY QTR YTD

§ 2651.001 – Issued polices for property in county where not licensed

4 16

14

Texas Insurance Code

VIOLATION OR DISCREPANCY QTR YTD

§ 2651.301 – Failed to maintain separate escrow account (commingled escrow & operating funds).

9 35

15

Texas Insurance Code

VIOLATION OR DISCREPANCY QTR YTD

§ 2651.151 – Annual escrow audit report prepared incorrectly or contained material inaccuracies or other problems

7 23

16

Texas Insurance Code

VIOLATION OR DISCREPANCY QTR YTD

§ 2652.001 – Unlicensed person acting as an escrow officer 5 30

17

Texas Insurance Code

VIOLATION OR DISCREPANCY QTR YTD

§ 2702.053 – Actual receipts and/or disbursements not in agreement with settlement statement or premium split not disclosed.

41 166

18

Title Bulletins

VIOLATION OR DISCREPANCY QTR YTD

Title Bulletin NO. 160 – All parties receiving portions of the real estate commission not disclosed on settlement statement.

19 64

19

Procedural Rules

VIOLATION OR DISCREPANCY QTR YTD

P-21: Schedule D of commitment not in file or premium split not disclosed on commitment.

26 98

20

Procedural Rules

VIOLATION OR DISCREPANCY QTR YTD

P-73: Failure to prepare/maintain Form T-64 (TD) when CD used.

33 129

21

Rate Rules

VIOLATION OR DISCREPANCY QTR YTD

R-1: Unauthorized fee charged for closing (or tax search) in addition to premium.

3 13

22

Rate Rules

VIOLATION OR DISCREPANCY QTR YTD

R-2: Premium collected in installments or premium not collected at all.

0 0

23

Rate Rules

VIOLATION OR DISCREPANCY QTR YTD

R-8: Refinance credit not given or not calculated correctly. 5 16

24

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#1 – Monthly escrow trial balances not prepared or not prepared timely.

2 10

25

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#3 – Reconciliations not approved by management or reviewed by another employee.

4 12

26

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#5 – Only one signature on escrow checks when agency’s size required two signatures.

6 17

27

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#6 – Record did not include copies of all checks, invoices, deposit slips and receipt items.

16 43

28

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#9 – Escrow bank accounts not styled as “escrow” or “trust”. 7 32

29

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#10 – No management approval for disbursement made on accounts open for more than six months or no review for disposition of funds.

8 23

30

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#14 – Guaranty file number not displayed on all escrow checks or deposit tickets.

2 6

31

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#15 – Disbursement sheets missing, incomplete or incorrect. 19 77

32

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#16 – Every disbursement not supported by invoice or sufficient other evidence.

33 128

33

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#17 – Escrow receivables not cleared timely. 4 25

34

Minimum Escrow Accounting Procedures &

Internal Controls

VIOLATION OR DISCREPANCY QTR YTD

#20 – Images of checks did not meet requirements 3 12

35

Escrow Auditing

VIOLATION OR DISCREPANCY QTR YTD

Pattern of posting errors. 2 17

36

Escrow Auditing

VIOLATION OR DISCREPANCY QTR YTD

Outstanding checks not cleared timely. 40 128

37

Guaranty Files

VIOLATION OR DISCREPANCY QTR YTD

Legal documents not recorded timely with county clerk or evidence of timely recording not on file.

12 43

38

Guaranty Files

VIOLATION OR DISCREPANCY QTR YTD

Funds not disbursed or escheated to state. 17 57

39

Minimum Capitalization Rules

VIOLATION OR DISCREPANCY QTR YTD

S. 5: Quarterly tax report not submitted timely. 12 48

40

Contact Info

John Rothermel

SW Regional Underwriter

Senior Vice President

Senior Underwriter

Stewart Title Guaranty Company

San Antonio, Texas

210.590.1981

john.rothermel@stewart.com

Per the TDI and the State Bar, in order to obtain a CE Certificate or CLE Credit you must:

– listen to the webinar for a minimum of 55 minutes

– obtain the password (provided at the end of the presentation)

– follow the instructions as given

41

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

Audit Review” 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

42

Recordings

www.stewart.com/texas

Under “Texas TIPS” tab

• Posted online 10 days after live presentation

• Other current courses available

Certificates

• Processing can take up to 10 business days.

• Contact us if you haven’t received your

certificate after the allotted processing time.

CEcertificate@stewart.com

43

Join us for the next Texas TIPS webinar!

February 21, 2019

Basic Bankruptcy

Victor Davis

For Questions/Comments Email

john.rothermel@stewart.com

or

heidi.junge@stewart.com

44