Posted by DianeCipa on 12/16/07 6:01pm
Msg #226366

the meaning of the word "employee" in UCI

"Closing employee" is a person EMPLOYED by either the Settlement Agent or Signing Agent.

It is agreed that the Signing Agent is a different entity than the Settlement Agent.

It is agreed that the Signing Agent may be a one person shop or an entity that is not a natural person such as a corporation, partnership, or limited liability company.

I cannot agree, however, that the "closing employee" could be an independent contractor hired or contracted by a Signing Agent. If that is the intention of the drafters of the UCI then they had better get a different word because the word "employee" has a well established meaning in law and commerce.

So if the term remains "closing employee" then I would argue that a Signing Agent who operates like a signing service must actually EMPLOY the persons who act as "closing employees" in their transactions.

The word employee shows up in other critical parts of the UCI such as:

"Settlement Agent shall not designate as a Signing Agent Lender, any real estate agent or broker involved in the transaction, or Mortgage Broker, or any of their employees."

We have to, I believe, presume that they mean employee in the truest sense of the word, here, because it would be ludicrous to infer otherwise. To extend the definition of employee to independent contractors doesn't allow for any reliable delineation under this rule.

So, we can't and shouldn't have two different definitions of the word employee in one document. I therefore absolutely stand on my position that it is the intention of the drafters that the word employee have the true and specific meaning of W2 employee and not a 1099 contractor.

Reply by Lee/AR on 12/16/07 6:29pm
Msg #226368

Well...there's the first problem...and it's a biggie. Think TCs are going to be 'hiring' enough 'employee' notaries to cover the country? Think any SA is only going to 'be employed by' by one co? Or if 40, 50, 100 companies, what's the IRS going to think when they get 200 W2s from different co's for the same SA? If 'employees', are we to be discriminated against and not get any benefits? (Just kidding on that one...)

Reply by WDMD on 12/16/07 6:37pm
Msg #226369

"Closing employee" is a person EMPLOYED by either the Settlement Agent or Signing Agent.

I therefore absolutely stand on my position that it is the intention of the drafters that the word employee have the true and specific meaning of W2 employee and not a 1099 contractor."

Just so I understand your interpretation of this are you saying that you believe that anyone you send to go to the closing table to identify the signers and secure signatures should be your employee as defined by the IRS?

Reply by DianeCipa on 12/16/07 7:31pm
Msg #226376

No. If they ARE the Signing Agent, they can be a one man independent contractor and not the employee of the Settlement Agent.

At issue here is HOW DO SIGNING SERVICES OPERATE? The UCI define the Closing Employee as either an employee of the Settlement Agent OR they can BE the Signing Agent or an EMPLOYEE of the Signing Agent.

If I understand the way signing services now operate, the TC contracts with a signing service who contracts with a NSA, right? So let's look at that sentence and I'll change it to how I think UCI will work.

The TC contracts with a Signing Agent who has w2 employees who perform closings, OR
the TC contracts with a Signing Agent who is a one man shop without employees.

Reply by Tess on 12/16/07 7:06pm
Msg #226374

I might be wrong, but I believe she means that as a signing agent, we can not hire another independent notary. In other words, no signing services!

Reply by WDMD on 12/16/07 7:21pm
Msg #226375

"I might be wrong, but I believe she means that as a signing agent, we can not hire another independent notary. In other words, no signing services! "

Could very well be. That's why i asked for clarification. I'm really interested to hear the response.

Reply by DianeCipa on 12/16/07 7:32pm
Msg #226377

signing services

Yes. Signing services would exist but as employers of closers.

Reply by Barbara A Demonte on 12/16/07 7:59pm
Msg #226387

Re: signing services

If your an employee then they have to start withholding taxes and fica. I agree with Diane, the word definitely needs to be changed to independent contractor. Read IRS's definition for an employee, we don't even come close to that description.

Reply by DianeCipa on 12/16/07 8:04pm
Msg #226393

Re: signing services

If you are a one man shop and the TC hires you directly, no problem. You wouldn't have to be an employee of anyone. I think that even if you were a partner with another NSA so you have back-up, you'd be ok. The Signing Agent can be an entity such as a partnership or LLC or corporation.

So, let's say you and two or three other NSAs get together and form a small business. Your company is the Signing Agent and you are the Closing Employee.

Reply by Barbara A Demonte on 12/16/07 8:11pm
Msg #226396

Re: signing services

Yes, under those circumstances you meet the IRS's definition of an employee. But anyone that you call and assign a closing to that doesn't work out of your office on a daily basis is not an employee.

Reply by WDMD on 12/16/07 8:23pm
Msg #226399

Re: signing services

Diane: "So, let's say you and two or three other NSAs get together and form a small business. Your company is the Signing Agent and you are the Closing Employee."

Barbara:"Yes, under those circumstances you meet the IRS's definition of an employee.'

I think under the IRS definitions 2 or 3 NSA's who get together and form a small business are not employees but a partnership. Two or three NSA's who REFER business to one another are sole-propietors.

Reply by Barbara A Demonte on 12/16/07 8:39pm
Msg #226403

Re: signing services

"I think under the IRS definitions 2 or 3 NSA's who get together and form a small business are not employees but a partnership. Two or three NSA's who REFER business to one another are sole-propietors."

But if they agree to draw salaries from the business, then they are employees of the partnership or LLC. And you are correct, if they just refer business to each other they aren't employees of a business.

Reply by WDMD on 12/16/07 8:45pm
Msg #226407

Re: signing services

"But if they agree to draw salaries from the business, then they are employees of the partnership or LLC.'

No they are not. If they draw salaries or money from a partnership they would recieve a K-1, not a W-2 like an employee. They are partners not an employee. Now, the 2 or 3 of them could form a corporation and be employees and receive a W-2. A LLC does not automatically make a corporation either. A sole- proprietor or partnership can also be a LLC.

Reply by DianeCipa on 12/16/07 9:27pm
Msg #226421

entity

“Person” means any natural person or persons, or any legally created entity.

“Signing Agent” means any Person, other than an employee of Settlement Agent, who is designated by Settlement Agent to supervise the Signing of the Loan Documents.

“Closing Employee” means the individual employed by Signing Agent or Settlement Agent who is directly responsible for supervising the Signing of the Loan Documents and who is present at the Signing for the purpose of procuring Borrower’s signature on Loan Documents

A partnership is a legally created entity and thus could be a Signing Agent. I would argue that the partners in a general partnership would be the Signing Agent and thus could be the Closing Employee. You're right it's a K1 but it's not the same as being an independent contractor with a 1099 and that's what I believe they are seeking to avoid.

Good point, though, and one that should be mentioned in comments.

Reply by WDMD on 12/16/07 9:45pm
Msg #226425

Re: entity

"You're right it's a K1 but it's not the same as being an independent contractor with a 1099 and that's what I believe they are seeking to avoid."

Are you saying you would not issue a 1099 to the partnership if they are sub-contracting from you? . Are you saying that you would consider this in a way similar to if you hired a plumber you would not issue a 1099, but use the plumbers invoice as proof of payment for tax purposes? As a business to customer exchange and not a sub-contractor arrangement? The K1 is for reporting income and expenses and allowable deductions between the partnership and partners.

Reply by Susan Fischer on 12/16/07 9:51pm
Msg #226426

Re: entity

“Closing Employee” means the individual employed by Signing Agent or Settlement Agent who is directly responsible for supervising the Signing of the Loan Documents and who is present at the Signing for the purpose of procuring Borrower’s signature on Loan Documents

It's a poor sentence.

"Closing Employee" means the individual (me) EMPLOYED by "Signing Agent"- what?? No! I am the signing agent, and I don't employ anyone. If my business is a ma and pa team, then "who is present at the Signing" is moot because ,1) a, say mother/daughter or ma/pa don't "employ" each other, and 2) both can't be at the table for the "purpose of procuring signatures..."

I say, scrap this term altogether, and use one, well-defined term for the person who is physically present to supervise a signing for the purpose of "closing" the transaction. The signing process is, I believe, already defined specifically as one definition of "Closing" in Closing Instructions I've seen.

"Closing Supervisor" seems to cover it. Signing Agent is not set in stone, and neither is NSA, but better NSA than "Closing Employee."

Reply by Simple Solutions Notary Service - JoAnn Baracosa on 12/17/07 11:56am
Msg #226494

Re: I agree with Susan Fisher

"Closing Supervisor" or may I add this name "Loan Signing Manager ( the notary) " is better than Employee. Isn't that what we do already, Manage the Loan signing. We do manage the time, place, printing, photo copies, last minute questions, collect any money that comes to the table, fax's, sending docs to title. Just my 2 cents.

Reply by PAW on 12/17/07 8:58am
Msg #226453

Re: signing services

My understanding of a partnership (in terms of partner vs employee) is that there are main two types of partnership, salaried and equity. A salaried partner remains an employee of the partnership, and may have additional responsibilities arising from the title of partner. In an equity partnership, the partners are not salaried, thus not employees of the partnership and only share in the equity held by the partnership. Drawing against the equity is not the same as receiving a salary.

Reply by WDMD on 12/17/07 10:13am
Msg #226469

Re: signing services

"A salaried partner remains an employee of the partnership, and may have additional responsibilities arising from the title of partner. In an equity partnership, the partners are not salaried, thus not employees of the partnership and only share in the equity held by the partnership. Drawing against the equity is not the same as receiving a salary."

From Taxbook Deluxe Edition:
It is not uncommon to see partnerships pay partners as employees, withold taxes, and issue W-2 forms at the end of the year. However,according to IRS Revenue Ruling 69-184 a partner should not be treated as an employee of a partnership, and is not subject to employee witholding for FICA, FUTA, or federal income tax. Partners should be compensated with guaranteed payments, and should not be treated as employees by a partnership.

Reply by DianeCipa on 12/17/07 10:52am
Msg #226481

Well, that sounds like a workable partnership option

if bona-fide employee status is required. Thank you.

Reply by WDMD on 12/17/07 11:02am
Msg #226483

Re: Well, that sounds like a workable partnership option

I'm curious. What sounds like a workable partnership option? The fact that the IRS says that partners cannot treat themselves as employees?

Reply by DianeCipa on 12/17/07 12:22pm
Msg #226504

PAWs comment

expresses a workable partnership plan in my book, if needed.

UCI folks are going to hopefully shed light on where they are drawing the line.

Reply by PAW on 12/17/07 12:40pm
Msg #226509

Operative words are "should not", not "can not"

The IRS doesn't say that partners "cannot" treat themselves as employees. It says "should not". Partners should share in the equity. But partnerships can have employees that are not partners, but there is nothing to stop an employee from becoming a partner, nor a partner from being an employee. There are many IRS rulings that refer to two types of partners: equity partners and non-equity partners. The rulings always state the equity partners are not employees as they share in 100% of the assets and profits of the partnership. Non-equity partners do not share in the assets and profits as owners, but are paid as employees of the partnership. They just have some additional rights and benefits by being a "partner". This is very common in law firms and medical practices.

Reply by WDMD on 12/17/07 1:54pm
Msg #226522

Re: Operative words are "should not", not "can not"

PAW:
"The IRS doesn't say that partners "cannot" treat themselves as employees. It says "should not"."

Here is Revenue Ruling 69-184 that I posted about:

Rev. Rul. 69-184, 1969-1 CB 256 -- IRC Sec. 3121 (Also Sections 3306, 3401; 31.3306(i)-1, 31.3401(c)-1.)

1

Reference(s): Code Sec. 3121; Reg § 31.3121(d)-1

Partnership remuneration is not “wages” subject to FICA, FUTA, and income tax withholding; S.S.T. 23 superseded.

Full Text:
Bona fide members of a partnership are not employees of the partnership within the meaning of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages (chapters 21, 23, and 24, respectively, subtitle C, Internal Revenue Code of 1954). Such a partner who devotes his time and energies in the conduct of the trade or business of the partnership, or in providing services to the partnership as an independent contractor, is, in either event, a self- employed individual rather than an individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. Sections 1402(a) and 3121(d)(2) of the Code.

Remuneration received by a partner from the partnership is not “wages” with respect to “employment” and therefore is not subject to the taxes imposed by the Federal Insurance Contributions Act and the Federal Unemployment Tax Act. Such remuneration also is not subject to Federal income tax withholding.

S.S.T. 23, C.B. XV-2, 405 (1936), is superseded, since the position set forth therein is restated under current statute and regulations in this Revenue Ruling.

PAW, you state there are many rulings concerning "equity" partners and "non-equity" partners. You further state that "non-equity" partners are paid as employees of the partnership. Please cite these rulings. I would really like to read them. I would like to see how these rulings would apply to a 2 or 3 person partnership in the business of conducting loan signings. I look forward to your cites.

Reply by PAW on 12/17/07 10:07pm
Msg #226585

Re: Operative words are "should not", not "can not"

The one I have at my fingertips is Private Ruling # 199945064

Reply by WDMD on 12/18/07 5:21am
Msg #226603

Re: Operative words are "should not", not "can not"

"The one I have at my fingertips is Private Ruling # 199945064"

Thanks PAW for the reference.I read the private letter ruling. As you know private letter rulings deal with a specfic set of circumstances and the IRS issues a ruling based on those. Anyway, the ruling deals with the taxability of long term disability benefits. In that case the IRS determined that the benefits should not be includible in a partners or employees gross income.
Equity partners are considered to have ownership stakes in the firm, and share in the profits (and losses) of the firm. Non-equity partners are generally paid a fixed salary (albeit much higher than associates), and they are often granted certain limited voting rights with respect to firm operations. I submit that non-equity partners are not actual owners of the firm, as they do not share in the profits and have very limited rights, therefore they could be paid like an employee.
I did not see where it would allow the equity partners (who are the actual owners of the company) of the partnership to be able to pay themselves with a W-2 and consider themselves an employee. In fact the ruling stated that equity partners (the owners of the firm) are self -employed. I wonder how many people in the loan document world would operate like a law firm.
Thanks again for the reference PAW. Honestly, I do not see how this would affect a partnership doing loan signings. Most likely, a partnership doing loan signings would be a 2 or 3 person gig, all with an ownership interest (considered self-employed).This is from a private letter ruling with specfic facts that the law firm wanted clarification on. They did not even ask for an employee/partner clarification.

Reply by WDMD on 12/16/07 8:05pm
Msg #226394

Re: signing services

"Read IRS's definition for an employee, we don't even come close to that description."

My point exactly. My earlier post I just wanted clarification from Diane as to her position on employees. She answered that.

Reply by Susan Fischer on 12/16/07 8:42pm
Msg #226405

So glad to see this discussion. "Employee" strikes me as

simply the wrong word.

As Diane said, "Employee" is a term of art under the whole umbrella of Employment Law. Plus, every state has employment laws, requirements, definitons, ade infinitem. Ludicrous is right!

To assume that it will be taken in the broadest possible terms seems ~very~ optimistic, and would tend to confuse all sorts of issues from the jump.

Why not just *not* define the person at the table as an employee of anyone? Or, in the alternative, create a definition of "employee" that excludes independent table-signers?

This issue was a big question for me too.

Reply by desktopfull on 12/16/07 9:09pm
Msg #226418

Re: So glad to see this discussion. "Employee" strikes me as

"To assume that it will be taken in the broadest possible terms seems ~very~ optimistic, and would tend to confuse all sorts of issues from the jump."

And we all know what "assume" means: it makes an "ASS- (out of) U-(and) ME."

It's absolutely the wrong word!

Reply by SharonMN on 12/17/07 12:10pm
Msg #226500

We all seem to be assuming that if a signing service is involved, they need to be the Signing Agent, and the actual notary needs to be an employee of the Signing Agent. Why can't the Signing Service simply be what they are, a headhunter service paid by Settlement Agent to find the Signing Agent (independent notary)?

“Person” means any natural person or persons, or any legally created entity.

“Signing Agent” means any Person, other than an employee of Settlement Agent, who is designated by Settlement Agent to supervise the Signing of the Loan Documents.

“Closing Employee” means the individual employed by Signing Agent or Settlement Agent who is directly responsible for supervising the Signing of the Loan Documents and who is present at the Signing for the purpose of procuring Borrower’s signature on Loan Documents

Reply by DianeCipa on 12/17/07 12:25pm
Msg #226505

good point but

in my opinion, then that "headhunter" payment would outside of the transaction. I would presume then that the Signing Agent would be directly paid either on HUD or by Settlement Agent and not through a third party broker. How do you envision that type of arrangement?

Reply by Tess on 12/17/07 1:56pm
Msg #226523

Overhead costs

I believe that signing services may be needed by the title companies that can’t afford in-house phone help. They should be paid by the title companies as overhead. Maybe they need to come up with a monthly fee for their use, or other terms, instead of per signing.

Reply by DianeCipa on 12/17/07 2:46pm
Msg #226528

interesting point

and maybe also a subscription service for closers?

Reply by sue_pa on 12/18/07 8:54am
Msg #226612

I DON'T GET IT !!!!!!

Please, please someone, explain the purpose of this thread to me !!!! We all know what we are and what we do - so does everyone else. There are MANY titles used for our jobs. Many of you don't know her but a wise lady who started in this business with many of us years ago, Janet Lynch, said something along the lines of ... I don't care what they call me as long as they call.... I truly don't understand what all this is about.

Reply by Teresa Kutz on 12/18/07 12:43pm
Msg #226643

Re: I DON'T GET IT !!!!!!

Sue,

The conversations about the UCI are all about discussing the technicalities of the wording of the document, that’s all! The industry and or, should I say, the individual title companies will or won’t adopt and define what they will in it. So you are correct that there really is no point to discussing it at the moment.

Whether or not we should force the issues, so there is no room for individual interpretation in it, is something else, and everyone on their own, will need to make that decision for themselves!