40-1137. Same; agents, authorized activities; use of client funds; escrow accounts, audit.
40-1137
40-1137. Same; agents, authorized activities; use ofclient funds; escrow accounts, audit.A title insurance agent may operate as an escrow, settlementorclosing agent, provided that:
(a) All funds deposited with the title insurance agent in connection withan escrow, settlement or closing shall be submitted for collection to,invested in ordeposited in a separate fiduciary trust account or accounts in a qualifiedfinancial institution no later than the close of the next business day, inaccordance with the following requirements:
(1) The funds shall be the property of the person or persons entitled tothem under the provisions of the escrow, settlement or closing agreement andshall be segregated for each depository by escrow, settlement or closing inthe records of the title insurance agent in a manner that permits the funds tobe identified on an individual basis;
(2) the funds shall be applied only in accordance with the terms of theindividual instructions or agreements under which the funds were accepted; and
(3) an agent shall not retain any interest on any money held in aninterest-bearing account without the written consent of all parties to thetransaction.
(b) Funds held in an escrow account shall be disbursedonly:
(1) Pursuant to written authorization of buyer and seller;
(2) pursuant to a court order; or
(3) when a transaction is closed according to the agreement of theparties.
(c) A title insurance agent shall not commingle the agent's personalfunds orothermoneys with escrow funds. In addition, the agent shall not use escrowfunds to pay or to indemnify against the debts of the agent or of anyother party. The escrow funds shall be used only to fulfill the terms of theindividual escrow and none of the funds shall be utilized until the necessaryconditions of the escrow have been met.All funds deposited for real estateclosings,including closings involving refinances of existing mortgage loans, whichexceed $2,500shall be in one of the followingforms:
(1) Lawful money of the United States;
(2) wire transfers such that the funds are unconditionally received by thetitle insurance agent or the agent's depository;
(3) cashier's checks, certified checks, teller's checks or bank moneyorders issued by afederally insured financial institution and unconditionally held by the titleinsurance agent;
(4) funds received from governmental entities, federally charteredinstrumentalities of the United States or drawn on an escrow accountof a real estate broker licensed in the state or drawn on an escrow account ofa title insurer or title insurance agent licensed to do business in the state;or
(5) other negotiable instruments which have been on deposit in the escrowaccount at least 10 days.
(d) Each title insurance agent shall have an annual audit made of itsescrow,settlement and closing deposit accounts, conducted by a certified publicaccountant or by a title insurer for which the title insurance agent has alicensing agreement. The title insurance agent shallprovide a copy of the audit report to the commissioner within30 daysafter theclose of thecalendar year for which an audit is required. Title insurance agents who areattorneys and who issue title insurance policies as part of their legalrepresentation of clients are exempt from the requirements of this subsection.However, the title insurer, at its expense, may conduct or cause to beconducted an annual audit of the escrow, settlement and closing accounts ofthe attorney. Attorneys who are exclusively in the business of title insuranceare not exempt from the requirements of this subsection.
(e) The commissioner may promulgate rules and regulations setting forth thestandardsof the audit and the form of audit report required.
(f) If the title insurance agent is appointed by two or more title insurersand maintains fiduciary trust accounts in connection with providing escrow andclosing settlement services, the title insurance agent shall allow each titleinsurer reasonable access to the accounts and any or all of the supportingaccount information in order to ascertain the safety and security of the fundsheld by the title insurance agent.
(g) Nothing in this section is intended to amend, alter or supersede otherlaws of this state or the United States, regarding an escrow holder's dutiesand obligations.
History: L. 1999, ch. 95, § 10;L. 2000, ch. 26, § 1;L. 2009, ch. 33, § 1; July 1.