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| Home > Statutes > Usa Arizona |
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USA Statutes : arizona
Title : Banks and Financial Institutions
Chapter : ESCROW AGENTS
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6-801 Definitions
In this chapter, unless the context otherwise requires:
1. "Account servicing" means the holding of documents or written instruments and
the receipt and disbursement of payments according to the instructions of the parties to
the documents or written instruments.
2. "Affiliate" means an entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with the entity
specified.
3. "Control" means ownership or the power to vote, either directly or indirectly,
more than twenty per cent of the outstanding voting shares of the controlled person.
4. "Escrow" means any transaction in which any escrow property is delivered with or
without transfer of legal or equitable title, or both, and irrespective of whether a
debtor-creditor relationship is created, to a person not otherwise having any right,
title or interest therein in connection with the sale, transfer, encumbrance or lease of
real or personal property, to be delivered or redelivered by that person upon the
contingent happening or nonhappening of a specified event or performance or
nonperformance of a prescribed act, when it is then to be delivered by such person to a
grantee, grantor, promisee, promisor, obligee, obligor, bailee or bailor, or any
designated agent or employee of any of them. Escrow includes subdivision trusts and
account servicing.
5. "Escrow agent" means any person engaged in the business of accepting escrows.
6. "Escrow business" means a commercial activity characterized by the regular and
continuous carrying on of escrow transactions.
7. "Escrow property" means property, money, a written instrument or evidence of
title or possession to real or personal property or any other thing of value.
8. "License" means a license issued pursuant to this chapter.
9. "Licensee" means a person licensed pursuant to this chapter.
10. "Subdivision trust" means an agreement in which title to real property or an
interest therein is held for the limited purpose of holding, subdividing, developing or
selling real property or an interest therein, or to facilitate any business transaction
with respect thereto and under which agreement the trustee acts pursuant to direction of
its beneficiaries, and without discretionary powers, with respect to the holding,
subdivision, development or sale of real estate or an interest therein or the disposition
of the proceeds therefrom. Subdivision trusts are, for the purpose of regulation under
this chapter, escrows, except that this paragraph shall not be construed to limit the
obligation or liability of trustees of subdivision trusts under common law or otherwise.
6-802 Acknowledgment of report of examination;penalty
A. The superintendent shall examine or cause to be examined each escrow agent as
prescribed by section 6-122. The superintendent shall forward a report of the
examination to the board of directors of the escrow agent within thirty days after the
report is completed. Within thirty days after the report is received, the directors
shall meet to consider its contents. Within ten days after the directors' meeting, the
chairman of the board of directors shall notify the superintendent of its meeting, shall
acknowledge that each director has reviewed the report and shall describe the board's
responses to the recommendations of the examiners, including any remedies for violations
of this title. In each case, the superintendent may extend the time period in this
subsection for a period not to exceed one hundred twenty days applicable to actions by
the board of directors and its chairman.
B. Unless excused by the superintendent for cause before or after the date the
response is due, an escrow agent who fails to file a timely response to the report of
examination shall pay the department up to one hundred dollars for each day of
delinquency, as assessed by the department.
6-811 Exemptions
A. The provisions of this chapter do not apply to and the term "escrow agent" does
not include:
1. Any person who is licensed to practice law in this state and who is not actively
engaged in conducting an escrow business.
2. Any person doing any of the acts specified in section 6-801, paragraph 4
pursuant to the order of a court.
3. Trustees of deeds of trust to the extent the activities are performed as a
trustee under a deed of trust.
4. Any person doing any of the acts specified in section 6-801, paragraph 4 in a
fiduciary capacity for any person, trust or estate pursuant to the order of a court.
5. Licensed real estate brokers who render certain services by collecting rents for
others, as to such rents, and who within a reasonable time account for such rents to the
person or persons properly entitled to such accounting.
6. Licensed real estate brokers who in the regular course of their business accept
earnest money for the purpose of effecting the sale or transfer of property, as to such
earnest money, and who within a reasonable time account for such earnest money to the
prospective buyer or seller or to a licensed escrow agent.
7. Persons licensed pursuant to title 32, chapter 9, but only to the extent that
these activities are regulated by title 32, chapter 9.
8. Any person who is licensed pursuant to chapter 9, article 2 of this title and
who is approved to service loans for either:
(a) The federal national mortgage association.
(b) The federal home loan mortgage corporation.
(c) The government national mortgage association.
9. Any person licensed pursuant to chapter 14, article 1 of this title.
10. Any person who is licensed pursuant to chapter 9, article 3 of this title.
B. The provisions of this article do not apply to:
1. A person doing business under the laws of this state or the United States
relating to banks, credit unions, savings banks, trust companies and savings and loan
associations, except that this subsection does not exempt such banks, credit unions,
trust companies, savings banks and savings and loan associations from regulation of such
escrow activities under other statutes or laws of this state or of the United States nor
does this subsection allow an affiliate of the bank, credit union, savings bank, trust
company or savings and loan association to engage in the escrow business unless it is
licensed pursuant to this article and engages in such a business in accordance with this
chapter.
2. A person who is licensed pursuant to chapter 9, article 2 of this title and who
is not approved to service loans for either:
(a) The federal national mortgage association.
(b) The federal home loan mortgage corporation.
(c) The government national mortgage association.
6-812 Foreign corporations
No foreign corporation without a valid grant of authority to do business under title
10, chapter 15, article 1 shall transact any escrow business in this state.
6-813 License of agent; nontransferable;posting
A. A person, except those exempt under section 6-811, shall not engage in or carry
on, or hold himself out as engaging in or carrying on, the escrow business or act in the
capacity of an escrow agent in this state without first obtaining a license.
B. An escrow agent's license is not transferable or assignable and control of a
license shall not be acquired through stock purchase or other devices without the prior
written consent of the superintendent.
C. A license shall be kept conspicuously posted in all licensed places of business
of the licensee.
6-814 Procedure for licensing; suretybond
A. Every escrow agent before engaging in the escrow business shall file with the
superintendent an application for a license, in writing, verified by oath and in the form
prescribed by the superintendent. It shall state the location of the principal office
and all branch offices in this state, the name or style of doing business, the names and
residence and business addresses of all persons holding an interest in the business as
principals, partners, officers, trustees and directors, specifying as to each his
capacity and title, the general plan and character of operation and the length of time
they have been engaged in the escrow business.
B. The superintendent may require additional information he considers necessary in
connection with any application for a license under this article.
C. At the time of filing an application for a license and at all times while
holding the license, the applicant shall deposit and maintain with the superintendent a
corporate surety bond in the amount of one hundred thousand dollars payable to any person
injured by the failure of the licensee to comply with the requirements of this chapter or
for the wrongful act, default, fraud or misrepresentation of the licensee or his
employees and to this state for the benefit of the person injured and executed by a
surety company qualified to do business in this state.
D. Notwithstanding section 35-155, in lieu of the total corporate surety bond
required by this section, an applicant or licensee may deposit with the superintendent a
deposit in the form of cash or alternatives to cash in the amount of one hundred thousand
dollars. The superintendent may accept as an alternative to cash any of the following:
1. Certificates of deposit or investment certificates which are payable or assigned
to the state treasurer, issued by banks doing business in this state and fully insured by
the federal deposit insurance corporation or any successor institution.
2. Certificates of deposit, investment certificates or share accounts which are
payable or assigned to the state treasurer, issued by a savings and loan association
doing business in this state and fully insured by the federal deposit insurance
corporation or any successor institution.
3. Certificates of deposit, investment certificates or share accounts which are
payable or assigned to the state treasurer, issued by a credit union doing business in
this state and fully insured by the national credit union administration or any successor
institution.
E. The superintendent shall deposit the cash or alternatives to cash received under
this section with the state treasurer. The state treasurer shall hold the cash or
alternatives to cash in the name of this state to guarantee the faithful performance of
all legal obligations of the person required to post the bond. The person is entitled to
receive any accrued interest earned from the alternatives to cash. The state treasurer
may impose a fee to reimburse the state treasurer for administrative expenses. The fee
shall not exceed ten dollars for each cash or alternatives to cash deposit and shall be
paid by the licensee. The state treasurer may prescribe rules relating to the terms and
conditions of each type of security provided by this section.
F. A deposit of cash or an assignment of an alternative to cash shall contain an
affirmative statement by the assignor that the monies assigned are not derived from any
escrow deposit. In addition to such other terms and conditions as the superintendent
prescribes by rule, the principal amount of the deposit shall be released only on written
authorization of the superintendent or on the order of a court of competent jurisdiction,
but in any event the principal amount of the deposit shall not be released before the
expiration of three years from the date of substitution of a bond for a cash alternative,
the surrender of the license pursuant to section 6-838 or the revocation or expiration of
the license, whichever occurs first.
G. No suit may be commenced on a bond or cash or alternative to cash after the
expiration of three years following the act or acts on which the suit is based, except
that time for purposes of claims for fraud shall be measured as provided in section
12-543, paragraph 3. If an injured person commences an action for a judgement to collect
from the bond or cash alternative deposited in lieu of a bond, the injured person shall
notify the superintendent of the action in writing at the time of commencement of the
action and shall provide copies of all documents relating to the action to the
superintendent upon request.
H. The superintendent shall examine the application for a license and if he is
satisfied that the applicant should not be refused a license under section 6-817, he
shall issue the license.
6-815 Renewal of license
A licensee shall make application for renewal as prescribed by the superintendent
and pay the renewal fee prescribed in section 6-126 not later than September 30 of each
year. For each day after September 30 that the renewal application is not received by
the superintendent the applicant shall pay twenty-five dollars in addition to the fee
prescribed by section 6-126. Licenses for which renewal applications are not received by
the superintendent by September 30 are suspended, and the licensee shall not act as an
escrow agent until the license is renewed or a new license is issued pursuant to this
article. A license of a licensee that has not filed its renewal application and paid the
renewal fee by October 31 expires. A license shall not be granted to the holder of an
expired license except as provided in this article for the issuance of an original
license.
6-816 Fees
A. Each application for a new license or a renewal license shall be accompanied by
the fee prescribed in section 6-126.
B. For each day a report required by section 6-832 is not received by the
department, a licensee shall pay a fee of twenty-five dollars. The superintendent may
excuse the fee for good cause if the cause is presented before the due date of the
report.
6-817 Refusal to license; suspension;revocation
A. The superintendent may upon investigation refuse to license any applicant, or
may suspend or revoke any license pursuant to title 41, chapter 6, article 10 by entering
an order to that effect, together with findings in respect to the order and by notifying
the applicant or escrow agent either personally or by certified mail, return receipt
requested sent to the agent's stated address, upon the determination by the
superintendent that the applicant or escrow agent:
1. Is unable to pay debts as they fall due in the regular course of business.
2. Has not conducted the applicant's or agent's business in accordance with law or
has violated this chapter or the rules relating to this chapter.
3. Is in such financial condition that the applicant or agent cannot continue in
business with safety to the applicant's or agent's customers or the public.
4. Has been found guilty of fraud in a legal or administrative proceeding in this
jurisdiction or any other jurisdiction.
5. Has made any material misrepresentations or false statements to, or concealed
any essential or material fact from, any person in the course of the escrow business.
6. Has knowingly made or caused to be made to the superintendent any false
representation of a material fact, or has suppressed or withheld from the superintendent
any information which the applicant or agent possesses, and which if submitted by the
applicant or agent would have caused the issuance of a license to be withheld or be
grounds for the suspension or revocation of a license.
7. Has failed to account properly for escrow property as required by the terms of
the escrow.
8. Refuses to permit an examination or investigation by the superintendent of the
applicant's or agent's books and affairs, or has refused or failed within a reasonable
time to furnish any information or make any report required by the superintendent under
this chapter or rules relating to this chapter.
9. Has been convicted of any criminal offense involving moral turpitude within the
last fifteen years.
10. Does not have the financial resources, experience, character or competence to
adequately serve the public or to warrant the belief that the business will be operated
lawfully, honestly, fairly and efficiently pursuant to this chapter.
11. Has disbursed monies in violation of escrow instructions.
12. Has failed to maintain an adequate internal control structure as prescribed by
section 6-841.
13. Has caused or allowed any overdraft or returned check for insufficient funds on
any of the escrow agent's trust or fiduciary accounts.
14. Has failed to authorize each financial institution with which it has deposited
trust or fiduciary funds to notify the superintendent of any overdraft or check returned
for insufficient funds on any trust or fiduciary accounts of the escrow agent.
B. It is sufficient cause for refusal, suspension or revocation of a license, in
case of a partnership, a corporation or any other group or association, if any member of
such persons, or officer or director thereof, has been guilty of any act or omission
which would be cause for refusing a license or suspending or revoking the license of an
individual agent.
6-831 Records
All escrow agents shall keep and maintain at all times in their principal places of
business complete and suitable records of all escrow transactions made by them, together
with books, papers and data clearly reflecting the financial condition of the business of
such agents.
6-832 Annual audit; report
A. The records of each escrow agent shall be audited at least once each fiscal year
by a certified public accountant. The audit shall include an audit of the escrow,
account servicing and subdivision trust activities of the escrow agent and shall follow
generally accepted accounting principles. A copy of the audit report shall be filed with
the superintendent not more than one hundred twenty days after the end of the escrow
agent's fiscal year. The audit requirement may be satisfied by filing a copy of the
audit report, which is prepared by a certified public accountant, of the parent of the
escrow agent including an audit of the escrow, account servicing and subdivision trust
activities of the escrow agent within the prescribed time period. The superintendent may
extend the time period in this subsection up to ninety days for good cause shown.
B. At the time required by the superintendent, every escrow agent shall make and
file in the office of the superintendent a true and correct report, in the form and
containing the data the superintendent may require, of the business of the agent,
including the agent's escrow, account servicing and subdivision trust activities. Every
agent shall reply promptly in writing to an inquiry from the superintendent concerning
the escrow agent's business.
C. The scope of the audit shall include consideration of the escrow agent's
internal control structure in accordance with generally accepted auditing standards. A
separate report shall be submitted to the superintendent if reportable conditions are
identified that indicate significant deficiencies in the design or operation of the
internal control structure of the escrow agent which would adversely affect the agent's
ability to record, process, summarize and report financial data consistent with the
assertions of management in the financial statements. If reportable conditions are
identified, the report on reportable conditions shall recommend specific measures to
improve the escrow agent's internal control structure.
6-833.01 Priority of distribution during receivership
A. In a receivership proceeding filed against an escrow agent, the priority of
distribution of claims from the general assets of the escrow agent shall be as provided
by this section. Every claim in each class shall be paid in full or adequate monies
shall be reserved for the payment before the members of the next class may receive any
payment. Subclasses may not be established in any class. The order of distribution is
as follows:
1. The costs and expenses of administration incurred in connection with the
receivership proceedings.
2. Claims for compensation actually owing to employees of the escrow agent other
than its officers for services rendered within three months before the beginning of a
receivership against the escrow agent. A claim for compensation may not exceed two
months of monetary compensation for each employee. The compensation owed shall be paid
as soon as is practicable after the receivership begins, except that the receiver at all
times shall reserve enough monies that in the receiver's opinion are sufficient to cover
the expenses of administration. This priority is in lieu of any other similar priority
authorized by law as to wages or compensation of employees.
3. Claims for breach of escrow agreements.
4. Claims of general creditors that do not fall within any other priority under
this section.
5. Claims of the federal, any state or a local government except those claims that
are treated as secured claims.
6. Claims of shareholders, members or other owners in that capacity.
B. The owner of a secured claim against an escrow agent for which a receiver has
been appointed may surrender the security, and any deficiency shall be treated as a claim
against the general assets of the escrow agent on the same basis as claims of unsecured
creditors.
6-833 Seizure of property of impaired escrowagent
A. When the superintendent ascertains by examination or otherwise that the assets
or capital of any agent are impaired, or that the agent's affairs are in an unsafe
condition, he may immediately take possession of all the property, business and assets of
the agent which are located in this state and retain possession of them pending the
further proceedings specified in this section. If the board of directors or any officer
or person in charge of the offices of such agent refuses to permit the superintendent to
take possession as prescribed by this subsection, the superintendent shall communicate
such fact to the attorney general, whereupon the attorney general shall immediately
institute such proceedings as may be necessary to place the superintendent in immediate
possession of the property of the agent. The superintendent thereupon shall make or have
made an inventory of the assets and known liabilities of the agent. The superintendent
shall file one copy of the inventory in his office and one copy in the office of the
clerk of the superior court of the county in which the principal office of the agent is
located. The clerk of the superior court shall mail one copy to each stockholder of the
agent at his last known address, if by the exercise of reasonable diligence it can be
determined. The clerk of the court with whom the copy of the inventory is filed shall
file it as any other case or proceeding pending in the court.
B. The officers, directors or stockholders of the agent may have sixty days from
the date when the superintendent takes possession of the property, business and assets to
make good any deficit which may exist or to remedy the unsafe condition of its
affairs. At the expiration of this time, if the deficiency in assets or capital has not
been made good or the unsafe condition remedied, the superintendent may apply to the
court to be appointed receiver and proceed to liquidate the assets of the agent which are
located in this state in the same manner as provided by law for liquidation of a private
corporation in receivership. The inventory made by the superintendent and all claims
filed by creditors shall be open at all reasonable times for inspection and any action
taken by the receiver upon any of the claims shall be subject to the approval of the
court before whom the cause is pending. The expenses of the receiver and compensation of
counsel, as well as expenditures required in the liquidation proceedings, shall be fixed
by the superintendent, subject to the approval of the court, and upon certification of
the superintendent shall be paid out of the funds in his hands as such receiver.
6-834 Deposit of monies; definition
A. Unless all of the parties to the escrow otherwise instruct the escrow agent in
writing, the escrow agent shall deposit and maintain all monies deposited in escrow to be
delivered on the close of the escrow or on any other contingency in a bank, savings bank
or savings and loan association doing business in this state and the escrow agent shall
keep all of the escrow monies separate, distinct and apart from monies belonging to the
escrow agent. Notwithstanding the parties' instructions to the escrow agent, the escrow
agent shall not deposit the escrow monies in an institution outside the United
States. When deposited, the monies shall be designated as "escrow accounts" or given
some other appropriate designation indicating that the monies are not the monies of the
escrow agent. These monies shall be deposited immediately on receipt or as soon
thereafter as is reasonably practicable.
B. A person shall not knowingly keep or cause to be kept any monies in any bank or
savings and loan association under the heading of "escrow accounts" or any other name
designating the monies as belonging to the clients of any escrow agent, except actual
escrow monies deposited with such escrow agent.
C. Escrow property is not subject to execution or attachment on any claim against
the escrow agent.
D. Not later than three business days after receipt of any escrow monies, the
escrow agent shall provide to each depositing buyer or seller, adequate notice of his
right to earn interest on all deposited monies. The notice shall accurately set forth
the following information with respect to this right:
1. A brief description of the depositor's right to earn interest on escrowed monies
through an interest-bearing deposit account.
2. The dollar charge that may be imposed by the escrow agent solely to set up the
interest-bearing account.
3. A good faith estimate of the amount of interest that may be earned during the
life of the escrow account, or an example of a typical transaction calculated on a one
thousand dollar deposit, using the prevailing savings account interest rate for a thirty
day period.
4. A brief description of how the interest-bearing account can be established,
including the name, address and telephone number of the escrow agent to be contacted.
E. An escrow agent shall not receive from any depository institution any interest
earned or other benefit from monies deposited with an escrow agent in connection with any
escrow. Nothing in this subsection prohibits the escrow agent from receiving accounting,
data processing or other services directly related to the administration of escrow
accounts.
F. For the purposes of this article, "adequate notice" means a printed notice to
the depositing buyer or seller that sets forth the pertinent facts clearly and
conspicuously. The notice shall be printed on the escrow instructions or on an
independent document and given to the depositing customer in a manner reasonably assuring
the customer's receipt of the notice.
6-835 Limit of legal action
Nothing in this chapter shall limit any statutory or common law right of any person
to bring an action in any court having jurisdiction for any act involved in the
transaction of the escrow business or the right of the state to punish any person for any
violation of any law based on such act.
6-836 Commissions; other considerationsprohibited
No escrow agent may pay or give a commission or any part of its fees or charges,
including fees for escrow services or other consideration, as an inducement or as
compensation for any escrow business.
6-837 Duty of escrow agent to produce escrowrecords for inspection; violation; classification
A. Any escrow agent shall produce for inspection any escrow records concerning the
assets, existence, condition, management and administration and the names of the parties,
including any or all beneficiaries, of any escrow of which he or she is the escrow agent
to any peace officer or local, state or federal law enforcement agency, provided such
person requesting information signs and submits a sworn statement to the escrow agent
that the request is made in the lawful performance of such person's duties. The peace
officer or local, state or federal law enforcement agency shall be prohibited from using
or releasing said information except in the proper performance of his or her duties.
B. Any escrow agent shall produce for inspection required by law any escrow records
of any escrow of which he or she is the escrow agent to the superintendent or to any
state or federal administrative agency lawfully requiring such disclosure. The
superintendent or any state or federal administrative agency shall be prohibited from
using or releasing said information except in the proper performance of his or her
duties.
C. Any person who knowingly fails to produce records pursuant to this section or
who obtains information under subsection A or B and is prohibited from releasing such
information but does release such information is guilty of a class 2 misdemeanor.
6-838 Surrender of license
A licensee that desires to surrender its license shall file with the superintendent
a certified copy of the resolution of its board of directors or a verified statement of
intent signifying this desire, and thereafter shall not accept additional escrow
business. Upon receipt of the resolution or statement of intent, the superintendent
shall make an investigation, and if he determines that the licensee has been discharged
from all duties which it has undertaken as an escrow agent, he shall issue an order to
the licensee certifying that it is no longer authorized to exercise the powers of an
escrow agent and the licensee shall immediately surrender its license.
6-839 Continuing jurisdiction
If the license of an escrow agent is surrendered, suspended or revoked, the agent
nevertheless continues to be subject to the provisions of this chapter and to the duties
previously undertaken for so long as it acts as a fiduciary with respect to any escrow
business previously undertaken.
6-840 Prohibitions; definitions
A. An escrow agent shall not accept any escrow in which a participant in the escrow
is an affiliate of the escrow agent unless:
1. The affiliation is disclosed to all nonaffiliated participants in writing by the
escrow agent.
2. Use of the affiliated escrow agent is not required by the affiliate as a
condition of making a loan or entering into any other agreement with the nonaffiliated
participants.
B. For the purpose of this section:
1. "Controlled escrow business" means the handling of an escrow by an escrow agent
where an affiliate of the escrow agent is a participant in the escrow transaction.
2. "Participant" means the buyer, seller, lender, mortgage broker, mortgage banker,
real estate broker or real estate salesman or any person who is a party to the escrow
transaction.
6-841.01 Fiduciary duty; notice of returned check
A. An escrow agent is the trustee of all monies received or collected and held in
escrow. An agent shall not knowingly or negligently commingle trust monies with the
escrow agent's own monies or with monies held in any other capacity. Every escrow agent
and every officer, director and employee of an escrow agent who has actual knowledge of
fraud or dishonesty in the application of escrow monies, owes a fiduciary duty as trustee
to the owner of the monies held in escrow.
B. An escrow agent shall notify the superintendent of any returned check for
insufficient funds or overdraft on any of the escrow agent's trust or fiduciary
accounts. The superintendent may revoke, suspend or refuse to renew the escrow agent's
license for failure to comply with this subsection.
6-841.02 Liability of title insurer; closing protection letter; definition
A. A real property escrow agent that is a title insurance agent shall disclose to
the buyer and seller of a residential dwelling that the title insurer may offer a closing
protection letter that provides protection for the loss of escrow monies due to fraud or
dishonesty of the escrow agent. This disclosure requirement applies only to transactions
involving a buyer and seller of a residential dwelling and shall be made when the buyer
or seller employs the escrow agent.
B. If an escrow agent does not make the disclosure prescribed by this section, the
title insurer shall reimburse the buyer or seller, as applicable, for any escrow monies
that are lost and that are not recovered from the ARIZONA escrow recovery fund
established by section 6-847.01. The title insurer's obligation pursuant to this
subsection shall be to the extent of that title insurer's standard closing protection
letter for a buyer or seller, as applicable.
C. For purposes of this section, "residential dwelling" means an owner occupied
structure or an investment property that is designed for residential use by four or fewer
families.
6-841.03 Notice of uninsured monies; rules
When an escrow is established and not later than three business days after an escrow
agent receives any escrow monies, the escrow agent shall provide a complete and accurate
disclosure to each buyer and seller of a residential dwelling as defined in section
6-841.02 that monies deposited in an escrow account are not insured against loss from
fraud or theft by this state or the United States government. The superintendent by rule
may prescribe requirements for the disclosure form.
6-841 Internal control structure;definition
A. An escrow agent shall adopt a systematic internal control structure to ensure
that persons employed by or associated with the escrow agent's business do not make
significant errors or perpetuate significant irregularities or fraud without timely
detection.
B. For purposes of this section, "internal control structure" means the policies
and procedures established to provide reasonable assurance that the escrow agent will
achieve the following objectives:
1. Safeguarding of the customers' assets.
2. Reliability in financial reporting.
3. Reliability in recording of all escrow transactions.
6-842 Mortgage checkoff; homeless trustfund
A real estate loan servicer or escrow agent who services mortgages may provide the
payor on the account with the option to designate an amount for deposit in the homeless
trust fund established by section 41-2021 that is in addition to any other payment made
by the payor. The real estate loan servicer or escrow agent shall transmit any monies so
designated to the department of economic security for deposit in the homeless trust
fund. The real estate loan servicer or escrow agent may provide on its payment coupons
or other similar documents that are printed after the effective date of this section a
statement that notifies the payor of the opportunity to contribute and a space to
designate the desired contribution.
6-843 Disbursements; applicability
A. Except as provided by subsection B, an escrow agent may only disburse money out
of an escrow account if deposits are previously made that are at least equal to the
disbursements and the deposits relate directly to the transaction for which the money is
being disbursed. The deposits shall be in at least one of the following forms:
1. Wire transfers so that the monies are received by the escrow agent or the
agent's depository.
2. Except as provided in paragraphs 1, 4 and 5, checks, drafts, negotiable orders
of withdrawal, money orders or any other item that has become available for withdrawal in
accordance with the federal expedited funds availability act (P.L. 100-86; 101 Stat. 635;
12 United States Code section 4001).
3. Credit transfers through the automated clearing house that are deemed available
by the depository institution receiving the credits. The credits must conform to the
operating rules set forth by a national automated clearing house association.
4. Cashier's checks, certified checks or teller's checks that have been deposited
in the escrow agent's depository account.
5. Checks made by an affiliate of a state or federally regulated depository
institution where the check is drawn on the affiliated depository institution so that the
monies are deposited in the escrow agent's depository account.
B. An escrow agent may disburse up to five hundred dollars per transaction or any
funds that are available as cash without complying with subsection A.
C. Subsection A does not apply to account servicing. 6-846.01 Filing of escrow rates
A. Every escrow agent who is required to make escrow rates under section 6-846
shall file with the superintendent his schedules of fees, every manual of
classifications, the rules and plans pertaining to the manual and every modification of
any of the foregoing. The filing shall state the proposed effective date and shall
indicate the character and extent of the contemplated service.
B. The superintendent shall review the filings as necessary to carry out the
provisions of this article.
C. Subject to subsection E of this section, each filing does not become effective
until fifteen days after the date of filing. On written notice to the escrow agent
making the filing, the superintendent may extend the waiting period for up to an
additional fifteen days. The waiting period may be extended further with the consent of
the escrow agent making the filing. On written application by the escrow agent making
the filing, the superintendent may authorize part or all of a filing to become effective
before the expiration of the waiting period or any extension.
D. Except in the case of rates filed under subsection E of this section, a filing
that has become effective is deemed to meet the requirements of this article.
E. If the superintendent finds that a rate for a particular kind or class of escrow
service cannot practicably be filed before it is used or a kind of escrow service, by
reason of rarity or peculiar circumstances, does not lend itself to advance determination
and filing of rates, the superintendent pursuant to rules adopted by the superintendent
may permit the rate to be used without a previous filing and waiting period.
6-846.02 Justification for escrow rates
A. An escrow agent shall accompany a rate filing with a statement setting forth the
basis on which the rate was fixed and the manner in which the fees are to be computed. A
filing may be justified by:
1. The experience or judgment of the escrow agent making the filing.
2. The escrow agent's interpretation of any statistical data on which the agent
relied.
3. The experience of other escrow agents.
4. Any other factors that the escrow agent deems relevant.
B. The statement and justification shall be open to public inspection after the
rate to which the statement and justification apply becomes effective.
6-846.03 Disapproval of escrow filings
A. Before issuing an order of disapproval and not less than twenty days after
written notice, the superintendent shall hold a hearing on an escrow rate filing. The
notice shall specify in reasonable detail the matters to be considered at the hearing and
shall be sent to every escrow agent who made the filing. If after the hearing the
superintendent finds that all or part of the filing does not satisfy the provisions of
this article, the superintendent shall issue an order that specifies what part of the
filing failed and, if the filing has become effective under section 6-846.01, when all or
part of the filing will be deemed no longer effective. At any time an escrow agent may
withdraw all or part of a filing. The superintendent shall send copies of the order to
each escrow agent affected. The order does not affect any escrow that was contracted
before the expiration of the period set forth in the order.
B. On written application to the superintendent a person or organization other than
the escrow agent who made the filing that is aggrieved with respect to any rate filing
that is in effect may request a hearing. The application shall specify in reasonable
detail the grounds on which the applicant is relying. If within thirty days after
receipt of the application the superintendent finds that the application was made in good
faith, that the applicant would be aggrieved if his grounds are established and that the
grounds justify a hearing, the superintendent, not less than twenty days after written
notice to the applicant and every escrow agent who made the filing, shall hold a
hearing. If after the hearing the superintendent finds that all or part of the filing
does not satisfy the provisions of this article, the superintendent shall issue an order
that specifies what part of the filing failed and, if the filing has become effective
under section 6-846.01, when all or part of the filing will be deemed no longer
effective. The superintendent shall send copies of the order to the applicant and to
each escrow agent affected. The order does not affect any escrow that was contracted
before the expiration of the period set forth in the order.
C. A filing or modification shall not be disapproved if the rates satisfy the
requirements of this article.
6-846.04 Deviations in escrow rates; civil penalty
A. An escrow agent may not deviate from his escrow rates that are in effect
pursuant to section 6-846.01.
B. If the superintendent finds that an escrow rate has been charged that deviates
from the escrow rate in effect pursuant to section 6-846.01, the escrow agent may be
subject to a penalty that is equal to the difference between the rate charged and the
allowable rate in effect pursuant to section 6-846.01.
C. If the superintendent finds that an escrow agent knowingly or with such
frequency as to indicate a general business practice violated subsection A of this
section with respect to a particular provision of the applicable escrow rate, the
superintendent, in addition to the penalty imposed under subsection B of this section,
may:
1. For each violation, impose an additional penalty of not more than two times the
penalty imposed under subsection B of this section.
2. Revoke the escrow agent's license.
D. In addition to penalties imposed under subsection B or C of this section, the
superintendent may impose civil penalties pursuant to section 6-132 if the superintendent
finds that an escrow agent knowingly violated subsection A of this section with respect
to a particular provision of the applicable escrow rate by charging rates that are
greater than the rates allowable pursuant to section 6-846.01.
6-846 Making of escrow rates
A. Every escrow agent who is also a title insurer or title insurance agent licensed
under title 20 shall make escrow rates that are not excessive or inadequate for the
safety and soundness of the escrow agent, that do not unfairly discriminate between risks
in this state which involve essentially the same exposure to loss and expense elements
and that give due consideration to the following:
1. The desirability for stability of rate structures.
2. The necessity, by encouraging growth in assets of escrow agents in periods of
high business activity, of assuring the financial solvency of escrow agents in periods of
economic depression.
3. The necessity for paying dividends on the capital stock of escrow agents
sufficient to induce capital to be invested in the capital stock.
B. Every escrow agent who is required to make escrow rates under subsection A shall
adopt basic classifications of escrow services that will be used as the basis for its
escrow rates.
C. Rates for escrow services and title insurance policies that are issued in
connection with escrow services shall not be combined.
6-847.01 ARIZONA escrow recovery fund
A. An ARIZONA escrow recovery fund is established consisting of monies received
pursuant to section 6-847.02. Every escrow agent shall comply with the provisions of
this article as a condition of authority to conduct business as an escrow agent in this
state.
B. The fund shall be under the immediate supervision of the superintendent.
C. Within the fund the superintendent shall keep separate and distinct the
following two accounts:
1. The real property escrow agents account consisting of monies received pursuant
to section 6-847.02, subsection A.
2. The account for all other escrow agents consisting of monies received pursuant
to section 6-847.02, subsection G.
D. All costs, expenses and liabilities of the fund shall be paid by the fund, shall
be assessed against either the real property escrow agents account or account for all
other escrow agents, as applicable, and shall not be a general obligation of the state.
E. All monies placed in the accounts of the fund shall be expended only for
administrative costs and the purposes of this article as provided in section 6-847.04. 6-847.02 Payments to the fund
A. Every real property escrow agent shall pay to the fund in the following manner:
1. Every person that is a real property escrow agent on January 1, 1993 shall pay a
one time contribution of five thousand dollars into the fund prior to January 15, 1993.
2. From and after January 1, 1993, every person upon becoming a real property
escrow agent, that has not already paid a one time contribution, shall pay a one time
contribution of five thousand dollars into the fund.
3. In addition to the payments required by paragraphs 1 and 2 of this subsection,
every real property escrow agent shall pay into the fund monies totalling three per cent
of its gross escrow fees charged for closing any sale or loan transaction on or after
January 1, 1993 and for account servicing performed or provided from or after October 1,
1994.
B. Payments made pursuant to subsection A, paragraph 3 of this section shall be
made quarterly and shall be due on the fifteenth day of the month following the end of
the quarter for which the payment is made. Payments shall be accompanied by reports in
the form required by the superintendent.
C. The superintendent shall deposit, pursuant to sections 35-146 and 35-147, all
monies paid pursuant to subsection A of this section in the real property escrow agents
account, under section 6-847.01, subsection C, paragraph 1, within the fund.
D. Payments to the fund pursuant to subsection A, paragraph 3 of this section shall
be required on all sales and transactions until the balance including interest of the
real property escrow agents account equals four million dollars, at which time the
superintendent shall advise all real property escrow agents that have paid to the fund
for at least two years, in writing, that payments for future sales and transactions under
subsection A, paragraph 3 of this section be discontinued. Real property escrow agents
that have not paid to the fund for at least two years at the time the payments are
discontinued shall continue to pay to the fund until they have contributed for two years.
E. On or before January 31 of each year, if the real property escrow agents account
balance on December 31 of the previous year exceeds four million dollars and the
superintendent determines that potentially covered claims will not be greater than the
amount by which the account exceeds four million dollars, the superintendent shall
disburse monies in excess of four million dollars in the following manner:
1. The account balance shall first be reduced pursuant to section 6-847.04,
subsection D.
2. Every escrow agent that is licensed at the time of the disbursal from the fund
and that has paid into the fund shall receive a percentage of the remaining excess. The
percentage shall be calculated by dividing that escrow agent's total contributions by the
total account balance on December 31 of the applicable year.
3. Any funds remaining after disbursement under paragraphs 1 and 2 of this
subsection shall remain in the account.
F. If payments have been discontinued under subsection D of this section and the
account balance is less than four million dollars, the superintendent may, at his
discretion, direct real property escrow agents, in writing, to resume payments in
accordance with subsection A, paragraph 3 of this section, and real property escrow
agents shall resume making payments beginning with the next full month following the date
of notice from the superintendent.
G. Every escrow agent who is not a real property escrow agent or a wholly owned
subsidiary of a real property escrow agent shall pay a contribution to the fund at such
times and in such amounts as the superintendent shall prescribe by rule. The
superintendent shall deposit, pursuant to sections 35-146 and 35-147, all monies paid
pursuant to this subsection in the account for all other escrow agents, under section
6-847.01, subsection C, paragraph 2, within the fund.
H. Notwithstanding subsection D of this section, the superintendent may order
escrow agents to continue payments to the fund after the fund balance exceeds four
million dollars if there is an open escrow agent receivership that may require additional
monies. 6-847.03 Investment of monies
On notice from the superintendent, the state treasurer shall invest and divest
monies in the fund as provided by section 35-313, and monies earned from investment shall
be credited to the fund. 6-847.04 Obligations of the fund
A. If the court grants a petition for receivership in accordance with section
6-833, the receiver appointed shall estimate the amount of additional funds needed to
supplement the assets of the impaired escrow agent available to the receiver for the
purpose of making payment of all escrow obligations. The receiver shall advise the
superintendent of the escrow claims approved by the court. The fund shall be liable only
for the difference between the amount of the escrow claims approved by the court and the
amount of the assets marshaled by the receiver. The superintendent shall pay from the
fund monies sufficient to enable the receiver to pay covered claims.
B. The real property escrow agents account of the fund under section 6-847.01,
subsection C, paragraph 1 shall be liable as provided in this section only for the
insolvency of an escrow agent who is a real property escrow agent. The account for all
other escrow agents of the fund under section 6-847.01, subsection C, paragraph 2 shall
be liable as provided in this section only for the insolvency of an escrow agent who is
not a real property escrow agent.
C. Any claimant recovering pursuant to this article shall be deemed to have
assigned his rights under the contract to the fund to the extent of recovery from the
fund. Every claimant seeking the protection of this article shall cooperate with the
fund to the same extent as such claimant would have been required to cooperate with the
insolvent escrow agent. The fund will have no cause of action against the claimant of
the insolvent escrow agent for any sums the fund has paid.
D. On December 31 of each year, an amount of not more than two per cent of the fund
monies may be used to reimburse the department for its costs in administering this
article and article 4 of this chapter. 6-847.05 Limitation on claims
A. Claimants eligible to receive payments pursuant to section 6-847.04 may receive
expedited payment as follows:
1. The claimant shall submit an affidavit to the receiver that states the nature of
the claim, the amount of the claim and the escrow agent's account number and shall attach
any supporting documentation.
2. After independently verifying the information submitted by the claimant, the
receiver may request an interim order of the court approving payment of the claim and
authorizing disbursement of monies from the fund.
3. If the claim is covered pursuant to section 6-847.04 and on compliance with
paragraph 2 of this subsection, the court shall authorize payment of the claim without
any additional showing of good cause and before the issuance of a final order in the
receivership.
B. Expedited payment of claims pursuant to subsection A of this section shall be
made only to buyers or sellers of a residential dwelling as defined in section
6-841.02. The maximum amount of any expedited claim paid is two thousand five hundred
dollars for each claimant.
C. The funds available for payment of a claim or a portion of a claim that is
greater than two thousand five hundred dollars or is otherwise not eligible for expedited
payment pursuant to subsections A and B of this section for any one escrow insolvency
shall be limited to the balance of the fund on the date of the court's order approving
final covered claims but shall not exceed three million dollars.
D. In the event that the aggregate covered claims are greater than the available
balance in the appropriate account provided by section 6-847.01, each eligible claimant
shall receive a pro rata share of the available monies in the appropriate account at the
time of the insolvency.
E. Notwithstanding subsection C of this section, any monies in the fund as of April
15, 1993 shall, if necessary, be used to pay escrow claims pursuant to section 6-847.04
for any escrow agent who has been ordered into receivership by the court prior to January
1, 1992.
6-847 Definitions
In this article, unless the context otherwise requires:
1. "Covered claim" means an unpaid claim approved by the court in accordance with
section 6-833 and for which the fund is liable as provided in section 6-847.04.
2. "Fund" means the ARIZONA escrow recovery fund.
3. "Impaired escrow agent" means an escrow agent that has been ordered into
receivership by the court under section 6-833.
4. "Real property escrow agent" means an escrow agent that also is a title insurer
or title insurance agent licensed under title 20 and any wholly owned subsidiary of the
real property escrow agent that is a licensed escrow agent but is not a title insurer or
title insurance agent licensed under title 20.
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