Brief⁽¹⁾

H.B. 2096, as amended, enacts new law for the regulation and supervision of title insurance agencies engaged in settlement and closing real estate transactions. The bill defines several relevant terms, including a "title insurance agent" as a person who, on behalf of a title insurance company, determines insurability and issues title insurance reports or policies; collects or disburses premiums, escrow, settlements, or closings; solicits or negotiates title insurance business; or records closing documents.

The bill authorizes a title insurance agent to operate as an escrow, settlement, or closing agent if:

• all funds deposited with the agent are deposited in a separate fiduciary trust account in a qualified financial institution;



• the funds remain the property of the person entitled to them under the provisions of the escrow, settlement, or closing agreement and are applied only in accordance with the terms of agreements under which the funds were accepted; and



• the agent has the written consent of all parties to a transaction to retain the interest earned on moneys held in interest-bearing accounts.

Further, the bill specifies that funds held in escrow may be disbursed only on the written authorization of the buyer or seller, pursuant to a court order, or when a transaction is closed according to the agreement of the parties. Funds held by the title agent in escrow may not be commingled with the agent's personal funds and may be used only to fulfill the terms of the individual escrow agreement.

Escrow, settlement, and closing deposit accounts must have a certified audit or be audited by the title insurance company for which the agent is licensed. Annual audits are required of agents in counties having a population of 40,001 and over, biennial audits for agents in counties having a population of 20,001 to 40,000, and triennial audits for agents in counties having a population of 20,000 or under. Sufficient records must be maintained to ensure compliance with the law and must be available for inspection by the Insurance Commissioner.

House Committee amendments add two provisions:

• Title insurance agents who handle escrow, settlement, or closing accounts must file a surety bond with the Commissioner or have an irrevocable letter of credit acceptable to the Commissioner issued by an insurance company or financial institution authorized to do business in Kansas. The surety bond or letter of credit amounts vary based on the population of the agent's county: $100,000 in counties having a population of 40,001 and over; $50,000 in counties having a population of 20,001 to 40,000; and $25,000 in counties having a population of 20,000 or under.



• All funds deposited for real estate closings, including refinancing of existing mortgages, which exceed $2,500, must be: in lawful money of the United States; wire transfers such that the funds are unconditionally received by the agent or the agent's depository; cashier's checks, certified checks, or bank money orders issued by an insured financial institution and unconditionally held by the agent; funds received from governmental entities or drawn on an escrow account of a real estate broker or on an escrow account of a title insurer or agency; or some other negotiable instrument which has been on deposit in the escrow account for at least ten days.

Background

H.B. 2096 was recommended in response to the bankruptcy of a Wichita-based title insurance and escrow agency in which some 700 citizens in Wichita lost significant amounts of money.

The bill was supported by the Kansas Land Title Association, the Kansas Association of REALTORS©, the Kansas Real Estate Commission, the Kansas Insurance Department, and the Johnson County Board of REALTORS©.

The fiscal impact statement indicates the provisions of the original bill can be carried out by current staff, with a possibility of additional staff being necessary later.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html.