SENATE BILL REPORT

SB 5562

BYSenators Moore, Warnke, Bender and Metcalf

Restricting the disbursement of funds in escrow transactions.

Senate Committee on Financial Institutions

Senate Hearing Date(s):February 19, 1987

Senate Staff:Stephanie Yates (786-7416)

AS OF FEBRUARY 18, 1987

BACKGROUND:

Some mortgage lenders issue mortgage loan checks drawn on out-of-state financial institutions.  When such a mortgage loan check is issued at a real estate closing, and deposited to the escrow account or submitted to a local financial institution for collection, it may be several days before those funds are available for withdrawal.  Unless other funds are available in the escrow account, disbursement of mortgage proceeds must be delayed beyond the date of closing.

Certain groups performing escrow services who do not maintain excess funds in escrow accounts claim that the practice of issuing mortgage loan checks drawn on out-of-state financial institutions places them at a disadvantage to other groups performing escrow services who maintain excess funds in escrow accounts.

SUMMARY:

No title insurance company, title insurance agent, escrow company, escrow agent, certified escrow agent, escrow officer, limited practice officer, financial institution, or any other person who is licensed to perform escrow services may disburse funds from a mortgage loan check until funds from that check have cleared the financial institution to which the check was deposited or submitted for collection.

Fiscal Note:      none requested