Washington State

House of Representatives

Office of Program Research



Business & Financial Services Committee

HB 1034

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Description: Regulating the licensing of escrow agents.

Sponsors: Representatives Kirby and Ryu.

Brief Summary of Bill

  • Modifies the definition of "escrow" in the Escrow Agent Registration Act (EARA).

  • Exempts certain entities licensed under the EARA from regulation under the Consumer Loan Act.

Hearing Date: 1/16/13

Staff: Caitlin Forsyth (786-5793).


Escrow Agent Registration Act.

Definition of Escrow.

"Escrow" is defined to mean "any transaction where a person delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held until the occurrence of a specified event or the performance of a prescribed condition for the purpose of effecting and closing the sale, purchase, exchange, transfer, encumbrance, or lease of real or personal property to another person or persons."

Licensing Required.

Unless exempt, a person or entity acting as an escrow agent must be licensed by the Department of Financial Institutions (DFI). Licenses must be renewed annually. A licensee must:Ÿ

Licensing Exemptions.

There are a number of persons and entities that are specifically exempt from regulation under the Escrow Agent Registration Act (EARA).

Consumer Loan Act.

The Consumer Loan Act (CLA) authorizes the DFI to regulate consumer loan companies doing business in Washington. Consumer loan companies include mortgage lenders and consumer finance companies. The CLA also applies to residential mortgage loan servicers.

License Required for Residential Mortgage Loan Servicers.

No persons or entity may service residential mortgage loans without being licensed or exempt from licensing under the CLA. Licensing includes: fees, background checks, and financial responsibility requirements. An applicant or a principal of an applicant for a CLA license may not have provided unlicensed residential mortgage loan modification services in the five years prior to the license application. The Director of the DFI (Director) may deny a license for revocation or suspension if a license related to lending, settlement services, or loan servicing was suspended by this state, another state, or the federal government within five years of the date of the application. There are a number of disclosure, reporting, fee, and payment provisions for residential mortgage loan servicers under the CLA.

Licensing Exemptions.

The CLA provides exemptions from licensing for:

The Director may waive licensing CLA provisions for persons making mortgage loans when the Director determines it is necessary to facilitate commerce and protect consumers.

Regulation under the Escrow Agent Registration Act and the Consumer Loan Act.

In 2009 a law was enacted that regulates residential mortgage loan servicers under the CLA. In 2010 changes to the EARA were made, including changes to the exemptions from regulation under the EARA. As a result of the 2009 and 2010 legislation, a small group of people who service residential mortgage loans are regulated under the EARA and the CLA. In 2011 a law was enacted that made a number of changes to the scope of the CLA, including allowing the Director to waive CLA licensing provisions in certain circumstances.

Summary of Bill:

Escrow Registration Act.

The definition of "escrow" includes the collection and processing of payments and the performance of related services by a third party on seller-financed loans secured by a lien on real or personal property but excludes vessel transfers.

Consumer Loan Act.

Entities licensed under the Escrow Act that process payments on seller financed loans secured by liens on real or personal property are exempt from regulation under the CLA.

Appropriation: None.

Fiscal Note: Not requested.

Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is passed.