Effective Date of Rule: Thirty-one days after filing.
Purpose: The rules are being amended to implement the Laws of 2010, to generally increase clarity and consistency, and to reorganize the chapter to consolidate existing subchapters A-G into a single chapter to allow ease of use and on-line searching.
Citation of Existing Rules Affected by this Order: Repealing chapters 208-680A through 208-680G WAC (all sections); and amending [new] chapter 208-680 WAC (all sections).
Statutory Authority for Adoption: RCW 43.320.040.
Other Authority: Chapter 18.44 RCW (as amended by chapter 34, Laws of 2010).
Adopted under notice filed as WSR 10-16-135 on August 4, 2010.
Changes Other than Editing from Proposed to Adopted Version: 1. WAC 208-680-030, a definition was added for "principal officers." The term was used in several places in the rules, as were "responsible persons" and "controlling persons." All three were similar, so this definition was added.
2. WAC 208-680-030, "responsible persons" was removed. It was used in few places, and "principal officers" covered the relevant persons.
3. WAC 208-680-110, requirements for proof of good character and credit were updated to more closely reflect the statute and to incorporate the newly defined "principal officers."
4. WAC 208-680-135, clarified that fingerprint identification for escrow officer (EO) and designated escrow officer (DEO) applicants must be submitted on standard FBI cardstock rather than a department of financial institutions (DFI)-provided form. This mirrors DFI's other fingerprint identification rules and brings the rules into line with existing practice.
5. WAC 208-680-145, changed to reflect DFI's willingness to accept passage of the Washington bar exam in lieu of the EO exam for attorneys that either must or choose to license as escrow officers, as stated in DFI's interim guidance document.
6. WAC 208-680-176, when an escrow agent loses its DEO or a branch designated escrow officer (BDEO), an agent may continue and finish existing clients and files but cannot accept new clients or files until a replacement is found and approved, or DFI otherwise consents. Escrow agents (EA) must identify a replacement within five days, or seek approval of the department. This change is intended to provide clarity in the even [event] that an EA loses its DEO or BDEO suddenly.
7. WAC 208-680-245(2), because the definition of responsible person was removed, DEOs or other controlling persons must inform DFI if an escrow office closes.
8. WAC 208-680-245(4), if a DEO or BDEO has left an agent before or during the closing of an office, another principal officer is responsible for filing monthly reconciliation reports. This was added because the prior draft did not clarify who was responsible for monthly reconciliation reports if the DEO or BDEO is no longer with the EA.
9. WAC 208-680-265 (4)(e), requires a ten-day postnotification for any change in a principal officer.
10. WAC 208-680-270, prior versions of the rules did not include the seven year limitation on employment bars for convictions/no contest pleas. This change aligns the rules with the statute.
11. WAC 208-680-410(6), clarifies that only employees that are included on a bank's signature card can have signatory authority over escrow trust accounts. This was the result of discussions with industry and with DFI examination staff.
12. WAC 208-680-410(8), the CR-102 version of the rules didn't address remotely deposited funds (other than wire deposits), and several comments asked for clarification as it is already a common industry practice.
13. WAC 208-680-530(7), adds a new section to address questions of what obligations an escrow agent has regarding its records when it closes. This was added to provide clarity.
14. WAC 208-680-540 (8)(c), allows escrow agents to put their full itemization on an addendum if they don't fit on the closing statement, as long as the addendum is provided to the principal parties. This was added at the request of commenters.
15. WAC 208-680-540(10), allows escrow agents to not obtain original signatures for the escrow file where not required by the escrow instructions.
16. WAC 208-680-648, removed the specific rules for challenging DFI taking possession and clarified that it is subject to the Administrative Procedure Act. This was done to make the appeals process more uniform with the rest [of] the division's procedures.
17. WAC 208-680-660, removed some pieces of the abandoned escrow records provisions in order to clarify that former licensees are financial [financially] responsible for maintaining, storing, and converting their records.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 13, Amended 0, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 54, Amended 0, Repealed 44.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 54, Amended 0, Repealed 44.
Number of Sections Adopted Using Negotiated Rule Making: New 54, Amended 0, Repealed 44; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.
Date Adopted: October 5, 2010.
Deborah Bortner, Director
Division of Consumer Services
ESCROW AGENT REGISTRATION ACT
"Act" means the Escrow Agent Registration Act, codified under chapter 18.44 RCW.
"Applicant" means any person applying for an escrow officer license or any person or group of persons applying for an escrow agent license. The term "applicant" includes the officers and controlling persons of the applicant, as well as any escrow officer seeking to become an escrow agent's designated escrow officer or branch designated escrow officer.
"Branch designated escrow officer" means any licensed escrow officer designated by a licensed escrow agent and approved by the director to supervise a specific branch office. The branch designated escrow officer is the licensed escrow officer responsible for supervising an agent's handling of escrow transactions, management of the agent's trust account, and supervision of all other licensed escrow officers employed by the agent at his or her branch designated office.
"Cash deposit" means funds deposited, in lieu of an errors and omissions policy, in an account in a recognized Washington state depository which account is maintained separate and apart from the escrow agent's own funds. The funds shall be deposited in such a manner to permit only the director to withdraw from the principal amount. The escrow agent may withdraw any interest accumulated to the account.
"Closing" means the transfer of title of real or personal property or execution of a real estate contract whichever event occurs first.
"Completed escrow" means a transaction in which the escrow agent has fully discharged its duties to the principal parties to the transaction. This includes, but is not limited to: Obtaining all necessary documents, obtaining required signatures, completing reconveyance or title elimination, and disbursing funds to the principal parties to the transaction, the agents to the transaction, and to third parties to the transaction as agreed by the principal parties in the escrow instructions or on the settlement form (such as HUD-1 or HUD-1A).
"Department" means the department of financial institutions.
"Designated escrow officer" means any licensed escrow officer designated by a licensed escrow agent and approved by the director as the licensed escrow officer responsible for supervising that agent's handling of escrow transactions, management of the agent's trust account, and supervision of all licensed escrow officers and other persons employed by the agent.
"Director" means the director of the department of financial institutions or his or her duly authorized representative. For purposes of this act, the division of consumer services is deemed to be the director's authorized representative.
"Escrow instructions" are the instructions, signed by the principal parties to the transaction that identify the duties and responsibilities of the escrow agent in carrying out the escrow, that identify the thing or things of value held by the escrow agent and the specified condition or set of conditions under which the thing or things of value are to be transferred.
"Good funds" means funds in a bank account that are immediately usable by the owner of the account. Good funds may be derived from the monetary instruments described in RCW 18.44.400(3).
"Handling escrow transactions" means participating in escrow transactions. It includes, but is not limited to, having access to a client's: Personal information, financial records, or funds. Employees that perform administrative functions like payroll or human resources services are not handling escrow transactions unless such persons also perform duties meeting this definition.
"Investigation" means an inquiry undertaken for the purpose of detection of violations of the act and these rules or securing information lawfully required under the act and these rules. The director may make private or public investigations.
"Officers" of the escrow agent shall include the president, secretary, treasurer, vice-president, and any other equivalent persons with control over management decisions of the escrow agent.
"Overdue instrument" means a negotiable instrument that is overdue as defined in RCW 62A.3-304.
"Permanent record" means any record required to be kept under RCW 18.44.400 for a period of six years from the completion of the escrow transaction.
"Principal officers" means natural person applicants for escrow agent licenses; corporate officers, vice-president and above; directors, shareholders, members, or anyone else owning ten percent or more of the escrow agent's equity; general or managing partners; sole proprietors and spouses of sole proprietors; designated and branch designated escrow officers; and any person defined as a "controlling person" in RCW 18.44.011(1).
"Principal parties" means the buyers and sellers in a purchase transaction, and the borrower and lender in a refinance transaction.
"Providing escrow services" means conducting transactions, except the acts of a qualified intermediary in facilitating an exchange under section 1031 of the Internal Revenue Code, wherein any person or persons, 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, 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 by such third person until the happening of a specified event or the performance of a prescribed condition or conditions, when it is then to be delivered by such third person, in compliance with instructions under which he or she is to act, to a grantee, grantor, promisee, promisor, obligee, obligor, lessee, lessor, bailee, bailor, or any agent or employee thereof.
"Reconveyance" means an instrument used to transfer title from an individual holding such title in trust to the equitable owner of real estate, when title is held as collateral security for a debt.
"Third party to the transaction" means those persons providing professional services necessary for the closing of the escrow, including, but not limited to: Real estate brokers, lenders, mortgage brokers, attorneys, tax facilitators or underlying lien holders.
"Transfer of title" occurs at the time the seller executes a deed or bill of sale and such is delivered to the purchaser or recorded.
"Trust" means a fiduciary relationship whereby a thing of value is delivered to an escrow agent with the intention that such thing of value be administered by the escrow agent for the benefit of the principal parties to the transaction.
"Trust account" means a bank account holding funds of any party to the transaction.
"Unclaimed funds" means any funds that are abandoned under the Uniform Unclaimed Property Act, chapter 63.29 RCW.
(2) I only plan on performing one or two escrow transactions. Do I need an escrow license? Yes. You must license unless you meet one of the above exceptions. There is no exception under the act for persons performing limited numbers of transactions.
You or your attorney-owned business entity will be required to license as an escrow agent if you or your business entity do one or more of the following:
(a) Principally provide escrow services, not including escrow services provided incidentally to the practice of law;
(b) Advertise yourself or your business entity as providing the services of an escrow agent without identifying yourself or your business entity as an attorney or law practice;
(c) Receive compensation or gain for providing escrow services through a business entity other than a bona fide law practice; or
(d) Permit nonattorney associates or employees to conduct escrow transactions without either a valid escrow officer license or an attorney's supervision.
(2) I am licensed to practice law in Washington. Am I subject to the department's investigative authority? Yes. The department has broad investigative authority under the act and these rules, and its investigatory authority is not restricted to persons who are required to obtain a license. The department has the power to investigate unlicensed persons and entities at least to the extent necessary to determine whether a violation of the act or these rules has occurred. This includes preliminary investigations of attorneys and business entities that claim the attorney exception from licensure.
Among other actions, the department may:
(a) Compel written statements from or subpoena any person with relevant information;
(b) Compel production of written materials and take evidence; and
(c) Apply to a superior court for an order compelling compliance with its authority under the act.
For further information on the department's investigative authority, see RCW 18.44.420 and WAC 208-680-620.
(3) I am licensed to practice law in Washington. Am I subject to the department's examination authority? Generally, no. Unless the department determines that the attorney exception from licensure does not apply to you or your business, you will not be subject to the department's examination authority under WAC 208-680-610. If the department has determined that the exception does not apply, you will be required to license the escrow portion of your business and it may be subject to regular examinations.
(4) I am licensed to practice law in Washington and excepted from licensing under the act. Am I subject to other provisions of the act? You may be subject to other provisions of the act for activities you conduct outside the practice of law. The attorney exception is a limited, individual exception from the act's licensure provision for actions undertaken while engaged in your professional, legal duties, and is not a general exemption from the act.
LICENSING AND THE ESCROW OFFICER EXAMINATION
(1) If you are applying for an escrow officer license, or are applying to be a designated escrow officer, you must provide:
(a) Proof that you have passed the escrow officer examination; and
(b) Satisfactory proof of your good character; and
(c) Satisfactory proof of your good credit rating, as evidenced by a report from a recognized credit-reporting agency, and in a form approved by the director.
(2) If you are applying for an escrow agent license, you must provide satisfactory proof of character and credit rating for all principal officers. If your applicant is a business entity and not a natural person, you must provide satisfactory proof of your entity's credit rating. This proof must be obtained and provided by a recognized credit-reporting agency in a form approved by the department.
(3) If you are reporting a change in principal officer, you will be required to provide with your escrow agent amendment application, for any new principal officer:
(a) Satisfactory proof of his or her good character; and
(b) Satisfactory proof of his or her good credit as evidenced by a report from a recognized credit-reporting agency, and in a form approved by the director.
(2) Can all or substantially all of the assets of an escrow agent be transferred to another person? Yes. A licensed escrow agent may transfer all or substantially all of its assets to another person as long as the transfer is approved by the department and the receiving party (the transferee) has been issued an escrow agent license under the act prior to the transfer.
(3) If I am transferring my assets to another escrow agent, what notification must I provide to the department? You must provide written notice to the department at least thirty days before the effective date of the transfer. The written notice must include a copy of the signed transfer agreement that contains, at a minimum:
(a) A stipulation that the transferee is responsible for obtaining an escrow agent license and finding or designating a licensed escrow officer as a designated escrow officer before completion of the transfer;
(b) A stipulation that the transferee will obtain and submit to the director evidence of financial responsibility in the form of the required bond or bonds and errors and omission insurance in compliance with RCW 18.44.201 and these rules before completion of the transfer;
(c) A stipulation that the transferee is either restricted from using or authorized to use, the escrow agent's business name, unless this requirement is waived by the director; and
(d) A stipulation indicating which of the parties will:
(i) Make all payments due to principal parties on or before the effective date of the transfer;
(ii) Maintain and preserve the accounting and other records as required by RCW 18.44.400 and WAC 208-680-520 and 208-680-530; and
(iii) Provide notice of the transfer to all principal parties who have pending escrows or deposited funds with the escrow agent, or who have executed some other form of written agreement with the escrow agent. Such notice must be provided within five days of your notice to the department, and must comply with RCW 18.44.465.
(4) If I am acquiring all or substantially all of the assets of an escrow agent, what notifications must I provide? The department treats this kind of sale of assets as a change in a principal officer. If you do not have an escrow agent license, you must apply for and receive one. If you already have an escrow agent license, at least thirty days before you acquire all or substantially all of the assets of an escrow agent you must provide the department with all the information required of a principal officer or controlling person as if you were applying for a new license. The change of control transaction may not be completed until the transferee has received a license and provided the department with appropriate notices.
(a) You must submit fingerprint identification for the natural person making the application, and for your principal officers, designated escrow officer or branch designated escrow officers, and any controlling person. This identification must be submitted on standard Federal Bureau of Investigation fingerprint cardstock or another form acceptable to the department.
(b) You may be required, at the department's discretion, to provide additional background information any applicant, principal officer, designated escrow officer, controlling person, or partner. This may include any information the department deems necessary to satisfy the director that the requirements under RCW 18.44.031(2) have been met. The director may require that such information be reported in writing and signed by the reporting individuals.
(c) If you have been issued an escrow agent license and experience a change in one or more principal officers or controlling persons, you must submit fingerprints and such other information as the director may request under (b) of this subsection to the department thirty days prior to the effective date of the change in principal officer or controlling person.
(2) The department will collect a fingerprinting fee from you equal to the department's cost for processing fingerprints through the Washington state patrol.
(a) You must submit fingerprint identification for the applicant. This identification must be submitted on standard Federal Bureau of Investigation fingerprint cardstock or another form acceptable to the department.
(b) You may be required, at the department's discretion, to provide additional background information about yourself to ascertain your honesty, truthfulness, and good reputation. This information may include, but is not limited to: Residential address and telephone number, qualifications, employment history, a personal credit report, and other information that the director may deem appropriate under RCW 18.44.031(2).
(2) The department will collect a fingerprinting fee from you equal to the department's cost for processing fingerprints through the Washington state patrol.
(2) Do I need to take and pass the escrow officer examination before filing my application and paying my application fee to the department? Yes. You must submit a copy of your test pass certificate with your application to the department. You must have passed the escrow examination no more than one year before your initial application for a license. If your license is not issued within two years of your successful completion of the examination, you will be required to retake the examination.
(3) Will the department review my application before I take the test to see if I meet the other requirements? No. Due to volume and resource limitations, the department does not review escrow officer applications unless they are accompanied by a test pass certificate.
(4) I am an attorney licensed to practice law in Washington. If I am required to license as an escrow officer, will I be required to take and pass the escrow officer examination? No, the department will accept membership in the Washington bar in lieu of taking and passing the escrow officer exam.
|Title of Fee||Fee|
|First examination (test)||$168.00|
|Transfer of license to a new escrow agent, name or address change, or license activation||28.01|
|Late renewal with penalty||579.81|
|Change of designated escrow officer, or name or address change, per license generated||28.01|
|Escrow agent branch office:|
|Application and original license||386.55|
|Late renewal with penalty||579.81|
|Change of branch designated escrow officer, or name or address change, per license generated||28.01|
(1) The consumer services program fund exceeds the projected acceptable minimum fund balance level approved by the office of financial management;
(2) The fees paid by escrow agents equals or exceeds the costs of the licensing, examinations, and enforcement escrow program; and
(3) That such course of action would be fiscally prudent.
(1) Allow another person to use it to establish and carry on an escrow agent business over which you do not have full management and supervisory responsibilities; or
(2) Fail to adequately supervise any individual conducting escrow or assisting in escrow under the authority of your license.
ORGANIZATION AND ADMINISTRATION
(2) An escrow agent license must be displayed in the main office of that escrow agent, and any branch licenses must be displayed in the appropriate branch office.
(2) Can I renew my escrow agent license? Yes. Escrow agent licenses may be renewed by paying the applicable fee to the department.
(3) I did not renew my escrow agent license on time, did not pay my escrow agent renewal fee by my renewal date, or my renewal fee payment was rejected. Can my escrow officers still provide escrow services? No. Your escrow agent license is now expired, and any escrow services your escrow officers perform are considered unlicensed activities and are in violation of the act. If they continue to perform escrow services on behalf of your agent after expiration of your license, the department may investigate and bring an enforcement proceeding against them.
For additional information about failed payments, see WAC 208-680-170.
(4) I did not renew my escrow agent license on time. Can I still renew my license, or do I need to file a new application? Once your license has expired, you have thirty days to file for renewal and to pay the renewal fee, and the department may assess a penalty. If you don't renew, your license will be canceled on the thirty-first day. A canceled license cannot be renewed or reinstated. If your escrow agent license is canceled and you wish to provide escrow services, you will have to apply for a new escrow agent license. Any escrow services your escrow officers perform after your license is canceled are unlicensed activities and are in violation of the act.
Even if you renew your license before it is canceled, you (and your escrow officers) are still liable for any unlicensed activities conducted while your license was expired.
(2) Can I renew my escrow officer license? Yes. Escrow officer licenses may be renewed by completing the on-line renewal application and paying the annual renewal license fee specified under WAC 208-680-155 by your renewal date. Your renewal date is the date one year after the day your license was issued.
(3) I did not complete the on-line escrow officer renewal process, did not pay my renewal fee by my renewal date, or my renewal fee payment was rejected. Can I still provide escrow services? No. Your license is now expired, and any escrow services you perform are considered unlicensed activities and are in violation of the act. If you continue to perform escrow services after expiration of your license, the department may investigate and bring an enforcement proceeding against you.
For additional information about failed payments, see WAC 208-680-170.
(4) I did not complete the on-line escrow officer form and pay my renewal fee by my renewal date. Can I still renew my license, or do I need to reapply? Once your license has expired, you have sixty days to file for renewal and to pay the renewal fee, and the department may assess a penalty. If you don't renew, your license will be canceled on the sixty-first day. A canceled license cannot be renewed or reinstated. If your license is canceled and you wish to provide escrow services, you will have to apply for a new license. You should note that if your new license is not issued within two years of your passing the escrow examination, you will have to take the escrow examination again. See WAC 208-680-135.
Even if you renew your license before it is canceled, you are still liable for any unlicensed activities you conducted while your license was expired.
For the renewal fee structure, see WAC 208-680-155.
(2) If I close an office, what are my notification requirements? When either the main office or a branch office of an escrow agent closes, either the designated escrow officer or a controlling person are jointly and severally obliged to notify the department within twenty-four hours of closure.
In addition to notifying the department, the designated escrow officer or a controlling person must:
(a) Within thirty days of office closure, provide the department with an itemized accounting of funds held in trust at the time of closure, including the names of the principal parties to the transaction, the escrow number, the amount of funds held and the purpose of the funds. If the trust account balance is zero, the escrow agent must provide a reconciliation of the trial balance supporting the zero balance;
(b) Within thirty days of office closure, provide the department with the name, residence address and telephone number of the person responsible for the records;
(c) Within thirty days of office closure, the street address where the records are located;
(d) Within thirty days of any change in the person responsible for the records or the place the records are maintained, notify the department of the change;
(e) Within thirty days of closure, provide the department with an itemized list of your retained records, specifying their location and quantity, including the number of files and the number of boxes they are stored in; and
(f) Within thirty days of closure, provide the department with a records retention plan that identifies the ways that you will store, retrieve, and destroy your required records in compliance with the act and this section. Your plan must identify how you will continue to pay any costs associated with your storage location.
(3) How long do I need to maintain my records after closure?
(a) Your records must be maintained for at least six years, and must be maintained in the state of Washington. They must be available upon demand of the department during business hours and must be maintained in a readily retrievable manner. Closing one or more of your offices does not discharge your obligation to retain your records.
(b) If there is a change in the person responsible for your records, or if the location of your records change, you must notify the department within thirty days.
(c) Your records must be stored, retrievable, and destroyed in accordance with the records retention plan you have submitted to the department.
(4) What are my obligations regarding my trust account after I close a branch office? If the closed branch office has an associated trust account that contains client funds at the time of closure, the designated escrow officer or branch designated escrow officer responsible for that location must provide the department with monthly reports and reconciliations of the trust account to the trial balance, in compliance with WAC 208-680-410(9), until the trust account balance is zero. These reconciliations are due within thirty days of the end of the preceding month. If the designated or branch designated escrow officer is no longer with the escrow agent, another principal officer must file the monthly reports and reconciliations.
(5) What are my obligations regarding my trust account after I close my main office? If your trust account contains client funds at the time of closure, the designated escrow officer must provide the department with monthly reports and reconciliations of the trust bank account to the trial balance, in compliance with WAC 208-680-410(9), until the trust bank account balance is zero. These reconciliations are due within thirty days of the end of the preceding month.
(6) If I close my main office, what obligation do I have regarding winding up my business? You must wind up your business in a reasonably prompt manner. Until your account balances are zero, you must also maintain your fidelity and surety bonds under WAC 208-680-310 and your errors and omissions policy under WAC 208-680-320.
(1) Ten-day prenotification required. You must report to the director, in writing, changes to the following information at least ten days before they occur:
(a) Your location or mailing address. See RCW 18.44.061 and WAC 208-680-235;
(b) The form of your business organization or its place of organization. For example, if your business is changing from a sole proprietorship to a corporation, or from a corporation to a limited liability corporation, you must notify the department and may be required to file a new escrow agent application;
(c) The name and mailing address of your registered agent if you are an out-of-state escrow agent; or
(d) Your legal or trade name.
(2) Twenty-four hour post-notification required. You must notify the director in writing within twenty-four hours of any change to the trust status of your trust account. For example, if you use an interest-bearing trust account because you are required to under a limited practice officer or attorney license, and the status of your interest-bearing account changes for any reason, you must notify the department in writing within twenty-four hours. This notification does not affect your responsibility to comply at all times with the trust account requirements of the act and WAC 208-680-410.
(3) Five-day post-notification required. You must notify the director in writing within five business days of any changes to the escrow agent's surety or fidelity bonds or errors and omissions policy. See RCW 18.44.201.
(4) Ten-day post-notification required. You are required to notify the director in writing within ten days of the occurrence of any of the following:
(a) The cancellation or expiration of your Washington state master business license;
(b) For an in-state escrow agent, a change in your standing with the Washington secretary of state, including the resignation or change of your registered agent. If you are an out-of-state escrow agent, you are subject to subsection (1) of this section, which requires ten-day prenotification;
(c) The escrow agent filing for bankruptcy;
(d) The personal bankruptcy filing of one or more of your principal officers, controlling persons, licensed escrow officers, designated escrow officers, or branch designated escrow officers; or
(e) Any change in a principal officer, if no other reporting period is specified in the act or these rules. This includes changes in ownership affecting ten percent or more of the escrow agent's equity.
(5) Other notification requirements. In addition to the notice requirements under this section, you are required to follow any other notification requirements in the act or in these rules. These include, but are not limited to:
(a) For an escrow office closure, see WAC 208-680-245.
(b) For a transfer involving all or substantially all of its assets, the escrow agent must comply with WAC 208-680-125.
(c) For a change in principal officer or controlling person of a licensed escrow agent, the escrow agent must comply with WAC 208-680-125 and 208-680-110 and may be required to file a new application for an escrow agent license.
(d) For changes in designated escrow officer or branch designated escrow officer, see WAC 208-680-510.
(e) For termination of a licensed escrow officer, the escrow agent must notify the department within three business days that the escrow officer no longer represents the escrow agent. If the escrow officer was terminated for dishonesty or financial misconduct involving the business, the escrow agent must provide the department with that information. Within ten business days of the termination, the escrow agent must deliver the escrow officer's license to the department. See RCW 18.44.101.
(f) For the filing of quarterly reports, see WAC 208-680-425.
(g) For suit or complaint notification, see WAC 208-680-570.
(h) Within five business days of the escrow agent's license being revoked, surrendered, suspended, or the license expiring, the escrow agent shall notify the principal parties of preexisting escrows of the action. The contents of the notification must comply with RCW 18.44.465.
(a) A felony; or
(b) A gross misdemeanor involving dishonesty.
(2) What financial responsibility restrictions are there on the persons I may employ to handle client funds? In addition to the criminal background restrictions that apply to all employees handling escrow transactions, an employee that receives money, disburses funds, or acts as a signatory on trust accounts may not have demonstrated disregard in the management of his or her financial condition in the last three years. Disregard for his or her financial condition may be shown by, but is not limited to:
(a) Being subject to an administrative action issued pursuant to the Consumer Loan Act, the Consumer Protection Act, the Mortgage Broker Practices Act, the Insurance Code, the Securities Act, the Check Cashers and Sellers Act, or other similar laws in this or another state;
(b) An independent credit report issued by a recognized credit reporting agency that indicates the person has a history of unpaid debts; or
(c) Any other demonstration of his or her inability to appropriately manage his or her personal finances in a way that may endanger the funds of either the escrow agent or the escrow agent's client.
(3) Do I need to examine my current employee's backgrounds to ensure that I am in compliance with this requirement? Yes. The restrictions are on all employees, not just new hires.
(4) How will the department enforce these provisions?
(a) Each escrow agent must develop written policies and procedures to document its efforts to comply with section 4, chapter 34, Laws of 2010 and this section. You must make your policies and procedures available to the department upon request, and they must be maintained as part of your books and records;
(b) Your actual practices must be consistent with your written policies and procedures and your employees must be trained in those policies and procedures;
(c) Each year, each escrow agent's designated escrow officer must submit to the department a statement along with the agent's renewal paperwork attesting to its compliance with its internal policies and procedures. Failure to truthfully submit this statement is a violation of the act. A branch designated escrow officer may sign and submit the statement of compliance for a branch office; and
(d) The department reserves the right to perform its own background checks on escrow agent employees to determine compliance during examinations, investigations, and enforcement proceedings.
(a) Provide an aggregate minimum coverage of two hundred thousand dollars;
(b) Have a deductible of no more than ten thousand dollars;
(c) Cover fraudulent or dishonest acts committed by one or more corporate officers, partners, sole practitioners, escrow officers, and employees, acting alone or in concert; and
(d) Run to the benefit of the escrow agent, unless the fraudulent or dishonest act is committed by one or more corporate officers, partners, or sole practitioners, in which case it runs to the benefit of the harmed consumer.
(2) I am unable to find a fidelity bond that permits third parties to claim on the bond. Can I use a bond that does not allow a third party to claim on the bond? If you make a good faith effort to find a bond that complies with the statutory and regulatory requirements, and are unable to do so, the department may accept a bond that meets the other fidelity requirements but does not permit third-party claims. The department may relax this requirement only until a determination can be made about the general availability of conforming bonds.
Licensees that use a nonconforming bond as authorized under this subsection should be aware that the department may consider a refusal to file a claim on a fidelity bond for fraudulent or dishonest acts committed by a corporate officer, partner, or sole practitioner, to be conducting business in an unsafe or unsound manner under section 11, chapter 34, Laws of 2010 and WAC 208-680-645.
(3) Am I required to maintain any other kind of bond? If your fidelity bond has a deductible, you must maintain a surety bond in the amount of ten thousand dollars. The surety bond must run to the benefit of the state and any person harmed by an escrow agent or its employees. The surety bond must be an original signed and sealed document with power of attorney attached, not a certificate of insurance.
(4) How long must I maintain my bonds? All bonds must be kept in effect while you are conducting escrow business. Additionally, after closure of your office you must maintain your fidelity and surety bonds until your escrow trust accounts have been reconciled and all balances are zero.
(5) How do I demonstrate compliance with this requirement? Along with your application or renewal, you must provide the department with a certificate of insurance. You must also provide coverage information to the department upon demand. The certificate of insurance does not need to be entitled a certificate of insurance, but must include at a minimum:
(a) Your escrow agent's name;
(b) The insurer's name;
(c) The aggregate amount of coverage;
(d) The amount of any deductible; and
(e) A statement of compliance with RCW 18.44.201.
To ensure compliance with the bonding requirement, you must provide a copy of the full bond language to the department during your first year of compliance, and then upon demand in subsequent years.
(2) If I want to use a securities alternative to the errors and omissions bond requirement in RCW 18.44.201 (1)(b), what are the requirements?
(a) Securities used as an alternative to an errors and omissions policy must be effectively delivered to the director along with a properly executed irrevocable assignment and any supporting documentation as required by the director.
(b) Only those securities that meet the definition of "investment securities" under chapter 208-512 WAC may be used to satisfy RCW 18.44.201. Securities issued by the licensed escrow agent or its affiliates are not acceptable securities for the purposes of fulfilling the requirements of RCW 18.44.201.
(a) One year from the date of the expiration, cancellation, surrender, or revocation of your license, unless there are any pending actions commenced under WAC 208-680-340 prior to the expiration, cancellation, surrender, or revocation of the escrow agent's license; or
(b) The day your trust accounts are fully reconciled and show a zero balance.
(2) If your cash deposit or securities were provided to the department to allow you to conduct escrow business and you have obtained an errors and omissions policy, your deposit or securities will be returned within thirty days of your providing the department with proof that you have obtained an errors and omissions policy.
(3) If your cash deposit or securities were provided to the department as part of a licensing application, they will be returned to you within thirty days of the department's denial of your application for an escrow agent license.
(2) A claim against the cash deposit or securities must be in the form of certified copy of a final judgment from a court of competent jurisdiction. Upon receipt of a claim in the proper form, the department will release the amount of cash deposit or securities sufficient to pay the final judgment.
(3) The department will notify the escrow agent of the receipt of the claim and advise the escrow agent that it must deposit additional cash or securities with the department to maintain the required principal amount of fifty thousand dollars after payment of the claim.
Failure to maintain the deposit or securities at the minimum level is sufficient grounds for the suspension or revocation of your license.
TRUST ACCOUNT PROCEDURES
(2) What kind of an account can I use as a trust account for my escrow services? Your trust account or accounts must be designated as a trust account or accounts in the certified name of the escrow agent. Your trust accounts must be noninterest bearing demand deposit accounts unless they are one of the following:
(a) An interest-bearing trust account or dividend earning investment account containing funds pertaining to an individual escrow transaction or escrow collection account, if directed to use one by a written agreement between and signed by all principal parties to the transaction. The agreement must specify the manner of distribution of accumulated interest to the parties to the transaction;
(b) An interest-bearing trust account or dividend-earning investment account containing only funds held on behalf of an owner, vendor, lessor, etc., involving escrow collections, if directed to use one by a written agreement or directive signed by the principal parties. The agreement must specify the manner of distribution of accumulated interest to the parties to the transaction;
(c) An interest-bearing trust account containing funds related to transactions in which a limited practice officer has prepared documents under authorization set forth in APR 12(h); or
(d) An interest-bearing trust account containing funds related to transactions in which a licensed attorney has prepared documents.
(3) What information do I need to provide to the department regarding my trust account? Each time you renew your escrow agent license, you must provide the department with an authorization to examine your trust account. This authorization must be on a form specified by the department, signed by a representative of the bank, and notarized.
(4) Can I set up a system of records and procedures that varies from this section? You must establish and maintain a system of records and procedures as provided in this section unless you receive approval from the department. Any alternative records or procedures proposed for use by the escrow agent must be approved in advance by the department.
(5) Who is responsible for disbursements of funds and funds held in trust? The escrow agent is ultimately responsible for the disbursement of all funds received and held in trust, regardless of how they are disbursed.
(6) Who may have signatory authority over trust account disbursements? The designated escrow officer must have signatory authority on all trust accounts, and he or she may authorize any employee that he or she supervises to sign disbursements by including them on a bank account signature card. Branch designated escrow officers must have signature authority for trust accounts at their branch, and may have signature authority for other branches if the designated escrow officer authorizes it on either a temporary or permanent basis. The signatory authority of any employee other than a designated or branch designated escrow officer is discretionary, may be conditional or temporary, and may be revoked by the designated escrow officer at any time.
(7) When must my client's funds be deposited into a trust account? You must deposit any funds you receive for an escrow transaction or collection account into the escrow agent's trust account on the first banking day following receipt.
This requirement does not apply to funds owned exclusively by the agent.
(8) What do I need to do when I receive escrow funds?
(a) When you receive funds, you must record the date, amount, source, and purpose on either a cash receipts journal or duplicate receipt. If you use a duplicate receipt, you must keep it as a permanent record.
(b) When you deposit funds into your trust account or accounts, the deposit must be documented by:
(i) For traditionally deposited funds, a duplicate bank deposit slip that is validated by bank imprint or an attached deposit receipt that bears the signature of the authorized representative of the agent indicating that the funds were actually deposited into the proper trust account;
(ii) For funds received via wire transfer, posting of the deposit in the same manner as other receipts with a traceable identifying name or number supplied by the financial institution or transferring entity. You must also make arrangements for a follow-up "hard copy" receipt for the deposit; or
(iii) For remotely deposited funds, a follow-up "hard copy" receipt for the deposit.
(c) The traceable identifying name or number supplied by the financial institution in (b) of this subsection does not need to be a name or number you use to identify the transaction, but must be enough to allow the department to track and verify the transfer.
(9) What are my responsibilities regarding my individual client ledgers? You must maintain an individual client ledger for each escrow transaction or collection account for which funds are received in trust. All receipts and disbursements must be posted in the individual client ledger. Your client ledgers are subject to the following requirements:
(a) Credit entries must show the date of deposit or wire transfer, amount, and name of remitter.
(b) Debit entries must show the date of check or wire transfer, check number (if funds are disbursed via check), amount of check or wire transfer, and name of payee.
(c) You must prepare monthly trial balances of each client ledger. You must reconcile the ledger with both the trust account bank statement and the trust account receipts and disbursement records. The reconciliation must be signed by the designated escrow officer or branch designated escrow officer, and must be maintained as permanent records.
(10) What are my obligations regarding a reconciled trust account? Your reconciled trust account or accounts must be equal at all times to your outstanding trust liability to clients. Your outstanding trust liability to clients must equal the trial balance of all of your escrows with undisbursed balances.
(11) What requirements must I meet for disbursements of trust funds?
(a) Disbursed funds must be good funds.
(b) Unless otherwise authorized in the escrow instructions, you must make trust fund disbursements by check. Checks must be drawn on your trust account or accounts, and must identify which specific escrow transaction or collection account the disbursement relates to. The number of each check and its amount, date, payee, and the specific client's ledger sheet debited must be shown in the cash register or cash disbursement journal. All data must agree exactly with the check as written.
(c) You may make disbursements via wire transfer if both of the following are true:
(i) You have made arrangements with the financial institution that holds your trust account or accounts to provide you with a follow-up "hard copy" debit memo when funds are disbursed via wire transfer; and
(ii) You retain in the transaction file a copy of instructions signed by the owner of the funds to be wire transferred identifying the receiving entity and account number.
(d) You may make appropriate transfers between escrow accounts by ledger entries alone if you use either:
(i) A transfer form containing the date of the transfer, the amount being transferred, the identity of the accounts being debited and credited, and the signature of a person authorized to approve disbursements; or
(ii) An intrabank debit memo transfer form, and all escrow accounts involved in the transaction are closed through the same bank account.
(e) If you are making recurring transfers between collection escrows, they must be authorized by standing escrow instructions on file from all appropriate parties.
(12) I have a voided check written on the trust account. What do I need to do with it? You must permanently deface the check and retain it.
(13) What are my obligations regarding fees payable to me for my escrow services? You must be paid via a separate check or bank transfer, drawn on the trust account and bearing the escrow or transaction number, for escrow and service fees. This payment must be provided for in the escrow instructions. All of your fees relating to a transaction may be combined in a single check, or transfer, but either the closing or settlement statement or an addendum signed by the principal parties must itemize the included charges.
(14) What are my obligations regarding fees payable to me for my collection account services? Your collection account fees may be paid with a single check for each collection period as long as such a check is supported by a schedule of fees and identified to each individual account. Your fees must be paid monthly unless the collection contract agreement provides a longer collection period.
(15) May I have funds in my trust account that are not related to an escrow transaction or collection account? No. Only funds related to an escrow transaction or an escrow collection account may be placed in your trust account. None of your funds may be in the trust account for any reason.
(16) What kinds of disbursements am I not allowed to make from my trust account? You may only make disbursements from your trust account for authorized purposes. Specifically, you may not make disbursements:
(a) For items not related to a specific escrow transaction or escrow collection account, including aggregate disbursements to the department of revenue of unclaimed funds from multiple transactions. Such disbursements must be made for each specific account with unclaimed funds;
(b) To any person or for any reason before the closing of an escrow transaction, or before the happening of a condition set forth in the escrow instructions. You may make a disbursement before the closing of a transaction or before a triggering condition if you receive a written release from all principal parties of the escrow transaction or collection account. Unless the disbursement is disputed under WAC 208-680-560, you are permitted to disburse earnest money funds without a written release if the earnest money agreement terminates according to its own terms prior to closing and provides for such disbursement.
(c) Relating to a specific escrow transaction or collection account in excess of the actual amount held in your trust account in connection with such transaction or collection account;
(d) To pay any fee owed to your employees or for your own business expenses. Such fees or expenses must be paid from your own regular business bank account and not from your trust account or accounts;
(e) For bank charges of any nature. You must make arrangements with your bank to have any bank charges applicable to the trust accounts charged to your regular business bank account, or to provide a separate statement of bank charges so they may be paid from your regular business bank account. However, you may pay bank charges from the interest you receive on trust accounts allowed under subsection (2)(c) or (d) of this section;
(f) For preauthorization of payments by the financial institution for recurring expenses such as mortgage payments on behalf of the owner if the account contains tenant security deposits or funds belonging to more than one client;
(g) Of funds received as a damage or security deposit involving a lease or rental contract, to the property owner or any other person or persons, without the written authority of the lessee. You must hold these funds until the end of the tenancy, at which point you must disburse them to the person or persons entitled to the funds under the terms of the rental or lease agreement, and as consistent with the provisions of RCW 59.18.270, Residential Landlord-Tenant Act, or other appropriate statute.
(h) If the financial institution's automated system does not have the ability to charge fees to another account, or does not provide a separate statement for the service fees as required by (e) of this subsection, and the account is debited for service fees, you must deposit funds from your general business or other nontrust account to cover the service fee charged within one banking day after receipt of notice.
(17) If I choose to use a computer accounting system, what additional requirements do I need to meet? The provisions of this section apply to both manual and computerized accounting systems. However, there are some additional requirements if you choose to use a computer accounting system.
(a) Your computer accounting system must provide a capability to back-up all data files;
(b) You must print receipt and check registers at least once monthly. You must retain printed records as permanent records. Reconciliations and trial balances must be conducted at least once monthly, and then printed and retained as a permanent record;
(c) You must maintain a printed, dated source document file to support any changes to existing accounting records;
(d) If your computer accounting system has the ability to write checks by filling in fields on existing checks, the check number must be preprinted on the check or a voucher copy retained by the supplier. Your computer accounting system may assign suffixes or subaccount codes before or after the check number for identification purposes;
(e) If your computer accounting system has the ability to print entire checks on blank check stock using MICR toner or a similar system, it must track all checks that are printed. Those checks must be verifiable against your check register to ensure no duplication or skipping of check numbers;
(f) The check number must appear in the magnetic coding which also identifies the account number for readability by the financial institution's computer; and
(g) All checks you write must be included within the computer accounting system.
(18) I have unclaimed funds in my trust account. What do I need to do with them? Unclaimed funds are governed by and defined in the Uniform Unclaimed Property Act of 1983, chapter 63.29 RCW. If you have unclaimed funds in your trust account, your designated escrow officer or branch designated escrow officer must contact the department of revenue for disposition instructions. You must maintain a record of the correspondence relating to unclaimed funds for at least five years.
You must dispose of unclaimed funds in accordance with this section on a rolling basis to ensure that you do not have unclaimed funds in your trust account. You must examine your books at least once a quarter to determine if you have unclaimed funds. If you have unclaimed funds in your trust account, they must be purged at least quarterly in order to comply with the completed quarterly reconciliation as required in WAC 208-680-425.
(a) A report concerning its operations, including the number of escrow transactions conducted and the total dollar volume of those transactions;
(b) A report concerning the trust account administration; and
(c) A one page summary of the completed three way reconciliation from the last month of the quarter.
(2) A three way reconciliation is completed if it demonstrates:
(a) You have no unclaimed funds in your trust account;
(b) You have no overdue instruments; and
(c) You have no outstanding balances more than nine months old, unless:
(i) The outstanding balance is authorized by valid instructions from the principal parties stating a finite period the funds should be held; or
(ii) You have conducted a quarterly examination of your records to ensure compliance with the Uniform Unclaimed Property Act of 1983, chapter 63.29 RCW.
(3) For trust account matters, your designated escrow officer must certify that he or she has reviewed the trust account report and any exhibits filed with it and that the information contained in the report and any exhibits is true and correct. This certification must be under penalty of perjury in a manner consistent with RCW 9A.72.085. The chief executive officer or chief financial officer of the escrow agent, or other knowledgeable person acceptable to the director, may certify the information on the report not related to trust account matters.
(4) Failure to file these reports within the time period specified in this rule is a violation of RCW 18.44.430 and may result in legal action by the department. False certifications of compliance may result in revocation of your license and referral to a prosecuting attorney.
RECORDS AND RESPONSIBILITIES
(2) The branch designated escrow officer bears responsibility for the custody, safety and correctness of entries of all required escrow records at his or her assigned branch office. The designated escrow officer bears responsibility for all actions of the branch designated escrow officer.
(3) Before issuing a new license reflecting a change of the designated escrow officer or branch designated escrow officer of a licensed escrow agent, the department must receive evidence that the responsibility for preexisting escrows is being transferred to the incoming designated escrow officer or incoming branch designated escrow officer. Such evidence must be demonstrated by a statement signed by both the outgoing designated escrow officer and the incoming designated escrow officer that lists all outstanding trust liabilities and certifies that funds in the trust account maintained by the agent are adequate to meet all trust liabilities. This statement must be received by the department before the changeover can occur. In the case of a change in branch designated escrow officer, the outgoing and incoming branch designated escrow officers must sign the statement.
(4) If the department is concerned that the licensee's trust accounting records may not comply with the requirements of WAC 208-680-410, and before accepting a new designated escrow officer or branch designated escrow officer, the department may retain or instruct the licensee to retain a certified public accountant, or other person acceptable to the department, to reconcile the trust account or accounts and report whether they have been maintained in compliance with WAC 208-680-410 and to report on the adequacy of the licensee's internal routines and controls to ensure continuing compliance with WAC 208-680-410.
(a) Copies of all duplicate deposit slips, validated by the bank or bearing the signature of the designated escrow officer or branch designated escrow officer, and including the date of actual deposit; wires; separate receipts; or other evidence of the deposit of funds into the trust account;
(b) Copies of all checks, wires, or other evidence of any disbursement from the trust account;
(c) Copies of all bank statements for the trust account, including all paid checks or copies of paid checks, electronic or otherwise, provided that such copies are made in such a manner that the endorsement on the paid check is visible and readable;
(d) A client's ledger containing an individual ledger sheet for each escrow transaction or collection account, unless you use a computer accounting system. If you use a computer accounting system, an individual ledger sheet does not need to be maintained in the transaction files until the closing of the escrow transaction or collection account as long as the computer accounting system records provide the status of the escrow transaction or collection account funds on a daily basis;
(e) Copies of all written receipts and prenumbered checks, if you use a manual trust accounting system to administer the trust account.
(2) In addition to trust account records, you are required to keep additional records, including:
(a) Transaction files containing all agreements, contracts, documents, leases, escrow instructions, closing statements and correspondence for each transaction;
(b) Reconciled bank statements and canceled checks for all bank accounts of the escrow agent, including but not limited to the pooled escrow trust accounts, individual escrow trust accounts, and general business operating accounts of the agent;
(c) All checks and receipts produced by any computer accounting system. These checks and receipts must be sequentially numbered. You must retain the original of any voided or incomplete sequentially numbered check or receipt which was not issued.
(3) All records other than the reconciled bank statements must identify the transaction they relate to, either by escrow number or some other clear identifying information.
(2) How long do I need to retain my records? You must keep required records and make them available for inspection by the department for a minimum of six years from completion of a transaction. Records must be retained in their original format until the related transaction is completed and the client's trust account balance is zero.
(3) Where do I need to retain my records? You must at all times maintain your records in a location that is reasonably likely to preserve them. For the first year after completion, records of a transaction must be maintained at an address where you are licensed to maintain an escrow office. Records of transactions that have been completed for more than one year may be stored at another location within the state of Washington. Records stored at a remote location must be available during business hours upon demand of the department and must be maintained in a manner that is readily retrievable.
(4) When can I convert my records to an electronic format? Once a transaction is completed and a client's trust account balance is zero, you may convert that client's file into a permanent storage format and destroy the originals.
(5) How can I store my records electronically? Records stored electronically must be electronically imaged and stored on permanent storage media like optical disks or microfilm. The storage media must meet the following requirements:
(a) The retrieval process must provide the ability to view and print the records on-site in their original form, including any signatures or other writings placed on the records prior to imaging;
(b) The equipment must be made available on- and off-site to the department for the purposes of an examination or investigation;
(c) The records must be stored exclusively in a nonrewritable and nonerasable format;
(d) The hardware and software necessary to display and print the records must be maintained by the escrow agent during the required retention period under subsection (2) of this section.
Permanent storage does not affect your duties under subsection (3) of this section to maintain files in your licensed location for the first year.
(6) Are there records that I cannot store in an unlicensed location or in an electronic format? Transactions and accounting records may not be stored at a remote location or on permanent storage media as described under this section if there are funds relating to the transaction, including reconveyances or holdbacks, remaining in the trust account.
(7) I am closing my escrow agent business. What are my obligations regarding my records? You must ensure that all records retention requirements are met and that records are properly destroyed when appropriate. You also have an ongoing duty to ensure the department is informed about who has your records and where they are being maintained.
(1) Escrow instructions. Prepare or accept an instrument of escrow instructions from and agreed to by the principal parties and the escrow agent. The escrow instructions must be signed by the principal parties. Escrow instructions must contain any and all agreements between the principal parties and the escrow agent or incorporate other written agreements by reference. The escrow instructions must not be modified except by written agreement signed by all principal parties and accepted by the escrow agent.
(2) Fee disclosures. Disclose in writing to the principal parties when fees for services provided may be earned by the escrow agent. The disclosure must specifically identify the fees using the same terminology as that provided on the closing statement (for example the HUD-1 or HUD-1A), and reflect the dollar amount associated with each item identified as a fee payable to the escrow agent. For purposes of this section, fees payable to the escrow agent mean any item payable directly to the escrow agent whether accounted for by the escrow agent as profit, potential for profit, or the offset of justifiable costs.
(3) Justifiable fees. Ensure that all fees are for bona fide services and bear a reasonable relationship in value to the services performed, regardless of whether the services are performed by the escrow agent or by a third party under contract with the escrow agent. No charges known at the time of closing for services performed by a third party to the transaction may exceed the actual cost of the third-party service. When the cost of a third-party service cannot be known with certainty at the time of closing, an escrow agent may:
(a) Provide an estimate of the charge for the third-party service on the preliminary closing statement, disclose the actual charge for the third-party service on the final disclosure statement, and refund any amounts collected in excess of the actual charge for the third-party service to the principal parties;
(b) Assume responsibility for performing the service and charge the principal parties a one-time fee for performing the service. The one-time fee must be reasonably related to the value of the service provided. The escrow agent may contract with a third party to perform the service. The escrow agent must disclose to the principal parties in the preliminary and final settlement statement that the fee is being paid to the escrow agent. The escrow agent may transfer such fees earned into the general account in compliance with WAC 208-680-410; or
(c) If conducting a subescrow transaction, charge the principal parties the average charges as determined by the master escrow agent or title insurance company.
(4) Escrow instructions. Comply with the escrow instructions for completing the closing statement. All funds disbursed on the closing statement should be bona fide and supported with adequate documents.
(5) Recordkeeping. Maintain copies of the escrow instructions and closing statement (for example, HUD-1 or HUD-1A) in the escrow transaction file.
(6) Addendums. Require an addendum to the purchase agreement for any and all material changes in the terms of the escrow transaction, including but not limited to, changes in the financing of the transaction.
(7) Services. Provide the services and perform all acts pursuant to the escrow instructions.
(8) Closing statements. Provide a complete detailed closing statement (for example HUD-1 or HUD-1A) as it applies to each principal at the time the transaction is closed. The escrow agent must retain a copy of all closing statements in the transaction file, even if funds are not handled by the agent. The closing statements must show, at a minimum:
(a) The date of closing;
(b) The total purchase price;
(c) An itemization of all adjustments, moneys or things of value received or paid in compliance with requirements of the Real Estate Settlement Procedures Act, 12 U.S.C. Section 2601, and Regulation X, 24 C.F.R. Section 3500, and all other applicable rules and regulations. Such itemization must include the name of the person or company to whom each individual amount is paid, or from whom each individual amount is received. If there is not enough room on the closing statement for a full itemization, itemization may be provided on an addendum as long as a copy of the addendum was also provided to the principal parties and is included in the transaction file;
(d) A detail of debits and credits identified to each principal party; and
(e) Names of payees, makers and assignees of all notes paid, made or assumed.
(9) Payment of proceeds. Pay the net proceeds of sale directly to the seller unless otherwise provided in writing by the seller or a court of competent jurisdiction.
(10) Obtain signatures. Obtain original signatures of the principal parties on either the preliminary or final closing statement and maintain a copy of the signed closing statement in the escrow transaction file, unless the escrow instructions authorize use of faxed or electronic signatures. If an escrow agent completes a transaction based on faxed signatures in accordance with the escrow instructions, it must obtain original signatures for the file only if the escrow instructions so require.
(11) Final closing statements. Provide a copy of the final closing statement to each principal party and to each real estate broker or agent involved with the transaction.
(2) Upon written notice from any principal party that the ownership of the funds is in dispute or is unclear based on the written agreements of the parties, the escrow agent must hold such funds until it receives written notice from all principal parties that the dispute has been resolved. In lieu of holding such funds, the escrow agent may interplead the funds into a court of competent jurisdiction pursuant to chapter 4.08 RCW. Upon notification of a bona fide dispute between the principal parties, the department may, at its discretion, order the escrow agent to interplead the funds into a court of competent jurisdiction. If the department orders an escrow agent to interplead funds, the escrow agent may deduct only the actual costs of interpleading from the escrow funds.
(3) Except as provided otherwise in this section, at no time may an escrow agent disburse or delay the disbursement of funds without the written consent of the principal parties unless the delay is necessary to ensure the funds being disbursed are good funds.
(1) Any criminal complaint, information, indictment, or conviction (including a plea of guilty or nolo contendere) in which the licensee is named as a defendant.
(2) Entry of a civil court order, verdict, or judgment, against the licensee in any court of competent jurisdiction in which the subject matter involves any escrow or business related activity by the licensee. Notification is required regardless of any pending appeal.
(3) Any administrative action or Washington state bar association disciplinary action taken against an escrow officer or any of an escrow agent's employees for subject matter involving escrow or related business activities, if the designated or branch designated escrow officer is aware of such action. Notification is required regardless of any pending appeal.
(4) If an escrow agent or escrow officer is aware of it, any criminal complaint, information, indictment, or conviction of any of a licensee's employees where the complaint, information, indictment, or conviction is for a felony or a gross misdemeanor involving dishonesty. Notification is required regardless of any pending appeal, and notifying the department under this section does not change an escrow agent's responsibilities under WAC 208-680-275.
(2) It is the responsibility of every licensed escrow officer to keep the department informed of his or her current home address.
(3) It is the responsibility of every licensed escrow officer to ensure accessibility of their escrow agent's offices and records to representatives of the department.
(4) It is the responsibility of every licensed escrow officer to promptly inform the department if he or she loses his or her affiliation with an escrow agent, and to stop conducting escrow transactions until he or she associates with a licensed escrow agent.
(1) Directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person;
(2) Directly or indirectly engage in any unfair or deceptive practice toward any person;
(3) Directly or indirectly obtain property by fraud or misrepresentation;
(4) Knowingly make, publish, or disseminate any false, deceptive, or misleading information in the conduct of the business of escrow, or relative to the business of escrow or relative to any person engaged therein;
(5) Knowingly receive or take possession for personal use of any property of any escrow business, other than in payment authorized by this chapter, and with intent to defraud, omit to make, or cause or direct to be made, a full and true entry thereof in the books and accounts of the business;
(6) Make or concur in making any false entry, or omit or concur in omitting to make any material entry, in its books or accounts;
(7) Knowingly make or publish, or concur in making or publishing, any written report, exhibit, or statement of its affairs or pecuniary condition containing any material statement which is false, or omit or concur in omitting any statement required by law to be contained therein;
(8) Willfully fail to make any proper entry in the books of the escrow business required by law;
(9) Fail to disclose in a timely manner to the other officers, directors, controlling persons, designated escrow officer, or other licensed escrow officers the receipt of service of a notice of an application for an injunction or other legal process affecting the property or business of an escrow agent, including in the case of a licensed escrow agent an order to cease and desist or other order of the director;
(10) Fail to make any report or statement lawfully required by the director or other public official;
(11) Fail to comply with any requirement of any applicable federal or state act as described in RCW 18.44.301;
(12) Collect a fee for tracking unclaimed funds that is not a bona fide out-of-pocket expense;
(13) Convert unclaimed funds for personal use; or
(14) Receive compensation or any thing of value from any party for assisting in "real estate flopping." "Real estate flopping" is a short sale transaction where the value of a property is misrepresented to the lender, who then authorizes sale of the property for less than market value. The property is resold to another person at market value or closer to market value, creating a profit. The failure to disclose the nature of the transactions or the true value of the property to the lender constitutes fraud on the lender, the original property owner, or the second buyer, and is a violation of this chapter.
EXAMINATIONS, INVESTIGATIONS, ENFORCEMENT, SANCTIONS, AND COSTS
(2) The department may make necessary inquiry of the business or personal affairs of each person identified in subsection (1) of this section for the purposes of determining compliance with the act and these rules. In conducting examinations, the department may:
(a) Access, during reasonable business hours, the offices and places of business, books, accounts, papers, files, records, including electronic records, computers, safes, and vaults of all such persons. Access must be given to both the trust account records and general business account records;
(b) Interview or take sworn testimony of any person subject to RCW 18.44.021, or any employee or independent contractor of any person subject to RCW 18.44.021;
(c) Interview or take sworn testimony of any principal party or agent to the transaction;
(d) Require the filing of statements in writing by any person, under oath or otherwise, as to all facts and circumstances concerning the matters under examination;
(e) Copy, or request to be copied, any items described in this section;
(f) Analyze and review any items described in this section;
(g) Require assistance, as necessary, from any employee or person subject to the act;
(h) Conduct meetings and exit reviews with owners, management, officers, or employees of any person subject to the act; and
(i) Prepare and deliver, as necessary, a report of examination requiring a response from the recipient.
(3) The department may make examinations as frequently as it deems necessary or appropriate; and
(4) The department may charge an appropriate hourly audit fee for examination under RCW 18.44.121(5).
(2) The department may investigate the escrow business or other business or personal financial records of any person subject to investigation under subsection (1) of this section. In conducting investigations, the department may:
(a) Access, during reasonable business hours, any location where any escrow business records are or may be located, including offices, places of business, personal residences, storage facilities, computers, safes, and vaults, for the purposes of obtaining, reviewing, or copying books, accounts, papers, files, or records, including electronic records, or records stored in any format;
(b) Administer oaths or affirmations;
(c) Subpoena witnesses and compel their attendance at a time and place determined by the director or designated person;
(d) Subpoena the production of any evidence or matter which is relevant to the investigation, including the taking of such evidence;
(e) Subpoena any person to determine the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge or relevant facts, or any other matter reasonably calculated to lead to the discovery of material evidence;
(f) Interview, publicly or privately, under administration of oath or otherwise, or take the sworn testimony of: Any principal party, any agent to the transaction, any employee or independent contractor of any person subject to the act, or any other person whose testimony is deemed relevant to the department's investigation;
(g) Require the filing of statements, affidavits, or declarations in writing by any person, under administration of oath, notary or otherwise, as to all facts and circumstances concerning the matters under investigation;
(h) Copy, or request to be copied, any items described in this section, or if the department makes a determination that there is a danger that original records may be destroyed, altered, or removed to deny the director access, or that original documents are necessary for the preparation of a criminal referral, the department may take originals of any items described in this section, regardless of the source of such items. Originals and copies taken by the department may be held, returned, or forwarded to other regulatory or law enforcement officials as deemed necessary;
(i) Analyze and review any items described in this section;
(j) Receive assistance, as necessary, from any employee or other person subject to RCW 18.44.021;
(k) Conduct meetings and exit reviews with owners, management, officers, or employees of any person subject to RCW 18.44.021;
(l) Conduct meetings and share information with other regulatory or law enforcement agencies;
(m) Prepare and deliver, as necessary, a report of investigation requiring a response from the recipient.
(3) For purposes of this section and RCW 18.44.420(1), "public" means open to the public as determined by the department.
(4) For purposes of this section and RCW 18.44.420(1), "private" means closed to the public or any person, including attorneys for witnesses, as determined by the department.
(1) Enter orders, including temporary orders to cease and desist, compelling any person to cease and desist from an unlawful practice, and to take such affirmative action as in the judgment of the department will carry out the purposes of this chapter;
(2) Enter charges for violations of chapter 18.44 RCW and chapter 208-680 WAC;
(3) Bring an action, with or without prior administrative proceedings, in the superior court to enjoin conduct or to enforce compliance with chapter 18.44 RCW, or any rule, regulation, or order of the department;
(4) Appoint a receiver or conservator to take over, operate, or liquidate any licensed escrow agent;
(5) Hold hearings;
(6) Make referrals to other regulatory or law enforcement agencies; or
(7) Under specific circumstances, take control of an escrow agent. See WAC 208-680-645.
(a) Deny, suspend, or revoke the escrow agent's license for any violation of RCW 18.44.430;
(b) Remove or prohibit any corporate officer, controlling person, director, employee, or licensed escrow officer from participation in the conduct of the affairs of any licensed escrow agent, for any violation of RCW 18.44.430;
(c) Order a licensed escrow agent or officer to pay restitution to an injured party; or
(d) Impose a fine of up to one hundred dollars per day against any escrow officer or agent for each day's violation of chapter 18.44 RCW or these rules.
(2) I work as an escrow agent, but I am excepted from licensure. What sanctions may the department impose on me for violations of the act? The department may deny a future application for a license under the act.
(3) I have been sanctioned in the past for providing unlicensed escrow services in Washington. May I apply for an escrow license? Yes, if you were sanctioned more than five years ago. Under RCW 18.44.430, the department may deny a license to anyone who has violated the act or its implementing rules, including the licensure requirements. The department will not issue a license to a person who has provided unlicensed escrow services within the last five years, but may issue a license to a person whose unlicensed activity took place more than five years before his or her application. If your unlicensed activity was particularly widespread or egregious, or if it posed a particular risk to the public interest, the department may still deny you an escrow license even if your unlicensed activity took place more than five years before your application.
(a) Is conducting business in an unsafe and unsound manner that poses a risk to the public;
(b) Has suspended payment of its trust obligations;
(c) Has refused to comply with a lawfully issued order of the department and one or more consumers are likely to be harmed by noncompliance.
A licensee may be considered to be conducting its business in an unsafe and unsound manner that is injurious to the public if it refuses to file a valid claim against its fidelity bond or errors and omissions policy for claims that affect a consumer and his or her property.
(2) What can the department do with a business it has taken control of? The department may take any action that the licensee would be able to take. At a minimum, the department may:
(a) Work with other licensees to complete pending escrow transactions;
(b) Discontinue unsafe or unsound practices and violations of laws or regulations;
(c) Make good any deficiencies;
(d) Make claims against the licensee's fidelity or surety bonds or errors and omissions insurance to make consumers harmed by employee activities whole;
(e) Make restitution to injured parties;
(f) Renew the licensee's license;
(g) Renew or make premium payments to maintain the licensee's bonds and insurance; and
(h) Take necessary steps to wind down the business of the escrow agent where it is clear that the escrow agent cannot be safely operated.
(3) How long may the department keep control of a business? The department may maintain control over a business until the licensee is able to resume business or the business is fully liquidated.
(4) I also conduct nonescrow business through my licensed escrow agent business. If the department seizes my escrow business, will it also seize these other areas of business? When possible, the department will only take control of the portion of a business related to escrow. If the portions of a business are not clearly divisible, the department will determine its actions on a case-by-case basis, based in part on the relationship between and degree of commingling of the business lines.
(5) I am an attorney whose law practice is licensed as an escrow agent. Will the department seize my law practice under this section? Where an attorney's law practice is excepted from licensure, the law practice is not subject to seizure under the act. For attorneys with a business entity licensed under the act, the department will generally not exercise its seizure authority against a business entity or portion of a business entity supervised by the Washington state bar association. In any event, the department will only take control of the portion of a business related to escrow as set forth in subsection (4) of the section.
(2) The expense of an examination or investigation pursuant to WAC 208-680-610 or 208-680-620 inside or outside this state shall be borne by the person examined or investigated.
(3) The expenses of an examination or investigation pursuant to this section may include, but are not limited to, staff time, travel, lodging, per diem, and any other expenses related to the examination or investigation. At a reasonable time following each examination or investigation performed, the director must provide the person examined with an invoice for the expenses incurred during the examination or investigation. Payment of the invoiced amount is due within thirty days of the date of the invoice.
(2) Are escrow commission meetings open to the public? Yes. Meetings of the escrow commission are open to the public. Records, minutes, and recordings of each meeting are also available on the department's web site, www.dfi.wa.gov.
Dates and times of the escrow commission's meetings are also posted on the department's web site, www.dfi.wa.gov.