81R5428 PMO-D

By: Hartnett H.B. No. 1852

A BILL TO BE ENTITLED

AN ACT

relating to the maintenance of certain interest-bearing accounts by escrow officers and the use of the interest on those accounts.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2652.005, Insurance Code, is amended to read as follows:

Sec. 2652.005. ESCROW ACCOUNT AUDIT. Each escrow account used by a licensed escrow officer for closing a transaction, including an account established under Section 2652.021, is subject to the audit requirements of Subchapter D, Chapter 2651.

SECTION 2. Chapter 2652, Insurance Code, is amended by adding Subchapter A-1 to read as follows:

SUBCHAPTER A-1. MAINTENANCE OF CERTAIN ACCOUNTS

Sec. 2652.021. INTEREST-BEARING ACCOUNT FOR CERTAIN FUNDS; OTHER ACCOUNTS AND INVESTMENTS AUTHORIZED. (a) An escrow officer shall establish and maintain at a financial institution an interest-bearing demand account that is functionally equivalent to an account commonly known as an Interest on Lawyers Trust Account (IOLTA) as described by 12 C.F.R. Section 370.2(h)(3)(i) for the deposit of funds that are nominal in amount or that the escrow officer reasonably anticipates will be held for a short period of time.

(b) An account established or maintained under Subsection (a) may be a single, unsegregated account.

(c) This section does not prohibit an escrow officer from establishing at the request of a purchaser and seller other interest-bearing accounts or other investments for a specific transaction authorized by this title for the deposit of funds that are not required to be deposited under this subchapter.

Sec. 2652.022. INTEREST ON ACCOUNT. (a) An escrow officer establishing an interest-bearing account under Section 2652.021 shall attempt in good faith to obtain a rate of interest payable on the account that is not less than the rate a financial institution pays to other depositors with accounts of a similar size and duration.

(b) If a financial institution offers the escrow officer an account with a higher interest rate or dividend on a deposit meeting certain time or minimum amount requirements, the escrow officer may establish that account if the right to withdraw or transfer the principal is not materially impaired other than by the statutory notification requirements generally applicable to that type of account.

Sec. 2652.023. REMITTANCE OF INTEREST ON ACCOUNT; REPORTS. An escrow officer establishing an interest-bearing account under Section 2652.021 shall direct the financial institution to:

(1) remit, at least quarterly, interest earned on the average daily balance in the account, less a reasonable service charge, to the administrative entity designated by the Texas Supreme Court;

(2) transmit, with the remittance described by Subdivision (1), a statement of the name and mailing address of the escrow officer maintaining the account, the rate or rates of interest applied to the account, and the amount of service charge deducted for the period for which the statement is made; and

(3) transmit to the depositing escrow officer and the department, at the same interval under which a remittance is made under Subdivision (1), a report showing:

(A) the amount of the remittance under Subdivision (1);

(B) the rate or rates of interest applied to the account;

(C) the amount of service charge deducted for the period for which the report is made; and

(D) the average daily balance for each month of that period.

Sec. 2652.024. CONSTRUCTION WITH OTHER LAW; OFFICER LIABILITY. (a) Nothing in this subchapter affects an escrow officer's obligations concerning funds other than funds required to be deposited in an interest-bearing account under Section 2652.021.

(b) An escrow officer is not liable for a good faith determination of which funds must be deposited under Section 2652.021, if the determination is made in accordance with this subchapter and any applicable commissioner rules.

Sec. 2652.025. RULES. The commissioner shall adopt rules to ensure compliance with this subchapter, including rules that, for the purposes of this subchapter:

(1) define "nominal" and "short duration";

(2) prescribe the requirements that a financial institution must meet before an escrow officer may establish an account under Section 2652.021 at the institution; and

(3) designate procedures for the collection and transmittal of interest funds to the administrative entity designated by the Texas Supreme Court.

SECTION 3. Section 2651.152(a), Insurance Code, is amended to read as follows:

(a) Each title insurance company shall have an annual audit made of trust fund accounts, including accounts established under Section 2652.021, for each county in which it operates in its own name. The company shall pay for the audit.

SECTION 4. The commissioner of insurance shall adopt rules required by Section 2652.025, Insurance Code, as added by this Act, not later than the 90th day after the effective date of this Act.

SECTION 5. The change in law made by this Act applies only to funds deposited with an escrow officer on or after the effective date of the rules adopted under Section 2652.025, Insurance Code, as added by this Act. Funds deposited with an escrow officer before the effective date of the rules adopted under Section 2652.025, Insurance Code, as added by this Act, are covered by the law in effect on the date the funds are deposited, and the former law is continued in effect for that purpose.

SECTION 6. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2009.