The Dodd-Frank Wall Street Reform and Consumer Protection Act (“The Act”) of 2010 represented the congressional response to the nation’s financial crisis of 2008. The Act is a massive piece of legislation that affects nearly every sector of the ...

 

DEPARTMENT OF FINANCIAL SERVICES

Division of Insurance Agents and Agency Services

RULE NO.:RULE TITLE:

69B-186.008Escrow Disbursements

PURPOSE AND EFFECT: The Dodd-Frank Wall Street Reform and Consumer Protection Act (“The Act”) of 2010 represented the congressional response to the nation’s financial crisis of 2008. The Act is a massive piece of legislation that affects nearly every sector of the financial industry. Its passage was, in large part, a reaction to the widely-held perception that the multiple agencies charged with regulating the financial sector had provided an inadequate and uncoordinated response to the financial crisis. This perception was most pronounced in the agencies’ response to the most visible features of the financial crisis, the collapse of the nation’s housing and mortgage markets. In an effort to address the financial regulators weak response to the financial crisis, the Act mandated the reorganization of the seven agencies charged with regulating the financial industry and also authorized the creation of new agencies. The Consumer Financial Protection Bureau (“CFPB”), an independent agency created under the Act, was charged with consolidating the regulation of consumer financial laws that were previously regulated across seven agencies. Among the more prominent tasks undertaken by the CFPB was the responsibility for implementing a new rule integrating the following two consumer protection statutes governing mortgage origination: the Truth in Lending Act (“TILA”), currently regulated by the Board of Governors of the Federal Reserve, and the Real Estate Settlement Procedures Act of 1974 (“RESPA”), currently regulated by the Department of Housing and Urban Development. The CFPB has announced a planned implementation date of August 1, 2015 for the new TILA-RESPA Integrated Disclosure rule (“TRID”).

Currently, and for over 30 years, settlement agents to real estate closing transactions have, in compliance with RESPA, been required to prepare and provide to consumers the HUD-1 Settlement Statement, while lenders are required to provide the revised Truth in Lending disclosure to consumers in compliance with TILA. The new TILA-RESPA Integrated Disclosure rule (“TRID”) includes a new “Closing Disclosure” form that will replace the currently used HUD-1 Settlement Statement. Like the currently used HUD-1 Settlement Statement, the Closing Disclosure, is, with few exceptions, required for use in consumer mortgage transactions. National industry groups and state regulators alike have expressed concern that the new Closing Disclosure required by TRID provides inadequate and potentially misleading information to consumers regarding the cost of title insurance. Representatives of both the lender and the title insurance industries have expressed concern over TRID's impending implementation and how it will change the customary dynamic that has existed between lenders and settlement agents. By custom, lender-creditors have typically relied on settlement agents to provide and assume responsibility for completing the HUD-1 Settlement Statement currently used in real estate closings. Under TRID, it is the lender-creditor who is wholly responsible for both the accuracy and the delivery of the Closing Disclosure form. To minimize TRID compliance risk, lenders have assumed responsibility for the preparation of the Closing Disclosure and its delivery to the consumer. One consequence of TRID's shifting of liability for the accuracy of the Closing Disclosure to the lender-creditor is the unintended relief from liability that it affords settlement agents. Such a consequence creates substantial financial risks to consumers engaged in real estate closing transactions, because, despite the shift in liability for preparation for the Closing Disclosure to the lender, it remains the settlement agent who continues to handle the disbursement of escrow funds. In the absence of the proposed rulemaking, following the implementation of TRID, Florida regulators will be limited in their ability to prosecute settlement agents who mishandle or misappropriate escrow funds. The proposed rule clarifies that the implementation of TRID will provide no relief from liability for settlement agents who have failed to act in a fiduciary capacity in conducting real estate closing transactions. The proposed rule assures that TRID’s implementation will in no way impede Florida regulators’ ability to hold settlement agents responsible and accountable for their actions In doing so, the proposed rule assures that Florida consumers retain protections currently afforded them under Florida law.

The proposed new rule establishes the following:

(1) Provides consumers with an explanation regarding the true cost for the title insurance policy they are purchasing as well as showing the exact amount of premium paid, as apportioned between parties.

(2) Authorizes the title insurance agency to hold and disburse the funds being held in the agency’s escrow account to fund the transaction.

(3) Requires the settlement agent to certify that the escrowed funds are being disbursed consistent with the disclosure provided to all the parties and as the lender has instructed the funds to be paid.

(4) Incorporates by reference new Form DFS-H1-2146 (Florida Insurance Premium Disclosure & Settlement Agent Certification Form, Effective 08/2015).

SUMMARY: The proposed new rule and rule chapter reaffirm that the implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure rule (“TRID”) will in no way diminish protections currently afforded Florida consumers who engage in real estate transactions involving the issuance of title insurance. The proposed rule requires settlement agents conducting real estate closing transactions in Florida that involve the issuance of title insurance to certify in writing that they agree to disburse escrow funds in accordance with the terms of the transaction.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION: The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: The Department’s analysis of the economic impact or regulatory costs associated with the proposed rule did not trigger any of the requirements in subsection 120.541(1), Florida Statutes, for preparing a Statement of Economic Regulatory Costs (SERC). As part of this analysis, the Department relied upon its past experience in the implementation of similar rules and determined that costs, if any, would not exceed the economic analysis criteria in a SERC as set forth in paragraph 120.541(2)(a), Florida Statutes.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 624.308(1), 626.8473(6) FS.

LAW IMPLEMENTED: 626.8473 FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW(IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):

DATE AND TIME: Wednesday, August 5, 2015, 9:00 a.m.

PLACE: 116 Larson Building, 200 East Gaines Street, Tallahassee, Florida.

Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Ray Wenger, [phone] or [e-mail]. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Ray Wenger, Financial Administrator, Division of Agent & Agency Services, Bureau of Investigation, Department of Financial Services, 200 E Gaines Street, Tallahassee, FL 32399-0320, [phone] or [e-mail]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69B-186.008, F.A.C. Escrow Disbursements

(1) For purposes of this rule, the term "settlement agent" refers to the licensee or licensee’s designee who, while acting in a fiduciary capacity, is responsible for facilitating the orderly transfer of ownership in real property and the related disbursement of funds in accordance with the terms and conditions of a real estate purchase-sale agreement.

(2) Any person responsible for the disbursement of escrow funds being held in connection to a real estate closing transaction involving the issuance of title insurance must provide the parties to the transaction with the following information no later than the time such funds are disbursed:

(a) If the lender provides any cost of a title insurance policy that differs in cost from a policy based on Florida premium rates listed under Rule 69O-186.003, F.A.C., the settlement agent must provide a written comparison of the cost of the lender’s policy versus the cost of an equivalent policy based on Florida premium rates.

1. The cost comparison must clearly disclose whether the premiums listed include the premiums being charged for all endorsements included in the policies, or, in the alternative, provide a list of the premiums charged for each endorsement separately.

2. The buyer and the seller must both acknowledge that they have been advised that the title insurance premiums will be disbursed from the escrow funds in amounts that may differ from the amounts indicated on the Closing Disclosure provided by the lender.

(b) The settlement agent must certify in writing that he or she has reviewed the Closing Disclosure and any other additional forms prepared in connection to the real estate transaction and agrees to disburse the escrow funds in accordance with the terms of the transaction. Compliance with the aforementioned certification requires the settlement agent to certify to the truth of the following statement: "I have reviewed the Closing Disclosure, the settlement statement, the lender’s closing instructions and all other forms prepared for this transaction, including any disclosure of the Florida title insurance premiums being paid, and I agree to disburse the escrow funds in accordance with the terms of this transaction."

(c) The name and license number of the settlement agent responsible for disbursing the escrow funds.

1. If funds are being disbursed through an attorney-operated agency, the name and Florida Bar Number of the attorney is to be listed.

(d) Any title insurance agency holding funds in escrow must list the name, license number, and the file number used by the title agent and agency to identify the transaction.

(e) The fraud statement required by Section 817.234, F.S., which reads as follows: "Any person who knowingly and with intent to injure, defraud, or deceive any insurer files a statement of claim or an application containing any false, incomplete, or misleading information is guilty of a felony of the third degree."

(3) The buyer(s) and the seller(s) must provide written approval authorizing the disbursement of escrow funds by the settlement agent.

(4) Any form or forms used to comply with this rule must be approved by the insurance company that has issued a title insurance policy on the property identified in the transaction. Any form or forms that satisfy the requirements of this rule will be considered part of a title insurance application in Florida. Such form or forms will not constitute loan documents.

A completed and signed copy of the approved form or forms must be:

(a) provided to the buyer, seller and lender who are named in the transaction

(b) maintained in the title insurance agency files for at least five (5) years.

(5) Form DFS-H1-2146, "Florida Insurance Premium Disclosure & Settlement Agent Certification Form" (Effective 08/01/2015), meets all of the requirements necessary to comply with this rule and is incorporated by reference herein. The form is available from the Department of Financial Services, Division of Insurance Agent and Agency Services, Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0318.

Rulemaking Authority 624.308(1), 626.8473(6) FS. Law Implemented 626.8473 FS. History – New.

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Ray Wenger, Financial Administrator, Division of Agent & Agency Services, Bureau of Investigation, Department of Financial Services

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Jeff Atwater, Chief Financial Officer, Department of Financial Services

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: June 24, 2015

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: April 3, 2015