AZ Escrow Rate Regulation

Arizona Escrow Rate Statutes (updated 2-13-18)

6-801. Definitions

In this chapter, unless the context otherwise requires: 1. " Account servicing" means the holding of documents or written instruments and the receipt and disbursement of payments according to the instructions of the parties to the documents or written instruments. 2. " Affiliate" means an entity that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the entity specified. 3. " Control" means ownership or the power to vote, either directly or indirectly, more than twenty per cent of the outstanding voting shares of the controlled person. 4. " Escrow" means any transaction in which any escrow property is delivered with or without transfer of legal or equitable title, or both, and irrespective of whether a debtor-creditor relationship is created, to a person not otherwise having any right, title or interest therein in connection with the sale, transfer, encumbrance or lease of real or personal property, to be delivered or redelivered by that person upon the contingent happening or nonhappening of a specified event or performance or nonperformance of a prescribed act, when it is then to be delivered by such person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee or bailor, or any designated agent or employee of any of them. Escrow includes subdivision trusts and account servicing. 5. " Escrow agent" means any person engaged in the business of accepting escrows. 6. " Escrow business" means a commercial activity characterized by the regular and continuous carrying on of escrow transactions. 7. " Escrow property" means property, money, a written instrument or evidence of title or possession to real or personal property or any other thing of value. 8. " License" means a license issued pursuant to this chapter. 9. " Licensee" means a person licensed pursuant to this chapter. 10. " Subdivision trust" means an agreement in which title to real property or an interest therein is held for the limited purpose of holding, subdividing, developing or selling real property or an interest therein, or to facilitate any business transaction with respect thereto and under which agreement the trustee acts pursuant to direction of its beneficiaries, and without discretionary powers, with respect to the holding, subdivision, development or sale of real estate or an interest therein or the disposition of the proceeds therefrom. Subdivision trusts are, for the purpose of regulation under this chapter, escrows, except that this paragraph shall not be construed to limit the obligation or liability of trustees of subdivision trusts under common law or otherwise.

6-802. Acknowledgment of report of examination; penalty

A. The superintendent shall examine or cause to be examined each escrow agent as prescribed by section 6-122. The superintendent shall forward a report of the examination to the board of directors of the escrow agent within thirty days after the report is completed. Within thirty days after the report is received, the directors shall meet to consider its contents. Within ten days after the directors' meeting, the chairman of the board of directors shall notify the superintendent of its meeting, shall acknowledge that each director has reviewed the report and shall describe the board's responses to the recommendations of the examiners, including any remedies for violations of this title. In each case, the superintendent may extend the time period in this subsection for a period not to exceed one hundred twenty days applicable to actions by the board of directors and its chairman. B. Unless excused by the superintendent for cause before or after the date the response is due, an escrow agent who fails to file a timely response to the report of examination shall pay the department up to one hundred dollars for each day of delinquency, as assessed by the department.

6-811. Exemptions

A. The provisions of this chapter do not apply to and the term " escrow agent" does not include: 1. Any person who is licensed to practice law in this state and who is not actively engaged in conducting an escrow business. 2. Any person doing any of the acts specified in section 6-801, paragraph 4 pursuant to the order of a court. 3. Trustees of deeds of trust to the extent the activities are performed as a trustee under a deed of trust. 4. Any person doing any of the acts specified in section 6-801, paragraph 4 in a fiduciary capacity for any person, trust or estate pursuant to the order of a court. 5. Licensed real estate brokers who render certain services by collecting rents for others, as to such rents, and who within a reasonable time account for such rents to the person or persons properly entitled to such accounting. 6. Licensed real estate brokers who in the regular course of their business accept earnest money for the purpose of effecting the sale or transfer of property, as to such earnest money, and who within a reasonable time account for such earnest money to the prospective buyer or seller or to a licensed escrow agent. 7. Persons licensed pursuant to title 32, chapter 9, but only to the extent that these activities are regulated by title 32, chapter 9. 8. Any person who is licensed pursuant to chapter 9, article 2 of this title and who is approved to service loans for either: (a) The federal national mortgage association. (b) The federal home loan mortgage corporation. (c) The government national mortgage association. 9. Any person licensed pursuant to chapter 14, article 1 of this title. 10. Any person who is licensed pursuant to chapter 9, article 3 of this title. B. The provisions of this article do not apply to: 1. A person doing business under the laws of this state or the United States relating to banks, credit unions, savings banks, trust companies and savings and loan associations, except that this subsection does not exempt such banks, credit unions, trust companies, savings banks and savings and loan associations from regulation of such escrow activities under other statutes or laws of this state or of the United States nor does this subsection allow an affiliate of the bank, credit union, savings bank, trust company or savings and loan association to engage in the escrow business unless it is licensed pursuant to this article and engages in such a business in accordance with this chapter. 2. A person who is licensed pursuant to chapter 9, article 2 of this title and who is not approved to service loans for either: (a) The federal national mortgage association. (b) The federal home loan mortgage corporation. (c) The government national mortgage association.

6-812. Foreign corporations

No foreign corporation without a valid grant of authority to do business under title 10, chapter 15, article 1 shall transact any escrow business in this state.

6-813. License of agent; nontransferable; posting

A. A person, except those exempt under section 6-811, shall not engage in or carry on, or hold himself out as engaging in or carrying on, the escrow business or act in the capacity of an escrow agent in this state without first obtaining a license. B. An escrow agent's license is not transferable or assignable and control of a license shall not be acquired through stock purchase or other devices without the prior written consent of the superintendent. C. A license shall be kept conspicuously posted in all licensed places of business of the licensee.

6-814. Procedure for licensing; surety bond

A. Every escrow agent before engaging in the escrow business shall file with the superintendent an application for a license, in writing, verified by oath and in the form prescribed by the superintendent. It shall state the location of the principal office and all branch offices in this state, the name or style of doing business, the names and residence and business addresses of all persons holding an interest in the business as principals, partners, officers, trustees and directors, specifying as to each his capacity and title, the general plan and character of operation and the length of time they have been engaged in the escrow business. B. The superintendent may require additional information he considers necessary in connection with any application for a license under this article. C. At the time of filing an application for a license and at all times while holding the license, the applicant shall deposit and maintain with the superintendent a corporate surety bond in the amount of one hundred thousand dollars payable to any person injured by the failure of the licensee to comply with the requirements of this chapter or for the wrongful act, default, fraud or misrepresentation of the licensee or his employees and to this state for the benefit of the person injured and executed by a surety company qualified to do business in this state. D. Notwithstanding section 35-155, in lieu of the total corporate surety bond required by this section, an applicant or licensee may deposit with the superintendent a deposit in the form of cash or alternatives to cash in the amount of one hundred thousand dollars. The superintendent may accept as an alternative to cash any of the following: 1. Certificates of deposit or investment certificates which are payable or assigned to the state treasurer, issued by banks doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution. 2. Certificates of deposit, investment certificates or share accounts which are payable or assigned to the state treasurer, issued by a savings and loan association doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution. 3. Certificates of deposit, investment certificates or share accounts which are payable or assigned to the state treasurer, issued by a credit union doing business in this state and fully insured by the national credit union administration or any successor institution. E. The superintendent shall deposit the cash or alternatives to cash received under this section with the state treasurer. The state treasurer shall hold the cash or alternatives to cash in the name of this state to guarantee the faithful performance of all legal obligations of the person required to post the bond. The person is entitled to receive any accrued interest earned from the alternatives to cash. The state treasurer may impose a fee to reimburse the state treasurer for administrative expenses. The fee shall not exceed ten dollars for each cash or alternatives to cash deposit and shall be paid by the licensee. The state treasurer may prescribe rules relating to the terms and conditions of each type of security provided by this section. F. A deposit of cash or an assignment of an alternative to cash shall contain an affirmative statement by the assignor that the monies assigned are not derived from any escrow deposit. In addition to such other terms and conditions as the superintendent prescribes by rule, the principal amount of the deposit shall be released only on written authorization of the superintendent or on the order of a court of competent jurisdiction, but in any event the principal amount of the deposit shall not be released before the expiration of three years from the date of substitution of a bond for a cash alternative, the surrender of the license pursuant to section 6-838 or the revocation or expiration of the license, whichever occurs first. G. No suit may be commenced on a bond or cash or alternative to cash after the expiration of three years following the act or acts on which the suit is based, except that time for purposes of claims for fraud shall be measured as provided in section 12-543, paragraph 3. If an injured person commences an action for a judgement to collect from the bond or cash alternative deposited in lieu of a bond, the injured person shall notify the superintendent of the action in writing at the time of commencement of the action and shall provide copies of all documents relating to the action to the superintendent upon request. H. The superintendent shall examine the application for a license and if he is satisfied that the applicant should not be refused a license under section 6-817, he shall issue the license.

6-815. Renewal of license

A licensee shall make application for renewal as prescribed by the superintendent and pay the renewal fee prescribed in section 6-126 not later than September 30 of each year. For each day after September 30 that the renewal application is not received by the superintendent the applicant shall pay twenty-five dollars in addition to the fee prescribed by section 6-126. Licenses for which renewal applications are not received by the superintendent by September 30 are suspended, and the licensee shall not act as an escrow agent until the license is renewed or a new license is issued pursuant to this article. A license of a licensee that has not filed its renewal application and paid the renewal fee by October 31 expires. A license shall not be granted to the holder of an expired license except as provided in this article for the issuance of an original license.

6-816. Fees

A. Each application for a new license or a renewal license shall be accompanied by the fee prescribed in section 6-126. B. For each day a report required by section 6-832 is not received by the department, a licensee shall pay a fee of twenty-five dollars. The superintendent may excuse the fee for good cause if the cause is presented before the due date of the report.

6-817. Refusal to license; suspension; revocation

A. The superintendent may upon investigation refuse to license any applicant, or may suspend or revoke any license pursuant to title 41, chapter 6, article 10 by entering an order to that effect, together with findings in respect to the order and by notifying the applicant or escrow agent either personally or by certified mail, return receipt requested sent to the agent's stated address, upon the determination by the superintendent that the applicant or escrow agent: 1. Is unable to pay debts as they fall due in the regular course of business. 2. Has not conducted the applicant's or agent's business in accordance with law or has violated this chapter or the rules relating to this chapter. 3. Is in such financial condition that the applicant or agent cannot continue in business with safety to the applicant's or agent's customers or the public. 4. Has been found guilty of fraud in a legal or administrative proceeding in this jurisdiction or any other jurisdiction. 5. Has made any material misrepresentations or false statements to, or concealed any essential or material fact from, any person in the course of the escrow business. 6. Has knowingly made or caused to be made to the superintendent any false representation of a material fact, or has suppressed or withheld from the superintendent any information which the applicant or agent possesses, and which if submitted by the applicant or agent would have caused the issuance of a license to be withheld or be grounds for the suspension or revocation of a license. 7. Has failed to account properly for escrow property as required by the terms of the escrow. 8. Refuses to permit an examination or investigation by the superintendent of the applicant's or agent's books and affairs, or has refused or failed within a reasonable time to furnish any information or make any report required by the superintendent under this chapter or rules relating to this chapter. 9. Has been convicted of any criminal offense involving moral turpitude within the last fifteen years. 10. Does not have the financial resources, experience, character or competence to adequately serve the public or to warrant the belief that the business will be operated lawfully, honestly, fairly and efficiently pursuant to this chapter. 11. Has disbursed monies in violation of escrow instructions. 12. Has failed to maintain an adequate internal control structure as prescribed by section 6-841. 13. Has caused or allowed any overdraft or returned check for insufficient funds on any of the escrow agent's trust or fiduciary accounts. 14. Has failed to authorize each financial institution with which it has deposited trust or fiduciary funds to notify the superintendent of any overdraft or check returned for insufficient funds on any trust or fiduciary accounts of the escrow agent. B. It is sufficient cause for refusal, suspension or revocation of a license, in case of a partnership, a corporation or any other group or association, if any member of such persons, or officer or director thereof, has been guilty of any act or omission which would be cause for refusing a license or suspending or revoking the license of an individual agent.

6-840. Prohibitions; definitions

A. An escrow agent shall not accept any escrow in which a participant in the escrow is an affiliate of the escrow agent unless: 1. The affiliation is disclosed to all nonaffiliated participants in writing by the escrow agent. 2. Use of the affiliated escrow agent is not required by the affiliate as a condition of making a loan or entering into any other agreement with the nonaffiliated participants. B. For the purpose of this section: 1. " Controlled escrow business" means the handling of an escrow by an escrow agent where an affiliate of the escrow agent is a participant in the escrow transaction. 2. " Participant" means the buyer, seller, lender, mortgage broker, mortgage banker, real estate broker or real estate salesman or any person who is a party to the escrow transaction.

6-841. Internal control structure; definition

A. An escrow agent shall adopt a systematic internal control structure to ensure that persons employed by or associated with the escrow agent's business do not make significant errors or perpetuate significant irregularities or fraud without timely detection. B. For purposes of this section, " internal control structure" means the policies and procedures established to provide reasonable assurance that the escrow agent will achieve the following objectives: 1. Safeguarding of the customers' assets. 2. Reliability in financial reporting. 3. Reliability in recording of all escrow transactions.

6-841.01. Fiduciary duty; notice of returned check

A. An escrow agent is the trustee of all monies received or collected and held in escrow. An agent shall not knowingly or negligently commingle trust monies with the escrow agent's own monies or with monies held in any other capacity. Every escrow agent and every officer, director and employee of an escrow agent who has actual knowledge of fraud or dishonesty in the application of escrow monies, owes a fiduciary duty as trustee to the owner of the monies held in escrow. B. An escrow agent shall notify the superintendent of any returned check for insufficient funds or overdraft on any of the escrow agent's trust or fiduciary accounts. The superintendent may revoke, suspend or refuse to renew the escrow agent's license for failure to comply with this subsection.

6-841.02. Liability of title insurer; closing protection letter; definition== A. A real property escrow agent that is a title insurance agent shall disclose to the buyer and seller of a residential dwelling that the title insurer shall offer on request a closing protection letter that provides protection for the loss of escrow monies due to fraud or dishonesty of the escrow agent. This disclosure requirement applies only to transactions involving a buyer and seller of a residential dwelling and shall be made when the buyer or seller employs the escrow agent. B. If an escrow agent licensed pursuant to this chapter does not make the disclosure prescribed by this section, the title insurer shall reimburse the buyer or seller, as applicable, for any escrow monies that are lost. The title insurer's obligation pursuant to this subsection shall be as set forth in the title insurer's standard closing protection letter. C. A title insurer may also provide a closing protection letter to any person that is a party to a transaction in which a title insurance policy will be issued. D. Under the terms and conditions of the closing protection letter as issued by the title insurer, a closing protection letter may indemnify a person insured under a title insurance policy against a loss that results from the following actions of a policy-issuing title insurance agent or other settlement service provider who has been approved by the title insurer for such protection: 1. Theft or misappropriation of settlement monies in connection with a transaction in which a title insurance policy will be issued by or on behalf of the title insurer issuing the closing protection letter, but only to the extent that the theft relates to the status of the title to that interest in land or to the validity, enforceability and priority of the lien of the mortgage on that interest in land. 2. As to a buyer or lender, failure to comply with the written closing instructions when agreed to by the settlement agent, title insurance agent or employee of the title insurer, but only to the extent that the failure to follow the instructions relates to the status of the title to that interest in land or to the validity, enforceability and priority of the lien of the mortgage on that interest in land. E. A title insurer must charge a party receiving a closing protection letter a fee. The title insurer earns the fee on the closing of the transaction, and the fee is not subject to any agreement requiring a division of fees or premiums collected on behalf of the title insurer. The fee for each closing protection letter shall not exceed twenty-five dollars for the protection of a party receiving the benefit of closing protection, the buyer, borrower or seller and the lender, in connection with the real property transaction giving rise to the issuance of the closing or settlement protection. F. A title insurer may not provide any other protection that purports to indemnify against improper acts or omissions of a person with regard to settlement or closing services. G. For the purposes of this section, " residential dwelling" means an owner occupied structure or an investment property that is designed for residential use by four or fewer families.

6-841.03. Notice of uninsured monies; rules

When an escrow is established and not later than three business days after an escrow agent receives any escrow monies, the escrow agent shall provide a complete and accurate disclosure to each buyer and seller of a residential dwelling as defined in section 6-841.02 that monies deposited in an escrow account are not insured against loss from fraud or theft by this state or the United States government. The superintendent by rule may prescribe requirements for the disclosure form.

6-843. Disbursements; applicability

A. Except as provided by subsection B, an escrow agent may only disburse money out of an escrow account if deposits are previously made that are at least equal to the disbursements and the deposits relate directly to the transaction for which the money is being disbursed. The deposits shall be in at least one of the following forms: 1. Wire transfers so that the monies are received by the escrow agent or the agent's depository. 2. Except as provided in paragraphs 1, 4 and 5, checks, drafts, negotiable orders of withdrawal, money orders or any other item that has become available for withdrawal in accordance with the federal expedited funds availability act (P.L. 100-86; 101 Stat. 635; 12 United States Code section 4001). 3. Credit transfers through the automated clearing house that are deemed available by the depository institution receiving the credits. The credits must conform to the operating rules set forth by a national automated clearing house association. 4. Cashier's checks, certified checks or teller's checks that have been deposited in the escrow agent's depository account. 5. Checks made by an affiliate of a state or federally regulated depository institution where the check is drawn on the affiliated depository institution so that the monies are deposited in the escrow agent's depository account. B. An escrow agent may disburse up to five hundred dollars per transaction or any funds that are available as cash without complying with subsection A. C. Subsection A does not apply to account servicing.

 

6-846. Making of escrow rates

A. Every escrow agent who is also a title insurer or title insurance agent licensed under title 20 shall make escrow rates that are not excessive or inadequate for the safety and soundness of the escrow agent, that do not unfairly discriminate between risks in this state which involve essentially the same exposure to loss and expense elements and that give due consideration to the following: 1. The desirability for stability of rate structures. 2. The necessity, by encouraging growth in assets of escrow agents in periods of high business activity, of assuring the financial solvency of escrow agents in periods of economic depression. 3. The necessity for paying dividends on the capital stock of escrow agents sufficient to induce capital to be invested in the capital stock. B. Every escrow agent who is required to make escrow rates under subsection A shall adopt basic classifications of escrow services that will be used as the basis for its escrow rates. C. Rates for escrow services and title insurance policies that are issued in connection with escrow services shall not be combined.

6-846.01. Filing of escrow rates

A. Every escrow agent who is required to make escrow rates under section 6-846 shall file with the superintendent his schedules of fees, every manual of classifications, the rules and plans pertaining to the manual and every modification of any of the foregoing. The filing shall state the proposed effective date and shall indicate the character and extent of the contemplated service. B. The superintendent shall review the filings as necessary to carry out the provisions of this article. C. Subject to subsection E of this section, each filing does not become effective until fifteen days after the date of filing. On written notice to the escrow agent making the filing, the superintendent may extend the waiting period for up to an additional fifteen days. The waiting period may be extended further with the consent of the escrow agent making the filing. On written application by the escrow agent making the filing, the superintendent may authorize part or all of a filing to become effective before the expiration of the waiting period or any extension. D. Except in the case of rates filed under subsection E of this section, a filing that has become effective is deemed to meet the requirements of this article. E. If the superintendent finds that a rate for a particular kind or class of escrow service cannot practicably be filed before it is used or a kind of escrow service, by reason of rarity or peculiar circumstances, does not lend itself to advance determination and filing of rates, the superintendent pursuant to rules adopted by the superintendent may permit the rate to be used without a previous filing and waiting period.

6-846.02. Justification for escrow rates

A. An escrow agent shall accompany a rate filing with a statement setting forth the basis on which the rate was fixed and the manner in which the fees are to be computed. A filing may be justified by: 1. The experience or judgment of the escrow agent making the filing. 2. The escrow agent's interpretation of any statistical data on which the agent relied. 3. The experience of other escrow agents. 4. Any other factors that the escrow agent deems relevant. B. The statement and justification shall be open to public inspection after the rate to which the statement and justification apply becomes effective.

6-846.03. Disapproval of escrow filings

A. Before issuing an order of disapproval and not less than twenty days after written notice, the superintendent shall hold a hearing on an escrow rate filing. The notice shall specify in reasonable detail the matters to be considered at the hearing and shall be sent to every escrow agent who made the filing. If after the hearing the superintendent finds that all or part of the filing does not satisfy the provisions of this article, the superintendent shall issue an order that specifies what part of the filing failed and, if the filing has become effective under section 6-846.01, when all or part of the filing will be deemed no longer effective. At any time an escrow agent may withdraw all or part of a filing. The superintendent shall send copies of the order to each escrow agent affected. The order does not affect any escrow that was contracted before the expiration of the period set forth in the order. B. On written application to the superintendent a person or organization other than the escrow agent who made the filing that is aggrieved with respect to any rate filing that is in effect may request a hearing. The application shall specify in reasonable detail the grounds on which the applicant is relying. If within thirty days after receipt of the application the superintendent finds that the application was made in good faith, that the applicant would be aggrieved if his grounds are established and that the grounds justify a hearing, the superintendent, not less than twenty days after written notice to the applicant and every escrow agent who made the filing, shall hold a hearing. If after the hearing the superintendent finds that all or part of the filing does not satisfy the provisions of this article, the superintendent shall issue an order that specifies what part of the filing failed and, if the filing has become effective under section 6-846.01, when all or part of the filing will be deemed no longer effective. The superintendent shall send copies of the order to the applicant and to each escrow agent affected. The order does not affect any escrow that was contracted before the expiration of the period set forth in the order. C. A filing or modification shall not be disapproved if the rates satisfy the requirements of this article.

6-846.04. Deviations in escrow rates; civil penalty

A. An escrow agent may not deviate from his escrow rates that are in effect pursuant to section 6-846.01. B. If the superintendent finds that an escrow rate has been charged that deviates from the escrow rate in effect pursuant to section 6-846.01, the escrow agent may be subject to a penalty that is equal to the difference between the rate charged and the allowable rate in effect pursuant to section 6-846.01. C. If the superintendent finds that an escrow agent knowingly or with such frequency as to indicate a general business practice violated subsection A of this section with respect to a particular provision of the applicable escrow rate, the superintendent, in addition to the penalty imposed under subsection B of this section, may: 1. For each violation, impose an additional penalty of not more than two times the penalty imposed under subsection B of this section. 2. Revoke the escrow agent's license. D. In addition to penalties imposed under subsection B or C of this section, the superintendent may impose civil penalties pursuant to section 6-132 if the superintendent finds that an escrow agent knowingly violated subsection A of this section with respect to a particular provision of the applicable escrow rate by charging rates that are greater than the rates allowable pursuant to section 6-846.01.