Escrow Examination FAQs
Answers to common questions about examinations conducted by DFI.
Must I disclose all fees I will charge to principal parties in an escrow transaction in the Escrow Instructions given to the principal parties?
Yes, WAC 208-640D-040(2) requires you to disclose in writing all fees you will charge the principal parties for services provided. The disclosure must specifically identify the fees using the same terminology as that provided on the closing statement (for example HUD1 or HUD1A), 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 means any item payable directly to the escrow agent whether realized by the escrow agent as profit, potential for profit, or the offset of justifiable costs.
When you do not know the cost of a third-party service with certainty at the time of closing, you may:
- Provide an estimate of the justifiable cost of the third-party service on the preliminary closing statement, disclose the actual justifiable cost of the third-party service on the final disclosure statement, and refund any amounts collected in excess of the actual justifiable cost of the third-party service to the principal parties to the transaction; or
- Assume responsibility for performing the service and charge the principal parties to the transaction 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 to the transaction 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 208-680E-011(12)(a).
Cashier’s checks are payable on demand, so may I disburse funds the same day that a cashier’s check is received?
No. Because the Act does not specifically state that cashier’s checks are “good funds” on the day received, you must wait until the next day to disburse the funds pursuant to RCW 18.44.400(3):
An escrow agent, unless exempt under RCW 18.44.021(2), must not make disbursements on any escrow account without first receiving deposits directly relating to the account in amounts at least equal to the disbursements. An escrow agent must not make disbursements until the next business day after the business day on which the funds are deposited unless the deposit is made in cash, by interbank electronic transfer, or in a form that permits the conversion of the deposit to cash on the same day the deposit is made. The deposits must be in one of the following forms:
- Interbank electronic transfers such that the funds are unconditionally received by the escrow agent or the agent's depository;
- Checks, negotiable orders of withdrawal, money orders, cashier's checks, and certified checks that are payable in Washington state and drawn on financial institutions located in Washington state;
- Checks, negotiable orders of withdrawal, money orders, and any other item that has been finally paid as described in RCW 62A.4-213 before any disbursement; or
- Any depository check, including any cashier's check, certified check, or teller's check, which is governed by the provisions of the federal expedited funds availability act, 12 U.S.C. Sec. 4001 et seq.
What kind of supporting documentation is needed for remote deposit capture?
The Act requires that you either retain validated third-party confirmation of the deposit (bank validated deposit slip), or the DEO must sign the deposit slip attesting to its accuracy. Typically with remote deposit capture, the only record detail of the deposit is your internal deposit record, which lists the deposit amount and the escrow number (actual checks or copies of checks deposited are also attached). The Designated Escrow Officer must sign this internal report on a daily basis attesting to the deposit’s accuracy.
When is a check considered stale under the Unclaimed Property Act and may I deduct fees for reissuing checks to the owner (customer) or for remitting funds as unclaimed property to the Department of Revenue?
Pursuant to RCW 63.20.050, checks are not considered stale until after three years of issuance and only if the owner (customer) has not made contact with the bank or escrow company regarding the check. Pursuant to the Department of Revenue, Unclaimed Property section, a holder may remit checks early under certain circumstances but must obtain an early reporting form. For early reporting, the check must be at least six months old and the holder must have made efforts to contact the owner (customer). Contact the Department of Revenue, Unclaimed Property Section, for further information.
If your trust account checks denote a “Void after 90 Days” clause, be mindful of the expeditious performance of the requirements of the Act. The DEO must work to clear outstanding checks by contacting the payees and reissuing checks or remit the funds to the Department of Revenue as unclaimed property.
You may not deduct a fee or charge for reissuing a check to the owner (customer) or for submitting a check as unclaimed property.
Can I contract with a real estate firm to offer a discounted closing fee to customers if I close the transaction?
Yes, if the discount goes directly to the customer and the real estate agent or real estate firm receives nothing in value from you. If you enter into this type of an agreement with the real estate firm, the customer should be provided a written disclosure stating that they will receive the discount if they use you to close the transaction, but that they still have the option of closing the transaction at a settlement agent of their choice.