Escrow Agent Alert 98-1
TO: All Escrow Agents and Escrow Officers
FROM: Mark Thomson, Director of Division of Consumer Services
DATE: October 28, 1998
SUBJECT: Market Conditions and the Good Funds Requirements of the Escrow Agent Registration Act.
Over the course of October, the Department has received notice from two lenders that they have filed for protection under chapter 11 of the United States Bankruptcy Code. We have been tracking the situations of several others.
Contracting liquidity in the capital markets in general and the secondary mortgage market in particular, place at risk mortgage lenders that rely on short-term warehouse facilities, securitization, and whole loan sales to meet funding needs.
While liquidity concerns in capital markets appear to be easing somewhat, the Department believes it is still vitally important for Escrow Agents to remain vigilant in monitoring compliance with the Good Funds provisions of the Escrow Agent Registration Act, Chapter 18.44 RCW.
It is extremely important Escrow Agents are in complete compliance with the following section of RCW 18.44.070:
"An escrow agent, unless exempted by RCW 18.44.020(2), shall 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 shall 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 conversion of the deposit to cash on the same day the deposit is made. The deposits shall 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; or
- 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.
The word "item" means any instrument for the payment of money even though it is not negotiable, but does not include money.
Violation of this section shall subject an escrow agent to penalties as prescribed in Title 9A RCW and remedies as provided in chapter 19.86 RCW and shall constitute grounds for suspension or revocation of the registration or license of any certified escrow agent."
The above cited provision of law is designed to protect consumers and your companies in times such as these. Compliance will be monitored in the Department’s audit process.