Chapter 427 Oregon Laws 2003

AN ACT

SB 207

Relating to escrow agents; creating new provisions; and amending ORS 696.505, 696.511, 696.520, 696.525, 696.527, 696.530, 696.535, 696.541, 696.578, 696.585 and 696.590.

Be It Enacted by the People of the State of Oregon:

SECTION 1. Sections 2 and 3 of this 2003 Act are added to and made a part of ORS 696.505 to 696.590.

SECTION 2. (1) The Real Estate Commissioner may issue or renew a limited escrow agent license if:

(a) An applicant elects not to apply for an escrow agent license; or

(b) An applicant does not qualify for an escrow agent license.

(2) The commissioner may limit a license issued under this section:

(a) By term;

(b) To activities subject to supervision by a specific escrow agent;

(c) By conditions to be observed in the exercise of the privileges granted; or

(d) In other ways determined by the commissioner as necessary or appropriate to protect the public.

(3) A limited licensee shall comply with the requirements of ORS 696.505 to 696.590 and shall:

(a) Restrict the escrow business of the licensee to those escrows specified in the application; or

(b) Limit its escrow business to collection escrows.

SECTION 3. (1) An escrow agent shall keep and maintain at all times in the licensed office of the agent, complete and suitable records of escrow transactions made by the agent and of the business of the agent including, but not limited to, books, papers and data clearly reflecting the financial condition of the business of the agent. The records must be open for inspection by the Real Estate Commissioner or the commissioner’s authorized representatives at all times. An escrow agent shall keep escrow records for a period of six years from the date the escrow closes or is terminated. An escrow agent may maintain the records in any format, as determined by the commissioner by rule, that allows for inspection and copying by the commissioner or the commissioner’s representatives. When an escrow agent acts as a subservicer for another escrow agent, the subservicer shall keep its records in the manner required for an escrow agent under this section.

(2) Notwithstanding the requirement of subsection (1) of this section that an escrow agent maintain escrow records in the agent’s licensed office, an escrow agent shall keep escrow records in the office in which the transaction occurred for one year from the date the escrow closes or is terminated.

(3) Notwithstanding the requirements of subsections (1) and (2) of this section to maintain escrow records in specified locations, an escrow agent may maintain escrow records at another location satisfactory to the commissioner if the escrow agent provides the commissioner with prior written notice of the proposed location.

SECTION 4. ORS 696.505 is amended to read:

696.505. As used in ORS 696.505 to 696.590, unless the context requires otherwise:

(1) “Collection escrow” means an escrow in which the escrow agent:

(a) Receives installment payments, instruments evidencing or securing an obligation or instruments discharging the security interest; and

(b) Disburses the payments or delivers the instruments upon specified conditions pursuant to the written instructions of an obligor and obligee.

[(1)] (2) “Commissioner” means the Real Estate Commissioner.

[(2)] (3) “Escrow” means any transaction wherein any written instrument, money, evidence of title to real or personal property or other thing of value is delivered, for the purpose of paying an obligation or effecting the sale, transfer, encumbrance or lease of real or personal property, to a person[:]

[(a)] not otherwise having any right, title or interest therein [for the purpose of effecting the sale, transfer, encumbrance or lease of real or personal property], to be held by that person as a neutral third party until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by [such person] the neutral third party to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor[,] or any agent or employee of any of them pursuant to the written instructions of the principals to the transaction.[; or]

[(b) For the purpose of effecting the sale of the person’s own real or personal property, to be held by that person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by such person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of them pursuant to the written instructions of the principals to the transaction.]

[(3)] (4) “Escrow agent” means any person who engages in the business of receiving escrows for deposit or delivery and who receives or is promised any fee, commission, salary or other valuable consideration, whether contingent or otherwise, for or in anticipation of performance.

[(4)] (5) “Principal” means:

(a) The buyer and seller, lessor and lessee and the exchanging parties in an escrow transaction involving the sale, lease, lease-option or exchange of real property or personal property; and

(b) The borrower in an escrow transaction involving the refinancing of real or personal property, including but not limited to the refinancing of an obligation secured by a land sale contract requiring a deed to be delivered as part of such refinancing.

[(5)] (6) “Real estate closing escrow” means an escrow where the escrow fee is paid in whole or in part by the principals to a real estate transaction and wherein the unpaid purchase price is delivered to an escrow agent for disbursal pursuant to the written instructions of the principals to the transaction simultaneously on the transfer of specified title to the real property.

(7) “Subservicer” means an escrow agent, a financial institution or a trust company, as those terms are defined in ORS 706.008, or a collection agency registered under ORS 697.015 when providing, pursuant to written instructions, a portion of the escrow services for an escrow to an escrow agent, or a person in the business of receiving escrows under the laws of another state, that would otherwise provide the escrow services directly to the principals.

SECTION 5. ORS 696.511 is amended to read:

696.511. (1) A person [shall] may not directly or indirectly engage in or carry on, or purport to engage in or carry on the business or act in the capacity of an escrow agent without first obtaining a license as an escrow agent under the provisions of ORS 696.505 to 696.590.

(2)(a) Every escrow agent before engaging in the escrow business shall file in the office of the Real Estate Commissioner an application for a license, in writing, verified by the applicant and in the form prescribed by the commissioner. [It shall state] The application must include the location of the agent’s principal office and all branch offices in this state, the name or style of doing business, the names, resident and business addresses of all persons interested in the business as principals, partners, elected officers, trustees and directors, specifying as to each the person’s capacity and title, the general plan and character of business and the length of time the agent has been engaged in business. Notification of changes in the information contained in the application or in the ownership of the business must be immediately filed with the commissioner.

(b) If the applicant is an individual, the applicant must be 18 years of age or older.

(3) For the initial license of an escrow agent, the commissioner may require information and evidence the commissioner considers necessary to demonstrate the applicant’s qualifications to transact escrow business including, but not limited to, information regarding the applicant’s financial resources, the applicant’s escrow business in another state or the experience or training of employees in escrow business, or a testimonial of an escrow agent licensed in this state. Subject to subsection (4) of this section, an applicant:

(a) Who is an individual must demonstrate a minimum of three years of experience in the administration of escrows within Oregon or a state with comparable escrow laws; or

(b) Who is not an individual must demonstrate a minimum collective experience among its personnel of three years in the administration of escrows within Oregon or a state with comparable escrow laws.

(4) The commissioner may waive the three-year experience requirement in subsection (3) of this section for an applicant who demonstrates other qualifications sufficient to ensure the protection of the public.

(5) For the initial license or license renewal of an escrow agent, the commissioner may require additional information the commissioner considers necessary to protect the public including, but not limited to, the fingerprints and criminal offender information of the applicant. For purposes of requiring fingerprints and criminal offender information, “applicant” means a person who has more than five percent ownership interest in the escrow agency and the corporate officers in direct control of escrow operations.

(6) For license renewal, an escrow agent shall provide:

(a) A certification of training, by which the applicant certifies that the applicant provides escrow agency staff within Oregon with an average of six hours or more of training per year per permanent, full-time employee in subjects that bear directly on the administration of escrows; and

(b) A statement identifying by name, address and telephone number one or more individuals who can respond to the inquiries of or referrals by the commissioner or the commissioner’s authorized representative regarding the applicant’s escrow business.

(7) The commissioner, if satisfied that the applicant should not be refused a license under ORS 696.535, shall issue or renew an escrow agent license for an applicant that complies with the requirements of ORS 696.505 to 696.590.

[(3) The commissioner may require additional information the commissioner considers necessary in connection with any application for a license under this section, including but not limited to verified current financial statements of the escrow agent, the escrow agent’s principals, partners, officers, trustees or directors and the fingerprints and the criminal offender information of the applicant. For purposes of requiring fingerprints and criminal offender information, “applicant” means any person having more than five percent ownership interest in the escrow agency and the corporate officers in direct control of escrow operations.]

[(4) The commissioner shall examine the application for a license and, if satisfied that the applicant should not be refused a license under ORS 696.535, the commissioner shall issue the license.]

[(5)] (8) To qualify for issuance or renewal of an escrow [agent’s] agent license [or for renewal of an escrow agent’s license], an applicant [must make full payment of] shall pay any outstanding civil penalties or other moneys due and owing to the Real Estate Agency except civil penalties or other moneys due that are the subject of judicial or administrative review on the date of the application for license or license renewal.

SECTION 6. ORS 696.520 is amended to read:

696.520. The provisions of ORS 696.505 to 696.590 do not apply to and the term “escrow agent” does not include:

(1) Any person doing business under the laws of this state or the United States relating to banks, mutual savings banks, trust companies, savings and loan associations, consumer finance companies, or insurance companies except to the extent that the person provides real estate closing escrow services other than those permitted under subsection (3) of this section.

(2) An attorney at law rendering services in the performance of duties as attorney at law.

(3) Any firm or corporation lending money on real or personal property and which firm or corporation is subject to licensing, supervision or auditing by a federal or state agency but only to the extent of closing a loan transaction between such firm or corporation and a borrower, and seller, if a fee for escrow services is not charged to the seller.

(4) Any person doing any of the acts specified in ORS 696.505 [(2)] (3) under order of any court.

(5) Any real estate broker or principal real estate broker licensed under ORS 696.022 who performs the closing for the principals in a real estate transaction handled by the broker, if the principals are not charged a separate fee for escrow services.

(6) Any collection agency registered under ORS 697.015 that is engaged in any collection or billing activity without holding documents relating to the debt.

SECTION 7. ORS 696.525 is amended to read:

696.525. (1)[(a)] At the time of filing an application for an escrow [agent’s] agent license, the applicant shall deposit with the Real Estate Commissioner a corporate surety bond running to the State of Oregon, executed by a surety company satisfactory to the commissioner, in the amount [as provided in paragraph (b) of this subsection] required by this section.

[(b)] (2) If the total annual receipts of client trust funds, as reported in the required annual report of the escrow agent, are:

[(A)] (a) Less than [$100 million] $30 million, the bond or deposit [shall be $25,000] must be $50,000.

[(B)] (b) [$100 million] $30 million or more, but less than [$300 million] $60 million, the bond or deposit [shall be $50,000] must be $125,000.

[(C)] (c) [$300 million] $60 million or more, but less than [$1 billion] $100 million, the bond or deposit [shall be $75,000] must be $250,000.

(d) $100 million or more, but less than $300 million, the bond or deposit must be $375,000.

[(D)] (e) [$1 billion] $300 million or more, the bond or deposit [shall be $100,000] must be $500,000.

[(c)] (3) The provisions of the corporate surety bond [shall] must be in the form substantially as follows:

______________________________________________________________________________

Know All Persons by These Presents, That we, ____ as principal, and ____, a corporation, qualified and authorized to do business in the State of Oregon as surety, are held and firmly bound unto the State of Oregon for the use and benefit of any interested person, in the sum of $____, lawful money of the United States of America, to be paid to the State of Oregon for the use and benefit aforesaid, for which payment well and truly to be made, we bind ourselves, our heirs, executors, administrators, successors, and assigns, jointly and severally, firmly by these presents.

The condition of the above obligation is such that: Whereas the above-named principal has made application for registration as an escrow agent within the meaning of ORS 696.505 to 696.590 and is required by the provisions of ORS 696.505 to 696.590 to furnish a bond in the sum above named, conditioned as herein set forth:

Now, therefore, if the principal, the principal’s agents and employees, shall strictly, honestly and faithfully comply with the provisions of ORS 696.505 to 696.590, and shall pay all actual damages suffered by any person by reason of the violation of any of the provisions of ORS 696.505 to 696.590, now or hereafter enacted, or by reason of any fraud, dishonesty, misrepresentation or concealment of material facts growing out of any transaction governed by the provisions of ORS 696.505 to 696.590, then this obligation shall be void; otherwise to remain in full force and effect.

This bond shall become effective on the __ day of ____, 2_, and shall remain in force until the surety is released from liability by the commissioner, or until this bond is canceled by the surety. The surety may cancel this bond and be relieved of further liability hereunder by giving 30 days’ written notice to the principal and to the commissioner.

This bond shall be one continuing obligation, and the liability of the surety for the aggregate of any and all claims which may arise hereunder shall in no event exceed the amount of the penalty hereof.

In witness whereof, the seal and signature of the principal hereto is affixed, and the corporate seal and the name of the surety hereto is affixed and attested by its duly authorized officers at _______, Oregon, this __ day of ______, 2__.

_________________(Seal)

Principal

_________________ (Seal)

Surety

By _________________

______________________________________________________________________________

[(2) The surety bond required in subsection (1) of this section, or deposit required in ORS 696.527, shall entitle the escrow agent, when properly licensed, to operate from one business location. The escrow agent, when registering a branch office, shall provide evidence that the liability amount of the required surety bond or the amount of deposit, or combination thereof, has been increased in a sum equal to $10,000 for each additional business location.]

SECTION 8. ORS 696.527 is amended to read:

696.527. (1) Any escrow agent may satisfy the requirements of ORS 696.525 by depositing with the State Treasurer, in an amount equal to the surety bond required, a deposit consisting only of the following:

(a) Cash;

(b) Ample secured obligations of the United States, a state or a political subdivision thereof;

(c) Certificates of deposit or other investments described in ORS 733.650 (4), to the extent that such investments are insured by the Federal Deposit Insurance Corporation; or

(d) Any combination of paragraphs (a), (b) or (c) of this subsection.

(2) The [deposit shall be accepted and held by the] State Treasurer shall accept and hold the deposit for the faithful performance of escrow activity by the escrow agent. No claimant or judgment creditor or the escrow agent shall have the right to attach or levy upon any of the assets or securities held on deposit.

(3) The Real Estate Commissioner, by order, [shall have discretion to] may authorize the State Treasurer to use such deposit, as follows:

(a) To satisfy any final judgment entered against the escrow agent for actual damages suffered by any person by reason of the violation of any of the provisions of ORS 696.505 to 696.590, now or hereafter enacted, or by reason of any fraud, dishonesty, misrepresentation or concealment of material fact growing out of any escrow transaction;

(b) For use in the liquidation of the escrow agent under the provisions of ORS 696.555; or

(c) To release any or all of such deposit to the escrow agent when, in the opinion of the commissioner, such deposit is no longer necessary to protect the public. [; or]

[(d) Pursuant to ORS 183.413 to 183.497 the commissioner may determine that a violation of ORS 696.505 to 696.590 has been committed and direct the payment of a claim from the bond required under ORS 696.525 or substitute therefor required under this section provided the following conditions have been met:]

[(A) The amount of actual damages claimed, excluding attorney fees, by the consumer is $1,500 or less.]

[(B) The consumer has first contacted the escrow agent involved and, in writing, has made demand for payment of actual damages.]

[(C) The escrow agent has had 30 calendar days from the date of the consumer’s written demand to deal with the demand.]

[(D) The claim is only for actual damages sustained by the consumer.]

(4) The commissioner [shall] may waive the requirement of the surety bond or deposit for any escrow agent [who] that:

(a) Demonstrates to the commissioner’s satisfaction that the capital and surplus or net worth, of such escrow agent as of the end of the previous business accounting year of the agent is equal to, or greater than, the average month-end balance of custodial funds held by such agent during the previous business accounting year;

(b) Provides a certified, annually renewable letter of credit executed by a financial institution and satisfactory to the commissioner in the amount of the surety bond required by ORS 696.525; or

(c) Provides a certified, personal guarantee executed by one or more owners of the escrow agency and satisfactory to the commissioner in the amount of the surety bond required by ORS 696.525.

(5) All other claims against the bond or deposit of an escrow agent must be paid by the commissioner only upon the receipt of a final court judgment against the escrow agent and only in the amount of actual damages as ordered by the court.

SECTION 9. ORS 696.530 is amended to read:

696.530. (1) The [escrow agent’s] license [shall expire] of an escrow agent expires June 30 next after the date of issuance if it is not renewed by July 1 of such year. A license may be renewed by filing a renewal application in writing, verified by the applicant and in the form prescribed by the Real Estate Commissioner and paying the annual license fee for the next succeeding fiscal year.

(2) The filing fees shall be:

(a) For filing an original or a renewal application, $300 for the principal office and $150 for each branch office.

(b) For filing an application for a duplicate copy of any license, upon satisfactory showing of such loss, the sum of $20.

(c) For each name change of an escrow agent or change of address of a principal or branch office in the records of the agency, $10.

SECTION 10. ORS 696.535 is amended to read:

696.535. (1) The Real Estate Commissioner may refuse to [license any escrow agent, or may] issue or may suspend or revoke any license[,] by entering an order to that effect[,] with the commissioner’s findings in respect thereto[,] if, upon examination into the affairs of the applicant or licensee[, either] in the performance of routine duties, [or] upon field examination[,] or upon hearing, [it is determined] the commissioner determines that the applicant or licensee:

(a) Has, under generally accepted accounting principles, a deficit net worth;

(b) Has demonstrated unworthiness to transact the business of an escrow agent;

(d) Has committed fraud in connection with any transaction governed by ORS 696.505 to 696.590;

(e) Has made any misrepresentations or false statement of an essential or material fact to, or concealed any essential or material fact from, any person in the course of the escrow business;

(f) Has knowingly made or caused to be made to the commissioner any false representation of a material fact, or has suppressed or withheld from the commissioner any information [which] the applicant or licensee possesses[, and which] that, if submitted, would have disqualified the applicant or licensee from original or renewed licensing under ORS 696.505 to 696.590;

(g) Has failed to account to the principals or persons entitled thereto in a real estate transaction for the moneys, documents or other things of value received in the transaction;

(h) Has not delivered, after a reasonable time, to persons entitled thereto, moneys, documents or other things of value held or agreed to be delivered by the licensee, as and when paid for and due to be delivered;

(i) Has caused uncompensated material loss to principals by engaging in a pattern of failures to act with neutrality between principals in multiple escrows;

[(i)] (j) Has refused to permit an examination by the commissioner of the escrow agent’s books and affairs, or has refused or failed, within a reasonable time, to furnish any information, records or files or make any report that may be required by the commissioner under the provisions of ORS 696.505 to 696.590; or

[(j)] (k) Has been convicted of a felony or any misdemeanor that is substantially related to the escrow agent’s competency or trustworthiness to engage in the business of an escrow agent.

(2) It is sufficient cause for refusal or revocation of a license in case of a partnership or corporation or any unincorporated association, if any member of a partnership or any officer or director of the corporation or association has been guilty of any act or omission which would be cause for refusing or revoking the registration of an individual agent.

[(3) All escrow agents shall keep and maintain at all times in their licensed offices, complete and suitable records of all escrow transactions made by them and of their business, including but not limited to books, papers and data clearly reflecting the financial condition of the business of such agents. Such records shall at all times be open for inspection by the commissioner or the commissioner’s authorized representatives. Escrow records shall be kept for a period of six years from the date of the escrow transaction. The records may be maintained in any format, as determined by the commissioner by rule, that allows for inspection and copying by the commissioner or the commissioner’s representatives. When an escrow agent acts as a subservicer for another escrow agent, with respect to subserviced escrow transactions the subservicer shall keep the records required to be kept by the escrow agent under this section.]

[(4) Notwithstanding the provisions of subsection (3) of this section, an escrow agent may store such records at a place in this state other than the licensed office of the escrow agent if the escrow agent provides prior written notice to the Real Estate Commissioner of the location and means of access to the records.]

SECTION 11. ORS 696.541 is amended to read:

696.541. (1) The Real Estate Commissioner shall have general supervision and control over all escrow agents doing business in this state. Subject to ORS 183.310 to 183.550, the commissioner may adopt such rules as reasonably necessary for the administration and enforcement of ORS 696.505 to 696.590.

(2) All [such] escrow agents [shall be] are subject to audits or examinations by the commissioner, or the commissioner’s authorized representatives at any time the commissioner considers advisable. The commissioner may collect from each escrow agent the reasonable expenses of such audit or examination including but not limited to any administrative expense for travel.

(3) The provisions of this section and of any other section relating to the examination of the affairs of an escrow agent shall extend to an escrow agent whose license has expired or been revoked or suspended, if in the judgment of the commissioner, such agent has violated any provisions of ORS 696.505 to 696.590.

SECTION 12. ORS 696.578 is amended to read:

696.578. (1) All money deposited in escrow to be delivered upon the close of the escrow or upon any other contingency shall be deposited and maintained in a bank authorized to do business within this state and kept separate, distinct and apart from funds belonging to the escrow agent. Such funds, when deposited, are to be designated as trust funds, escrow accounts, or under some other appropriate name indicating that the funds are not the funds of the escrow agent.

(2) Trust funds received by an escrow agent may be placed by the agent in a federally insured interest-bearing bank account, designated a clients’ trust account, but only with the prior written approval of all parties having an interest in the trust funds. The earnings of such interest-bearing account may inure to the benefit of the escrow agent if expressly approved in writing before deposit of the trust funds by all parties having an interest in the trust funds.

(3) Any bank services, as defined by rule by the Real Estate Commissioner, provided to the escrow agent shall not be considered to affect the impartiality or neutrality of the escrow agent. Such services are permitted with approval in the written closing instructions of the principals.

(4) Clients’ trust funds may be invested in secured obligations of the United States, if:

(a) The depositing principal gives prior written approval to the escrow agent for such investment after receiving written disclosure as may be required by rule adopted by the commissioner;

(b) The depositing principal releases the escrow agent from any liability for loss of such funds;

(c) The depositing principal agrees that any loss of funds shall not be a claim against the bond, [or] deposit, letter of credit or personal guarantee of the agent under ORS 696.525 and 696.527; and

(d) The escrow agent does not have any interest in the investment or earnings from the investment.

(5) If the funds to be invested represent earnest money in a transaction, both principals in the transaction must give prior written approval for the investment and are both considered depositing principals.

SECTION 13. ORS 696.585 is amended to read:

696.585. (1) Any person who violates any provision of ORS 696.505 to 696.545, or any lawful rule or final order of the Real Estate Commissioner or any final judgment or decree made by any court upon application of the commissioner, may be required to forfeit and pay to the General Fund of the State Treasury, a civil penalty in an amount determined by the commissioner of not more than [$1,000] $3,000 for each offense. Each violation shall be deemed a separate offense.

(2) In addition to the civil penalty set forth in subsection (1) of this section, any person who violates any provision of ORS 696.505 to 696.590, any lawful rule or final order of the commissioner or any final judgment or decree made by a court upon application to the commissioner, may be required to forfeit and pay to the General Fund of the State Treasury, a civil penalty in an amount determined by the commissioner but not to exceed the amount by which such person profited in any transaction which violates any such provision, rule, order, judgment or decree.

(3) Civil penalties under this section [shall be] are imposed as provided in ORS 183.090.

(4) The provisions of this section are in addition to and not in lieu of any other enforcement provision contained in ORS 696.505 to 696.590.

SECTION 14. ORS 696.590 is amended to read:

696.590. (1) Any person who violates ORS 696.511 (1) may be required by the Real Estate Commissioner to forfeit and pay to the General Fund of the State Treasury a civil penalty in an amount determined by the commissioner of:

(a) Not less than [$100] $500 nor more than [$500] $1,000 for the first offense of unlicensed professional escrow activity; and

(b) Not less than [$500] $1,000 nor more than [$1,000] $3,000for the second and subsequent offenses of unlicensed professional escrow activity.

(2) In addition to the civil penalty set forth in subsection (1) of this section, any person who violates ORS 696.511 may be required by the commissioner to forfeit and pay to the General Fund of the State Treasury a civil penalty in an amount determined by the commissioner but not to exceed the amount by which such person profited in any transaction which violates ORS 696.511.

(3) Civil penalties under this section [shall] must be imposed in the manner provided in ORS 183.090.

(4) The civil penalty provisions of subsections (1) and (2) of this section are in addition to and not in lieu of the criminal penalties for unlicensed professional escrow activity in ORS 696.990 (1) and (2).

Approved by the Governor June 23, 2003

Filed in the office of Secretary of State June 23, 2003

Effective date January 1, 2004

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