Bill Text: IL SB2738 | 2015-2016 | 99th General Assembly | Introduced
Bill Title: Amends the Title Insurance Act. Makes changes in the definition of "insured closing letter" or "closing protection letter". Provides that a closing protection letter shall not be issued by any person or entity (including an independent escrowee) other than a title insurance company. Effective immediately.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2016-04-22 - Rule 3-9(a) / Re-referred to Assignments [SB2738 Detail]
Download: Illinois-2015-SB2738-Introduced.html
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1 | AN ACT concerning regulation.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Title Insurance Act is amended by changing | |||||||||||||||||||||||
5 | Sections 3 and 16 and adding Section 17 as follows:
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6 | (215 ILCS 155/3) (from Ch. 73, par. 1403)
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7 | Sec. 3. As used in this Act, the words and phrases | |||||||||||||||||||||||
8 | following shall
have the following meanings unless the context | |||||||||||||||||||||||
9 | requires otherwise:
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10 | (1) "Title insurance business" or "business of title | |||||||||||||||||||||||
11 | insurance" means:
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12 | (A) Issuing as insurer or offering to issue as insurer | |||||||||||||||||||||||
13 | title insurance;
and
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14 | (B) Transacting or proposing to transact one or more of | |||||||||||||||||||||||
15 | the following
activities when
conducted or performed in | |||||||||||||||||||||||
16 | contemplation of or in conjunction with the issuance
of | |||||||||||||||||||||||
17 | title insurance;
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18 | (i) soliciting or negotiating the issuance of | |||||||||||||||||||||||
19 | title insurance;
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20 | (ii) guaranteeing, warranting, or otherwise | |||||||||||||||||||||||
21 | insuring the correctness of
title
searches for all | |||||||||||||||||||||||
22 | instruments affecting titles to real property, any | |||||||||||||||||||||||
23 | interest in
real property, cooperative units and |
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1 | proprietary leases, and for all liens or
charges | ||||||
2 | affecting the same;
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3 | (iii) handling of escrows, settlements, or | ||||||
4 | closings;
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5 | (iv) executing title insurance policies;
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6 | (v) effecting contracts of reinsurance;
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7 | (vi) abstracting, searching, or examining titles; | ||||||
8 | or
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9 | (vii) issuing insured closing letters or closing | ||||||
10 | protection letters;
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11 | (C) Guaranteeing, warranting, or insuring searches or | ||||||
12 | examinations of
title to real property or any interest in | ||||||
13 | real property, with the exception of
preparing an | ||||||
14 | attorney's opinion of title; or
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15 | (D) Guaranteeing or warranting the status of title as | ||||||
16 | to ownership of or
liens on real property and personal | ||||||
17 | property by any person other than the
principals to the | ||||||
18 | transaction; or
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19 | (E) Doing or proposing to do any business substantially | ||||||
20 | equivalent to any
of the activities listed in this | ||||||
21 | subsection,
provided that the preparation of an attorney's | ||||||
22 | opinion
of title pursuant to paragraph (1)(C) is not | ||||||
23 | intended to be within the
definition of "title insurance | ||||||
24 | business" or "business of title insurance".
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25 | (1.5) "Title insurance" means insuring, guaranteeing, | ||||||
26 | warranting, or
indemnifying owners of real or personal property |
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1 | or the holders of liens or
encumbrances thereon or others | ||||||
2 | interested therein against loss or damage
suffered by reason of | ||||||
3 | liens, encumbrances upon, defects in, or the
unmarketability of | ||||||
4 | the title to the property; the invalidity or
unenforceability | ||||||
5 | of any liens or encumbrances thereon; or doing any business in
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6 | substance equivalent to any of the foregoing.
"Warranting" for | ||||||
7 | purpose of this provision shall not
include any warranty | ||||||
8 | contained in instruments of encumbrance or conveyance.
Title | ||||||
9 | insurance is a single line form of insurance, also known as | ||||||
10 | monoline. An attorney's opinion of title pursuant to paragraph | ||||||
11 | (1)(C) is not intended to
be within the definition of "title | ||||||
12 | insurance".
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13 | (2) "Title insurance company" means any domestic company | ||||||
14 | organized under
the laws of this State for the purpose of | ||||||
15 | conducting the business of
title insurance and any title | ||||||
16 | insurance
company organized under the laws of another State, | ||||||
17 | the District of Columbia
or foreign government and authorized | ||||||
18 | to transact the business of
title insurance in this State.
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19 | (3) "Title insurance agent" means a person, firm, | ||||||
20 | partnership,
association, corporation or other legal entity | ||||||
21 | registered by a title
insurance company and authorized by such | ||||||
22 | company to determine insurability
of title in accordance with | ||||||
23 | generally acceptable underwriting rules and
standards in | ||||||
24 | reliance on either the public records or a search package
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25 | prepared from a title plant, or both, and authorized by such | ||||||
26 | title insurance company in addition to do any
of the following: |
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1 | act as an escrow agent pursuant to subsections (f), (g), and | ||||||
2 | (h) of Section 16 of this Act, solicit title insurance, collect
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3 | premiums, or issue title insurance commitments,
policies, and | ||||||
4 | endorsements of the title insurance company; provided, | ||||||
5 | however, the term "title insurance agent"
shall not include | ||||||
6 | officers and salaried employees of any title insurance
company.
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7 | (4) "Producer of title business" is any person, firm, | ||||||
8 | partnership,
association, corporation or other legal entity | ||||||
9 | engaged in this State in the
trade, business, occupation or | ||||||
10 | profession of (i) buying or selling
interests in real property, | ||||||
11 | (ii) making loans secured by interests in real
property, or | ||||||
12 | (iii) acting as broker, agent, attorney, or representative of
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13 | natural persons or other legal entities that buy or sell | ||||||
14 | interests in real
property or that lend money with such | ||||||
15 | interests as security.
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16 | (5) "Associate" is any firm, association, partnership, | ||||||
17 | corporation or
other legal entity organized for profit in which | ||||||
18 | a producer of title
business is a director, officer, or partner | ||||||
19 | thereof, or owner of a
financial interest, as defined herein, | ||||||
20 | in such entity; any legal entity
that controls, is controlled | ||||||
21 | by, or is under common control with a producer
of title | ||||||
22 | business; and any natural person or legal entity with whom a
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23 | producer of title business has any agreement, arrangement, or | ||||||
24 | understanding
or pursues any course of conduct the purpose of | ||||||
25 | which is to evade the
provisions of this Act.
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26 | (6) "Financial interest" is any ownership interest, legal |
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1 | or beneficial,
except ownership of publicly traded stock.
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2 | (7) "Refer" means to place or cause to be placed, or to | ||||||
3 | exercise any
power or influence over the placing of title | ||||||
4 | business, whether or not the
consent or approval of any other | ||||||
5 | person is sought or obtained with respect
to the referral.
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6 | (8) "Escrow Agent" means any title insurance company or any | ||||||
7 | title
insurance agent, including independent contractors of | ||||||
8 | either, acting on behalf of a title insurance company, which
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9 | receives deposits, in trust, of funds or documents, or both, | ||||||
10 | for the purpose
of effecting the sale, transfer, encumbrance or | ||||||
11 | lease of real property to
be held by such escrow agent until | ||||||
12 | title to the real property that is the
subject of the escrow is | ||||||
13 | in a prescribed condition. An escrow agent conducting closings | ||||||
14 | shall be subject to the provisions of paragraphs (1) through | ||||||
15 | (4) of subsection (e) of Section 16 of this Act.
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16 | (9) "Independent Escrowee" means any firm, person, | ||||||
17 | partnership,
association, corporation or other
legal entity, | ||||||
18 | other than a title insurance company or a title insurance
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19 | agent, which receives deposits, in trust, of funds or | ||||||
20 | documents, or both, for
the purpose of effecting the sale, | ||||||
21 | transfer, encumbrance or lease of real
property to be held by | ||||||
22 | such escrowee until title to the real property that
is the | ||||||
23 | subject of the escrow is in a prescribed condition. Federal and
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24 | State chartered banks, savings and loan associations, credit | ||||||
25 | unions,
mortgage bankers, banks or trust companies authorized | ||||||
26 | to do business under
the Illinois Corporate Fiduciary Act, |
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1 | licensees under the Consumer
Installment Loan Act, real estate | ||||||
2 | brokers licensed pursuant to the Real
Estate License Act of | ||||||
3 | 2000, as such Acts are now or hereafter amended, and
licensed | ||||||
4 | attorneys when engaged in the attorney-client relationship are
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5 | exempt from the escrow provisions of this Act. "Independent | ||||||
6 | Escrowee" does not include employees or independent | ||||||
7 | contractors of a title insurance company or title insurance | ||||||
8 | agent authorized by a title insurance company to perform | ||||||
9 | closing, escrow, or settlement services.
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10 | (10) "Single risk" means the insured amount of any title | ||||||
11 | insurance
policy, except that where 2 or more title insurance | ||||||
12 | policies are issued
simultaneously covering different estates | ||||||
13 | in the same real property, "single
risk" means the sum of the | ||||||
14 | insured amounts of all such title insurance
policies. Any title | ||||||
15 | insurance policy insuring a mortgage interest, a claim
payment | ||||||
16 | under which reduces the insured amount of a fee or leasehold | ||||||
17 | title
insurance policy, shall be excluded in computing the | ||||||
18 | amount of a single
risk to the extent that the insured amount | ||||||
19 | of the mortgage title insurance
policy does not exceed the | ||||||
20 | insured amount of the fee or leasehold title
insurance policy.
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21 | (11) "Department" means the Department of Financial and | ||||||
22 | Professional Regulation.
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23 | (12) "Secretary" means the Secretary
of Financial and | ||||||
24 | Professional Regulation.
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25 | (13) "Insured closing letter" or "closing protection | ||||||
26 | letter" means
an indemnification or undertaking to a party to a |
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1 | real property transaction, from
a principal such as a title | ||||||
2 | insurance company, setting forth
in writing the extent of the | ||||||
3 | title insurance company's principal's responsibility for | ||||||
4 | intentional
misconduct or errors in closing the real property | ||||||
5 | transaction on the part of a
settlement agent, such as a title | ||||||
6 | insurance agent or other settlement service
provider, and | ||||||
7 | includes protection afforded pursuant to subsections (f), (g), | ||||||
8 | and (h) of Section 16 and Section 16.1 of this Act even if such | ||||||
9 | protection is afforded by contract.
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10 | (14) "Residential real property" means a building or | ||||||
11 | buildings consisting of one to 4 residential units or a | ||||||
12 | residential condominium unit where at least one of the | ||||||
13 | residential units or condominium units is occupied or intended | ||||||
14 | to be occupied as a residence by the purchaser or borrower, or | ||||||
15 | in the event that the purchaser or borrower is the trustee of a | ||||||
16 | trust, by a beneficiary of that trust.
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17 | (15) "Financial institution" means any bank subject to the | ||||||
18 | Illinois Banking Act, any savings and loan association subject | ||||||
19 | to the Illinois Savings and Loan Act of 1985, any savings bank | ||||||
20 | subject to the Savings Bank Act, any credit union subject to | ||||||
21 | the Illinois Credit Union Act, and any federally chartered | ||||||
22 | commercial bank, savings and loan association, savings bank, or | ||||||
23 | credit union organized and operated in this State pursuant to | ||||||
24 | the laws of the United States. | ||||||
25 | (Source: P.A. 98-387, eff. 8-16-13.)
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1 | (215 ILCS 155/16) (from Ch. 73, par. 1416)
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2 | Sec. 16. Title insurance agents.
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3 | (a) No person, firm, partnership, association, corporation | ||||||
4 | or other
legal entity shall act as or hold itself out to be a | ||||||
5 | title insurance agent
unless duly registered by a title | ||||||
6 | insurance company with the Secretary.
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7 | (b) Each application for registration shall be made on a | ||||||
8 | form specified
by the Secretary and prepared by each title | ||||||
9 | insurance company
which the agent represents. The title | ||||||
10 | insurance company shall retain the
copy of the application and | ||||||
11 | forward a copy to the Secretary.
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12 | (c) Every applicant for registration, except a firm, | ||||||
13 | partnership,
association, limited liability company, or | ||||||
14 | corporation, must be 18 years or more of age. Included in every | ||||||
15 | application for registration of a title insurance agent, | ||||||
16 | including a firm, partnership,
association, limited liability | ||||||
17 | company, or corporation, shall be an affidavit of the applicant | ||||||
18 | title insurance agent, signed and notarized in front
of a | ||||||
19 | notary public, affirming that the applicant and every owner, | ||||||
20 | officer, director, principal, member, or
manager of the | ||||||
21 | applicant has never been convicted or pled guilty to any felony | ||||||
22 | or misdemeanor involving a crime of
theft or dishonesty or | ||||||
23 | otherwise accurately disclosing any such felony or misdemeanor | ||||||
24 | involving a crime of
theft or dishonesty. No person who has had | ||||||
25 | a conviction or pled guilty to any felony or
misdemeanor | ||||||
26 | involving theft or dishonesty may be registered by a title |
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1 | insurance company without a written notification to the | ||||||
2 | Secretary disclosing the conviction or plea, and no such
person | ||||||
3 | may serve as an owner, officer, director, principal, or manager | ||||||
4 | of any registered title insurance
agent without the written | ||||||
5 | permission of the Secretary.
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6 | (d) Registration shall be made annually by a filing with | ||||||
7 | the Secretary;
supplemental registrations for new title | ||||||
8 | insurance agents to be added
between annual filings shall be | ||||||
9 | made from time to time in the manner
provided by the Secretary; | ||||||
10 | registrations shall remain in effect unless
revoked or | ||||||
11 | suspended by the Secretary or
voluntarily withdrawn by the
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12 | registrant or the title insurance company.
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13 | (e) Funds deposited in connection with any escrows, | ||||||
14 | settlements, or closings shall be deposited in a separate | ||||||
15 | fiduciary trust account or accounts in a bank or other | ||||||
16 | financial institution insured by an agency of the federal | ||||||
17 | government unless the instructions provide otherwise. The | ||||||
18 | funds shall be the property of the person or persons entitled | ||||||
19 | thereto under the provisions of the escrow, settlement, or | ||||||
20 | closing and shall be segregated by escrow, settlement, or | ||||||
21 | closing in the records of the escrow agent. The funds shall not | ||||||
22 | be subject to any debts of the escrowee and shall be used only | ||||||
23 | in accordance with the terms of the individual escrow, | ||||||
24 | settlement, or closing under which the funds were accepted. | ||||||
25 | Interest received on funds deposited with the escrow agent | ||||||
26 | in connection with any escrow, settlement, or closing shall be |
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1 | paid to the depositing party unless the instructions provide | ||||||
2 | otherwise. | ||||||
3 | The escrow agent shall maintain separate records of all | ||||||
4 | receipts and disbursements of escrow, settlement, or closing | ||||||
5 | funds. | ||||||
6 | The escrow agent shall comply with any rules adopted by the | ||||||
7 | Secretary pertaining to escrow, settlement, or closing | ||||||
8 | transactions. | ||||||
9 | (f) A title insurance agent shall not act as an escrow | ||||||
10 | agent in a nonresidential real property transaction where the | ||||||
11 | amount of settlement funds on deposit with the escrow agent is | ||||||
12 | less than $2,000,000 or in a residential real property | ||||||
13 | transaction unless the title insurance agent, title insurance | ||||||
14 | company, or another authorized title insurance agent has | ||||||
15 | committed for the issuance of title insurance in that | ||||||
16 | transaction and the title insurance agent is authorized to act | ||||||
17 | as an escrow agent on behalf of the title insurance company for | ||||||
18 | which the commitment for title insurance has been issued. The | ||||||
19 | authorization under the preceding sentence shall be given | ||||||
20 | either (1) by an agency contract with the title insurance | ||||||
21 | company which contract, in compliance with the requirements set | ||||||
22 | forth in subsection (g) of this Section, authorizes the title | ||||||
23 | insurance agent to act as an escrow agent on behalf of the | ||||||
24 | title insurance company or (2) by a closing protection letter | ||||||
25 | in compliance with the requirements set forth in Section 16.1 | ||||||
26 | of this Act, issued by the title insurance company to the |
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1 | seller, buyer, borrower, and lender. A closing protection | ||||||
2 | letter shall not be issued by a title insurance agent , an | ||||||
3 | independent escrowee, or any other person or entity other than | ||||||
4 | a title insurance company . The provisions of this subsection | ||||||
5 | (f) shall not apply to the authority of a title insurance agent | ||||||
6 | to act as an escrow agent under subsection (g) of Section 17 of | ||||||
7 | this Act. | ||||||
8 | (g) If an agency contract between the title insurance | ||||||
9 | company and the title insurance agent is the source of the | ||||||
10 | authority under subsection (f) of this Section for a title | ||||||
11 | insurance agent to act as escrow agent for a real property | ||||||
12 | transaction, then the agency contract shall provide for no less | ||||||
13 | protection from the title insurance company to all parties to | ||||||
14 | the real property transaction than the title insurance company | ||||||
15 | would have provided to those parties had the title insurance | ||||||
16 | company issued a closing protection letter in conformity with | ||||||
17 | Section 16.1 of this Act. | ||||||
18 | (h) A title insurance company shall be liable for the acts | ||||||
19 | or omissions of its title insurance agent as an escrow agent if | ||||||
20 | the title insurance company has authorized the title insurance | ||||||
21 | agent under subsections (f) and (g) of this Section 16 and only | ||||||
22 | to the extent of the liability undertaken by the title | ||||||
23 | insurance company in the agency agreement or closing protection | ||||||
24 | letter. The liability, if any, of the title insurance agent to | ||||||
25 | the title insurance company for acts and omissions of the title | ||||||
26 | insurance agent as an escrow agent shall not be limited or |
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1 | otherwise modified because the title insurance company has | ||||||
2 | provided closing protection to a party or parties to a real | ||||||
3 | property transaction escrow, settlement, or closing. The | ||||||
4 | escrow agent shall not charge a fee for protection provided by | ||||||
5 | a title insurance company to parties to real property | ||||||
6 | transactions under subsections (f) and (g) of this Section 16 | ||||||
7 | and Section 16.1, but shall collect from the parties the fee | ||||||
8 | charged by the title insurance company and shall promptly remit | ||||||
9 | the fee to the title insurance company. The title insurance | ||||||
10 | company may charge the parties a reasonable fee for protection | ||||||
11 | provided pursuant to subsections (f) and (g) of this Section 16 | ||||||
12 | and Section 16.1 and shall not pay any portion of the fee to | ||||||
13 | the escrow agent. The payment of any portion of the fee to the | ||||||
14 | escrow agent by the title insurance company, shall be deemed a | ||||||
15 | prohibited inducement or compensation in violation of Section | ||||||
16 | 24 of this Act. | ||||||
17 | (i) The Secretary shall adopt and amend such rules as may | ||||||
18 | be required for the proper administration and enforcement of | ||||||
19 | this Section 16 consistent with the federal Real Estate | ||||||
20 | Settlement Procedures Act and Section 24 of this Act. | ||||||
21 | (Source: P.A. 98-398, eff. 1-1-14; 98-832, eff. 1-1-15; 99-104, | ||||||
22 | eff. 1-1-16 .)
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23 | (215 ILCS 155/17) (from Ch. 73, par. 1417)
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24 | Sec. 17. Independent escrowees.
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25 | (a)
Every independent escrowee shall be subject to the same
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1 | certification and deposit requirements to which title | ||||||
2 | insurance companies
are subject under Section 4 of this Act.
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3 | (b) No person, firm, corporation or other legal entity | ||||||
4 | shall hold itself
out to be an independent escrowee unless it | ||||||
5 | has been issued a certificate
of authority by the Secretary.
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6 | (c) Every applicant for a certificate of authority, except | ||||||
7 | a firm,
partnership, association or corporation, must be 18 | ||||||
8 | years or more of age.
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9 | (d) Every certificate of authority shall remain in effect | ||||||
10 | one year
unless revoked or suspended by the Secretary
or | ||||||
11 | voluntarily surrendered
by the holder.
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12 | (e) An independent escrowee may engage in the escrow, | ||||||
13 | settlement, or closing
business, or any combination of such | ||||||
14 | business, and operate as an escrow,
settlement, or closing | ||||||
15 | agent, provided that:
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16 | (1) Funds deposited in connection with any escrow, | ||||||
17 | settlement, or
closing shall be deposited in a separate | ||||||
18 | fiduciary trust account or
accounts in a bank or other | ||||||
19 | financial institution insured by an agency of
the federal | ||||||
20 | government unless the instructions provide otherwise. Such
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21 | funds shall be the property of the person or persons | ||||||
22 | entitled thereto under
the provisions of the escrow, | ||||||
23 | settlement, or closing and shall be
segregated by escrow, | ||||||
24 | settlement or closing in the records of the
independent | ||||||
25 | escrowee. Such funds shall not be subject to any debts of | ||||||
26 | the
escrowee and shall be used only in accordance with the |
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1 | terms of the
individual escrow, settlement or closing under | ||||||
2 | which the funds were accepted.
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3 | (2) Interest received on funds deposited with the | ||||||
4 | independent escrowee
in connection with any escrow, | ||||||
5 | settlement or closing shall be paid to the
depositing party | ||||||
6 | unless the instructions provide otherwise.
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7 | (3) The independent escrowee shall maintain separate | ||||||
8 | records of all
receipt and disbursement of escrow, | ||||||
9 | settlement or closing funds.
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10 | (4) The independent escrowee shall comply with any | ||||||
11 | rules or regulations
promulgated by the Secretary
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12 | pertaining to escrow, settlement or closing
transactions.
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13 | (f) The Secretary or his authorized representative shall | ||||||
14 | have the power
and authority to visit and examine at any time | ||||||
15 | any independent escrowee
certified under this Act and to verify | ||||||
16 | and compel compliance with the provisions of
this Act.
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17 | (g) A title insurance company or title
insurance agent, not | ||||||
18 | qualified as an independent escrowee, may act in the
capacity | ||||||
19 | of an escrow agent when it is supplying an abstract of title,
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20 | grantor-grantee search, tract search, lien search, tax | ||||||
21 | assessment search, or
other limited purpose search to the | ||||||
22 | parties to the transaction even if it is
not issuing a title | ||||||
23 | insurance commitment or title insurance policy. A title
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24 | insurance agent may act as an escrow agent only when | ||||||
25 | specifically authorized in
writing on forms prescribed by the | ||||||
26 | Secretary by a title insurance company that
has duly registered |
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1 | the agent with the Secretary and only when notice of the
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2 | authorization is provided to and receipt thereof is | ||||||
3 | acknowledged by the
Secretary. The authority granted to a title | ||||||
4 | insurance agent may be limited or
revoked at any time by the | ||||||
5 | title insurance company.
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6 | (h) A closing protection letter shall not be issued by an | ||||||
7 | independent escrowee. | ||||||
8 | (Source: P.A. 94-893, eff. 6-20-06.)
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9 | Section 99. Effective date. This Act takes effect upon | ||||||
10 | becoming law.
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