00 CS FOR HOUSE BILL NO. 247(L&C) 01 "An Act relating to the characterization of, use of, segregation of, deposit of, 02 interest on, and disbursement of escrow money; relating to the recording, filing, 03 and delivery of escrow documents; relating to civil penalties for violations of 04 certain escrow provisions by escrow settlement agents; relating to the supervision 05 by the Department of Commerce and Economic Development of escrow 06 settlement agents; and authorizing the adoption of regulations to implement 07 certain escrow provisions." 08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 09 * Section 1. LEGISLATIVE PURPOSE. The purpose of this Act is to provide maximum 10 assurance to the public that their money will not be placed in jeopardy when entrusted to a 11 settlement agent in the course of residential real property transactions. 12 * Sec. 2. AS 21.66.250 is amended to read: 13 Sec. 21.66.250. Trust funds. Except as provided in AS 34.80, trust 14 [TRUST] funds or assets held in a fiduciary capacity by a title insurance company that 01 is authorized to do a trust business shall be invested in accordance with AS 06.25. 02 * Sec. 3. AS 34 is amended by adding a new chapter to read: 03 Chapter 80. Escrow Transactions. 04 Sec. 34.80.010. Characterization of escrow money. The money that is 05 received by a settlement agent for an escrow transaction is not the property of the 06 settlement agent and is not subject to execution, attachment, or other form of collection 07 for a claim against the settlement agent. Escrow money may not be used for a purpose 08 other than to fulfill the terms of the escrow transaction agreement and may not be 09 disbursed or otherwise used until the happening of the event or performance of the 10 condition on which the delivery of the money is conditioned. 11 Sec. 34.80.020. Segregation and deposit of escrow money. (a) A settlement 12 agent shall segregate the escrow money from one escrow transaction from all other 13 money, including the escrow money of other escrow transactions. The records of a 14 settlement agent must reflect this segregation. 15 (b) A settlement agent shall deposit escrow money in a depository escrow 16 account of a financial institution located in this state. 17 Sec. 34.80.030. Interest on escrow money. Notwithstanding any other 18 provision of law, interest may not be collected or paid by a settlement agent on 19 money held for an escrow transaction unless authorized in writing by the parties to the 20 escrow transaction, including the settlement agent. 21 Sec. 34.80.040. Disbursement of escrow money. (a) A settlement agent 22 may not disburse escrow money unless items that are at least equal in value to the 23 proposed disbursements have been received by the settlement agent for the escrow 24 transaction, have been deposited as required by AS 34.80.020(b), and are available for 25 withdrawal as a matter of right from the depository escrow account. 26 (b) A settlement agent may not disburse escrow money on the same business 27 day as the items are deposited under AS 34.80.020(b) unless the deposit is made in 28 cash, by interbank electronic transfer, or in a form that permits conversion of the 29 deposit to cash on the same day the deposit is made. 30 (c) A settlement agent may not disburse escrow money on the business day 31 after the business day on which the items are deposited under (a) of this section unless 01 the deposit is made by 02 (1) a cashier's check or a certified check if the cashier's check or 03 certified check is payable in the state and drawn on a financial institution located in 04 the state; 05 (2) a cashier's check, a negotiable order of withdrawal, a money order, 06 or another item if the check, order of withdrawal, money order, or other item has been 07 finally paid before the disbursement; or 08 (3) a depository check, including a cashier's, certified, or teller's check, 09 that is governed by 12 U.S.C. 4001 - 4010 (Expedited Funds Availability Act). 10 (d) In (a) of this section, "available for withdrawal as a matter of right" means 11 (1) when the item has been submitted for collection and payment for 12 the item has been received; 13 (2) when the financial institution where an item has been deposited 14 considers the money represented by the item available for withdrawal; or 15 (3) unless written notification has been received from the financial 16 institution where the item was deposited establishing a longer period for an item drawn 17 on an out-of-state financial institution, after a reasonable time has passed for 18 prohibiting customers from drawing on the item. 19 Sec. 34.80.050. Recording, filing, or delivery of escrow transaction 20 documents. A settlement agent may not record in the office of the recorder in this 21 state or record in an office in another state that is equivalent to the office of the 22 recorder, file under AS 45.09 in this state or file under an equivalent statute in another 23 state, or deliver a conveyance of property, loan documents, documents establishing a 24 security interest in property, or other documents from an escrow transaction until the 25 money required by the escrow transaction agreement to be disbursed at the same time 26 is available for disbursement under AS 34.80.040. 27 Sec. 34.80.060. Civil penalty. A settlement agent who wilfully violates this 28 chapter is liable to the state for five times the amount of the consideration paid to the 29 agent for the services rendered for the escrow transaction that is the subject of the 30 violation. In this section, "settlement agent" does not include an employee of a person 31 who engages in the business of handling escrow transactions. 01 Sec. 34.80.070. Department supervision. The department shall supervise the 02 compliance of settlement agents with the provisions of this chapter, except that the 03 department may not audit a settlement agent's records and accounts unless a person 04 who is a party to an escrow transaction of the settlement agent has complained in 05 writing to the department about the agent's noncompliance with this chapter and the 06 audit is limited to the records and accounts of the escrow transaction to which the 07 person is a party. 08 Sec. 34.80.080. Regulations. The department may adopt regulations under 09 AS 44.62 (Administrative Procedure Act) to implement this chapter. 10 Sec. 34.80.090. Definitions. In this chapter, 11 (1) "department" means the Department of Commerce and Economic 12 Development; 13 (2) "depository escrow account" means an account that holds escrow 14 money pending completion of an escrow transaction, and that is in a financial 15 institution; 16 (3) "escrow transaction" means a transaction where, for the purpose of 17 effecting and closing the sale, purchase, exchange, transfer, encumbrance, leasing, or 18 other disposition of an interest in residential real property, 19 (A) money, written documents, evidence of title to real or 20 personal property, or other things of value are delivered to a person for 21 retention until the happening of a specific event or the performance of a 22 prescribed condition; and 23 (B) upon the happening of the event or performance of the 24 condition, the person holding the things of value delivers them to the persons 25 entitled to them under the escrow transaction agreement; 26 (4) "escrow money" means the money that is received by a settlement 27 agent for an escrow transaction; 28 (5) "financial institution" means a financial institution 29 (A) whose accounts are insured by an agency of the federal 30 government; 31 (B) that is located in this state and does not meet the 01 requirements of (A) of this paragraph, but is subject to regulation by the 02 division of banking, securities and corporations in the Department of 03 Commerce and Economic Development; or 04 (C) that is located in another state and does not meet the 05 requirements of (A) of this paragraph, but is subject to regulation in the other 06 state by an agency comparable to the division of banking, securities and 07 corporations in the Department of Commerce and Economic Development; 08 (6) "item" means cash, a check, a negotiable order of withdrawal, a 09 share draft, a traveler's check, a money order, or an interbank electronic transfer; in 10 this paragraph, "check" includes a cashier's check; 11 (7) "residential real property" means real property on which is located 12 a building containing one to four dwelling units; 13 (8) "settlement agent" means a person who engages in the business of 14 handling escrow transactions, but does not include a financial institution or person who 15 collects money for the sole purpose of applying the money to the payment of a loan 16 during the term of the loan; "settlement agent" includes an employee of a person who 17 engages in the business of handling escrow transactions when the employee is carrying 18 out the employee's duties in the business. 19 * Sec. 4. This Act applies to escrow transactions that begin on or after the effective date 20 of this Act. In this section, "escrow transaction" has the meaning given in AS 34.80.090, 21 enacted by sec. 3 of this Act. 22 * Sec. 5. This Act takes effect January 1, 1999.