Title of Regulation: 14VAC5-395. Rules Governing Settlement Agents (amending 14VAC5-395-10, 14VAC5-395-20, 14VAC5-395-30, 14VAC5-395-70, 14VAC5-395-75, 14VAC5-395-80).

Statutory Authority: §§ 12.1-13 and 55.1-1012 of the Code of Virginia.

Effective Date: October 14, 2019.

Agency Contact: Raquel Pino, Insurance Policy Advisor, Bureau of Insurance, State Corporation Commission, P.O. Box 1157, Richmond, VA 23218, telephone (804) 371-9499, FAX (804) 371-9944, or email raquel.pino@scc.virginia.gov.

Summary:

The amendments update citations to the Code of Virginia due to the recodification of Title 55 to the Title 55.1 in the 2019 Session of the General Assembly.

14VAC5-395-10. Applicability.

This chapter implements Chapter 27.3 (§ 55-525.16 10 (§ 55.1-1000 et seq.) of Title 55 55.1 of the Code of Virginia and applies to all title insurance agents, title insurance agencies, and title insurance companies providing escrow, closing, or settlement services involving the purchase of or lending on the security of any real property in the Commonwealth of Virginia.

14VAC5-395-20. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Agent" or "insurance agent" means an individual or business entity that sells, solicits, or negotiates contracts of title insurance in the Commonwealth.

"Bureau" means the State Corporation Commission Bureau of Insurance.

"Business entity" means a partnership, limited partnership, limited liability company, corporation, or other legal entity other than a sole proprietorship, professional corporation, or professional limited liability company.

"Chapter 27.3 10" means Chapter 27.3 (§ 55-525.16 10 (§ 55.1-1000 et seq.) of Title 55 55.1 of the Code of Virginia.

"Designated licensed producer" means an individual who (i) possesses a valid license to sell, solicit, or negotiate contracts of title insurance in the Commonwealth; (ii) is appointed; (iii) is an officer, director, or employee of the business entity; and (iv) is responsible for the business entity's compliance with the insurance laws, rules, and regulations of this Commonwealth.

"Employee" means an individual (i) whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person and (ii) whose compensation for federal income tax purposes is reported, or required to be reported, on a W-2 form issued by the controlling person.

"Escrow, closing, or settlement services" means the administrative and clerical services required to carry out the terms of contracts affecting real estate. These services include (i) placing orders for title insurance; (ii) receiving and issuing receipts for money received from the parties; (iii) ordering loan checks and payoffs; (iv) ordering surveys and inspections; (v) preparing settlement statements or Closing Disclosure forms; (vi) determining that all closing documents conform to the parties' contract requirements; (vii) setting the closing appointment; (viii) following up with the parties to ensure that the transaction progresses to closing; (ix) ascertaining that the lenders' instructions have been satisfied; (x) conducting a closing conference at which the documents are executed; (xi) receiving and disbursing funds; (xii) completing form documents and instruments selected by and in accordance with instructions of the parties to the transaction; (xiii) handling or arranging for the recording of documents; (xiv) sending recorded documents to the lender; (xv) sending the recorded deed and the title policy to the buyer; and (xvi) reporting federal income tax information for the real estate sale to the Internal Revenue Service.

"Lay real estate settlement agent" means a person who (i) is not licensed as an attorney under Chapter 39 (§ 54.1-3900 et seq.) of Title 54.1 of the Code of Virginia, (ii) is not a party to the real estate transaction, (iii) provides escrow, closing or settlement services in connection with a transaction related to any real estate in this Commonwealth, and (iv) is listed as the settlement agent on the settlement statement or Closing Disclosure for the transaction.

"Settlement agent" means a person, other than a party to the real estate transaction, who provides escrow, closing, or settlement services in connection with a transaction related to real estate in the Commonwealth and who is listed as the settlement agent on the settlement statement or Closing Disclosure for the transaction. Any person, other than a party to the transaction, who conducts the settlement conference and receives or handles money shall be deemed a "settlement agent" subject to the applicable requirements of Chapter 27.3 10 and this chapter.

"Title insurance agency" or "title insurance agent" means any individual or business entity licensed in the Commonwealth, pursuant to Chapter 18 (§ 38.2-1800 et seq.) of Title 38.2 of the Code of Virginia, as a title insurance agent and appointed by a title insurance company licensed in the Commonwealth who shall perform all of the following services (for which liability arises) relevant to the issuance of title insurance policies, subject to the underwriting directives and guidelines of the agent's title insurance company. These services shall include (i) the evaluation of the title search to determine the insurability of the title;, (ii) a determination of whether or not underwriting objections have been cleared;, (iii) the actual issuance of a title commitment or binder and endorsements;, and (iv) the actual issuance of the policy or policies and endorsements on behalf of the title insurance company. A title insurance agent holding funds in escrow shall promptly deposit the funds in a trust account in a financial institution authorized to do business in this Commonwealth. This trust account shall be separate from all other accounts held by the agent.

"Title insurance company" means any company licensed to transact, or transacting, title insurance in this Commonwealth.

14VAC5-395-30. Registration.

A. Every settlement agent shall register with the bureau in accordance with the provisions of § 55-525.30 § 55.1-1014 of the Code of Virginia.

B. At the time of application for registration, a settlement agent other than a title insurance company shall provide to the bureau (i) its certificate of authorization or charter of a domestic limited liability company or corporation, or certificate of registration or certificate of authority of a foreign limited liability company or corporation, as applicable; (ii) an original surety bond; and (iii) the name of the designated licensed producer.

C. Within 30 days of registration a settlement agent shall furnish to the bureau:

1. Legal name;

2. Any fictitious or assumed names;

3. Principal place of business address;

4. Addresses of all other business locations;

5. Telephone numbers;

6. Escrow account numbers and financial institution addresses;

7. Employee and independent contractor list;

8. Website or websites;

9. Affiliated entities; and

10. Such other information as the bureau may require.

14VAC5-395-70. Reporting requirements.

A. Every settlement agent shall make all escrow, closing, or settlement records available promptly upon request for examination by the bureau without notice during normal business hours.

B. A settlement agent shall maintain documentation that supports all entries on the settlement statement or Closing Disclosure.

C. A settlement agent shall promptly respond to a bureau request for books, records, documentation, or other information in connection with the bureau's investigation, enforcement, or examination of the settlement agent's compliance with applicable laws and regulations. If no time period is specified by the bureau, a written response as well as any requested books, records, documentation, or information shall be delivered by the settlement agent to the bureau not later than 30 days from the date of such request.

D. Within 30 days following the occurrence of any of the following events, a settlement agent other than a title insurance company shall report to the bureau if:

1. Any bankruptcy, reorganization, or receivership proceedings are filed by or against the settlement agent.

2. Any governmental authority enters a final disposition in a regulatory, administrative, or enforcement action against the settlement agent.

3. Any governmental authority revokes or suspends the settlement agent's registration, license, or other license for a similar business.

4. Based on allegations by any governmental authority that the settlement agent violated any law or regulation applicable to the conduct of its licensed business, the settlement agent enters into, or otherwise agrees to the entry of, a settlement or consent order, decree, or agreement with or by such governmental authority.

5. The settlement agent surrenders its license in another state.

6. The settlement agent is denied a license in another state.

7. The settlement agent or any of its members, partners, directors, officers, principals, employees, or independent contractors is convicted of a felony.

8. Any funds held by the settlement agent are (i) seized by or on behalf of any court or governmental instrumentality or (ii) forfeited to or on behalf of any court or governmental instrumentality. The term "forfeited" shall not include the escheatment of funds in accordance with The Uniform Disposition of Unclaimed Property Act (§ 55-210.1 (§ 55.1-2500 et seq. of Title 55 55.1 of the Code of Virginia) or the interpleading of funds to a court of competent jurisdiction.

E. A settlement agent shall immediately notify the bureau following the loss of (i) a designated licensed producer, (ii) required insurance coverage, or (iii) required bond coverage.

F. A settlement agent or former settlement agent other than a title insurance company shall provide the following information to the bureau within 10 days after such person's title insurance license is surrendered, terminated, suspended, or revoked or has lapsed by operation of law, or the licensed and registered business is otherwise closed: (i) the names, addresses, telephone numbers, fax numbers, and email addresses of a designated contact person; (ii) the location of the settlement agent's or former settlement agent's records; and (iii) any additional information that the bureau may reasonably require. A settlement agent or former settlement agent other than a title insurance company shall maintain current information with the bureau until all escrow funds are disbursed and all title policies are issued.

G. Sixty days prior to ceasing business, a settlement agent shall provide notice to the bureau of its intent to cease conducting settlements and the anticipated date of business termination.

H. The reports required by this section shall be in the format and contain such additional information as the bureau may reasonably require. The bureau may also require additional reports that it deems necessary.

14VAC5-395-75. Operating requirements.

A settlement agent shall comply with the following requirements:

1. A settlement agent shall continuously maintain the requirements and standards for licensure and registration.

2. A settlement agent shall reconcile its escrow accounts monthly.

3. A settlement agent shall not provide any information to the bureau or a consumer that is false, misleading, or deceptive.

4. A settlement agent shall not charge duplicative or padded fees for escrow, closing, or settlement services.

5. A settlement agent shall not engage in any activity that directly or indirectly results in an evasion of the provisions of Chapter 27.3 10 or this chapter.

6. Any person, other than a party to the transaction, who conducts the settlement conference and receives or handles money, including possessing wire transfer authority, shall be deemed a "settlement agent" subject to the applicable requirements of Chapter 27.3 10 and this chapter.

7. A designated licensed producer shall be appointed by the same title insurance company as its employer settlement agent.

8. A settlement agent shall not use or accept the services of a title insurance agent who is an independent contractor unless the title insurance agent is licensed and appointed. A settlement agent that permits an independent contractor to conduct one or more settlement conferences on behalf of the settlement agent shall ensure that the independent contractor is properly insured and bonded as required by Chapter 27.3 10 and this chapter.

9. A settlement agent that uses the services of a title insurance agent who is an independent contractor shall be considered the legal principal of the independent contractor and shall be liable for any violations of Chapter 27.3 10 or this chapter committed by the independent contractor, including unintentional conduct, within the scope of engagement.

10. A former settlement agent shall remain subject to the provisions of Chapter 27.3 10 and this chapter in connection with all settlements that the settlement agent performed while licensed and registered, notwithstanding the occurrence of any of the following events:

a. The settlement agent's license is surrendered, terminated, suspended, or revoked or has lapsed by operation of law; or

b. The settlement agent ceases conducting settlements.

11. If a settlement agent or former settlement agent disposes of records containing a consumer's personal financial information or copies of a consumer's identification documents, such records and copies shall be disposed of in a secure manner.

14VAC5-395-80. Enforcement.

Failure to comply with any provision of Chapter 27.3 10 or this chapter may result in penalties, license revocation or suspension, the entry of a cease and desist order, restitution, or other enforcement action.