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Public Act 100-0485


 

Public Act 0485 100TH GENERAL ASSEMBLY



 


 
Public Act 100-0485
 
HB2702 EnrolledLRB100 10664 SMS 20888 b

    AN ACT concerning regulation.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Title Insurance Act is amended by changing
Sections 3 and 17 and by adding Section 17.1 as follows:
 
    (215 ILCS 155/3)  (from Ch. 73, par. 1403)
    Sec. 3. As used in this Act, the words and phrases
following shall have the following meanings unless the context
requires otherwise:
    (1) "Title insurance business" or "business of title
insurance" means:
        (A) Issuing as insurer or offering to issue as insurer
    title insurance; and
        (B) Transacting or proposing to transact one or more of
    the following activities when conducted or performed in
    contemplation of or in conjunction with the issuance of
    title insurance;
            (i) soliciting or negotiating the issuance of
        title insurance;
            (ii) guaranteeing, warranting, or otherwise
        insuring the correctness of title searches for all
        instruments affecting titles to real property, any
        interest in real property, cooperative units and
        proprietary leases, and for all liens or charges
        affecting the same;
            (iii) handling of escrows, settlements, or
        closings;
            (iv) executing title insurance policies;
            (v) effecting contracts of reinsurance;
            (vi) abstracting, searching, or examining titles;
        or
            (vii) issuing insured closing letters or closing
        protection letters;
        (C) Guaranteeing, warranting, or insuring searches or
    examinations of title to real property or any interest in
    real property, with the exception of preparing an
    attorney's opinion of title; or
        (D) Guaranteeing or warranting the status of title as
    to ownership of or liens on real property and personal
    property by any person other than the principals to the
    transaction; or
        (E) Doing or proposing to do any business substantially
    equivalent to any of the activities listed in this
    subsection, provided that the preparation of an attorney's
    opinion of title pursuant to paragraph (1)(C) is not
    intended to be within the definition of "title insurance
    business" or "business of title insurance".
    (1.5) "Title insurance" means insuring, guaranteeing,
warranting, or indemnifying owners of real or personal property
or the holders of liens or encumbrances thereon or others
interested therein against loss or damage suffered by reason of
liens, encumbrances upon, defects in, or the unmarketability of
the title to the property; the invalidity or unenforceability
of any liens or encumbrances thereon; or doing any business in
substance equivalent to any of the foregoing. "Warranting" for
purpose of this provision shall not include any warranty
contained in instruments of encumbrance or conveyance. Title
insurance is a single line form of insurance, also known as
monoline. An attorney's opinion of title pursuant to paragraph
(1)(C) is not intended to be within the definition of "title
insurance".
    (2) "Title insurance company" means any domestic company
organized under the laws of this State for the purpose of
conducting the business of title insurance and any title
insurance company organized under the laws of another State,
the District of Columbia or foreign government and authorized
to transact the business of title insurance in this State.
    (3) "Title insurance agent" means a person, firm,
partnership, association, corporation or other legal entity
registered by a title insurance company and authorized by such
company to determine insurability of title in accordance with
generally acceptable underwriting rules and standards in
reliance on either the public records or a search package
prepared from a title plant, or both, and authorized by such
title insurance company in addition to do any of the following:
act as an escrow agent pursuant to subsections (f), (g), and
(h) of Section 16 of this Act, solicit title insurance, collect
premiums, or issue title insurance commitments, policies, and
endorsements of the title insurance company; provided,
however, the term "title insurance agent" shall not include
officers and salaried employees of any title insurance company.
    (4) "Producer of title business" is any person, firm,
partnership, association, corporation or other legal entity
engaged in this State in the trade, business, occupation or
profession of (i) buying or selling interests in real property,
(ii) making loans secured by interests in real property, or
(iii) acting as broker, agent, attorney, or representative of
natural persons or other legal entities that buy or sell
interests in real property or that lend money with such
interests as security.
    (5) "Associate" is any firm, association, partnership,
corporation or other legal entity organized for profit in which
a producer of title business is a director, officer, or partner
thereof, or owner of a financial interest, as defined herein,
in such entity; any legal entity that controls, is controlled
by, or is under common control with a producer of title
business; and any natural person or legal entity with whom a
producer of title business has any agreement, arrangement, or
understanding or pursues any course of conduct the purpose of
which is to evade the provisions of this Act.
    (6) "Financial interest" is any ownership interest, legal
or beneficial, except ownership of publicly traded stock.
    (7) "Refer" means to place or cause to be placed, or to
exercise any power or influence over the placing of title
business, whether or not the consent or approval of any other
person is sought or obtained with respect to the referral.
    (8) "Escrow Agent" means any title insurance company or any
title insurance agent, including independent contractors of
either, acting on behalf of a title insurance company, which
receives deposits, in trust, of funds or documents, or both,
for the purpose of effecting the sale, transfer, encumbrance or
lease of real property to be held by such escrow agent until
title to the real property that is the subject of the escrow is
in a prescribed condition. An escrow agent conducting closings
shall be subject to the provisions of paragraphs (1) through
(4) of subsection (e) of Section 16 of this Act.
    (9) "Independent Escrowee" means any firm, person,
partnership, association, corporation or other legal entity,
other than a title insurance company or a title insurance
agent, which receives deposits, in trust, of funds or
documents, or both, for the purpose of effecting the sale,
transfer, encumbrance or lease of real property to be held by
such escrowee until title to the real property that is the
subject of the escrow is in a prescribed condition. Federal and
State chartered banks, savings and loan associations, credit
unions, mortgage bankers, banks or trust companies authorized
to do business under the Illinois Corporate Fiduciary Act,
licensees under the Consumer Installment Loan Act, real estate
brokers licensed pursuant to the Real Estate License Act of
2000, as such Acts are now or hereafter amended, and licensed
attorneys when engaged in the attorney-client relationship are
exempt from the escrow provisions of this Act. "Independent
Escrowee" does not include employees or independent
contractors of a title insurance company or title insurance
agent authorized by a title insurance company to perform
closing, escrow, or settlement services.
    (10) "Single risk" means the insured amount of any title
insurance policy, except that where 2 or more title insurance
policies are issued simultaneously covering different estates
in the same real property, "single risk" means the sum of the
insured amounts of all such title insurance policies. Any title
insurance policy insuring a mortgage interest, a claim payment
under which reduces the insured amount of a fee or leasehold
title insurance policy, shall be excluded in computing the
amount of a single risk to the extent that the insured amount
of the mortgage title insurance policy does not exceed the
insured amount of the fee or leasehold title insurance policy.
    (11) "Department" means the Department of Financial and
Professional Regulation.
    (12) "Secretary" means the Secretary of Financial and
Professional Regulation.
    (13) "Insured closing letter" or "closing protection
letter" means an indemnification or undertaking to a party to a
real property transaction, from a principal such as a title
insurance company, setting forth in writing the extent of the
principal's responsibility for intentional misconduct or
errors in closing the real property transaction on the part of
a settlement agent, such as a title insurance agent or other
settlement service provider, or an indemnification or
undertaking given by a title insurance company or an
independent escrowee setting forth in writing the extent of the
title insurance company's or independent escrowee's
responsibility to a party to a real property transaction which
indemnifies the party against the intentional misconduct or
errors in closing the real property transaction on the part of
the title insurance company or independent escrowee and
includes protection afforded pursuant to subsections (f), (g),
and (h) of Section 16, and Section 16.1, subsection (h) of
Section 17, and Section 17.1 of this Act even if such
protection is afforded by contract.
    (14) "Residential real property" means a building or
buildings consisting of one to 4 residential units or a
residential condominium unit where at least one of the
residential units or condominium units is occupied or intended
to be occupied as a residence by the purchaser or borrower, or
in the event that the purchaser or borrower is the trustee of a
trust, by a beneficiary of that trust.
    (15) "Financial institution" means any bank subject to the
Illinois Banking Act, any savings and loan association subject
to the Illinois Savings and Loan Act of 1985, any savings bank
subject to the Savings Bank Act, any credit union subject to
the Illinois Credit Union Act, and any federally chartered
commercial bank, savings and loan association, savings bank, or
credit union organized and operated in this State pursuant to
the laws of the United States.
(Source: P.A. 98-387, eff. 8-16-13.)
 
    (215 ILCS 155/17)  (from Ch. 73, par. 1417)
    Sec. 17. Independent escrowees.
    (a) Every independent escrowee shall be subject to the same
certification and deposit requirements to which title
insurance companies are subject under Section 4 of this Act.
    (b) No person, firm, corporation or other legal entity
shall hold itself out to be an independent escrowee unless it
has been issued a certificate of authority by the Secretary.
    (c) Every applicant for a certificate of authority, except
a firm, partnership, association or corporation, must be 18
years or more of age.
    (d) Every certificate of authority shall remain in effect
one year unless revoked or suspended by the Secretary or
voluntarily surrendered by the holder.
    (e) An independent escrowee may engage in the escrow,
settlement, or closing business, or any combination of such
business, and operate as an escrow, settlement, or closing
agent, provided that:
        (1) Funds deposited in connection with any escrow,
    settlement, or closing shall be deposited in a separate
    fiduciary trust account or accounts in a bank or other
    financial institution insured by an agency of the federal
    government unless the instructions provide otherwise. Such
    funds shall be the property of the person or persons
    entitled thereto under the provisions of the escrow,
    settlement, or closing and shall be segregated by escrow,
    settlement or closing in the records of the independent
    escrowee. Such funds shall not be subject to any debts of
    the escrowee and shall be used only in accordance with the
    terms of the individual escrow, settlement or closing under
    which the funds were accepted.
        (2) Interest received on funds deposited with the
    independent escrowee in connection with any escrow,
    settlement or closing shall be paid to the depositing party
    unless the instructions provide otherwise.
        (3) The independent escrowee shall maintain separate
    records of all receipt and disbursement of escrow,
    settlement or closing funds.
        (4) The independent escrowee shall comply with any
    rules or regulations promulgated by the Secretary
    pertaining to escrow, settlement or closing transactions.
    (f) The Secretary or his authorized representative shall
have the power and authority to visit and examine at any time
any independent escrowee certified under this Act and to verify
and compel compliance with the provisions of this Act.
    (g) A title insurance company or title insurance agent, not
qualified as an independent escrowee, may act in the capacity
of an escrow agent when it is supplying an abstract of title,
grantor-grantee search, tract search, lien search, tax
assessment search, or other limited purpose search to the
parties to the transaction even if it is not issuing a title
insurance commitment or title insurance policy. A title
insurance agent may act as an escrow agent only when
specifically authorized in writing on forms prescribed by the
Secretary by a title insurance company that has duly registered
the agent with the Secretary and only when notice of the
authorization is provided to and receipt thereof is
acknowledged by the Secretary. The authority granted to a title
insurance agent may be limited or revoked at any time by the
title insurance company.
    (h) An independent escrowee may, pursuant to Section 17.1
of this Act, issue an insured closing letter if, in addition to
complying with the same certification and deposit requirements
that title insurance companies are subject to under Section 4
of this Act, the independent escrowee:
        (1) Satisfies the Secretary that it has a minimum
    capital and surplus of $2,000,000. The Secretary may
    provide the forms and standards for this purpose by rule.
    This paragraph applies only to independent escrowees
    licensed under this Act for the first time on or after the
    effective date of this amendatory Act of the 100th General
    Assembly.
        (2) Files with and has approved by the Secretary proof
    of a fidelity bond in the minimum amount of $2,000,000 per
    occurrence.
        (3) Establishes and maintains a statutory closing
    protection letter reserve for the protection of parties
    named in warranties of services consisting of a sum of 25%
    of the closing protection letter revenue received by the
    independent escrowee on or after the effective date of this
    amendatory Act of the 100th General Assembly. The reserve
    shall be reported as a liability of the independent
    escrowee in its financial statements. Amounts placed in the
    statutory closing protection letter reserve shall be
    deducted in determining the net profit of the independent
    escrowee for the year. Except as provided in this
    subsection, assets in value equal to the statutory closing
    protection letter reserve are not subject to distribution
    among creditors, stockholders, or other owners of the
    independent escrowee until all claims of parties named in
    warranties of services have been paid in full and
    discharged.
        (4) Releases from the statutory closing protection
    letter reserve a sum equal to 10% of the amount added to
    the reserve during a calendar year on July 1 of each of the
    5 years following the year in which the sum was added and
    releases from the statutory closing protection letter
    reserve a sum equal to 3 1/3% of the amount added to the
    reserve during that year on each succeeding July 1 until
    the entire amount for that year has been released.
    The Secretary shall adopt and amend rules as may be
required for the proper administration and enforcement of this
subsection (h) consistent with the federal Real Estate
Settlement and Procedures Act and Section 24 of this Act.
(Source: P.A. 94-893, eff. 6-20-06.)
 
    (215 ILCS 155/17.1 new)
    Sec. 17.1. Closing or settlement protection; independent
escrowees.
    (a) Notwithstanding the provisions of item (iii) of
paragraph (B) of subsection (1) and subsection (9) of Section 3
of this Act, an independent escrowee is not authorized to act
pursuant to subsection (9) of Section 3 of this Act in a
nonresidential real property transaction where the amount of
settlement funds on deposit with the escrow agent is less than
$2,000,000 or in a residential real property transaction
unless, as part of the same transaction, closing protection
letters protecting the buyer's or borrower's, lender's, and
seller's interests have been issued by the independent
escrowee.
    (b) Unless otherwise agreed to between an independent
escrowee and a protected person or entity, a closing protection
letter under this Section shall indemnify all parties to a real
property transaction against actual loss, not to exceed the
amount of the settlement funds deposited with the independent
escrowee. The closing protection letter shall in any event
indemnify all parties to a real property transaction when such
losses arise out of:
        (1) failure of the independent escrowee to comply with
    written closing instructions to the extent that they relate
    to (A) the status of the title to an interest in land or
    the validity, enforceability, and priority of the lien of a
    mortgage on an interest in land, including the obtaining of
    documents and the disbursement of funds necessary to
    establish the status of title or lien or (B) the obtaining
    of any other document specifically required by a party to
    the real property transaction, but only to the extent that
    the failure to obtain such other document affects the
    status of the title to an interest in land or the validity,
    enforceability, and priority of the lien of a mortgage on
    an interest in land; or
        (2) fraud, dishonesty, or negligence of the
    independent escrowee in handling funds or documents in
    connection with closings to the extent that the fraud,
    dishonesty, or negligence relates to the status of the
    title to the interest in land or to the validity,
    enforceability, and priority of the lien of a mortgage on
    an interest in land or, in the case of a seller, to the
    extent that the fraud, dishonesty, or negligence relates to
    funds paid to or on behalf of, or which should have been
    paid to or on behalf of, the seller.
    (c) The indemnification under a closing protection letter
may include limitations on the liability of the independent
escrowee for any of the following:
        (1) Failure of the independent escrowee to comply with
    closing instructions that require title insurance
    protection inconsistent with that set forth in the title
    insurance commitment for the real property transaction.
    Instructions that require the removal of specific
    exceptions to title or compliance with the requirements
    contained in the title insurance commitment shall not be
    deemed to be inconsistent.
        (2) Loss or impairment of funds in the course of
    collection or while on deposit with a bank due to bank
    failure, insolvency, or suspension, except such as shall
    result from failure of the independent escrowee closer to
    comply with written closing instructions to deposit the
    funds in a bank that is designated by name by a party to
    the real property transaction.
        (3) Mechanics' and materialmen's liens in connection
    with sale, purchase, lease, or construction loan
    transactions, except to the extent that protection against
    such liens is afforded by a title insurance commitment or
    policy issued by the title insurance agent or title
    insurance company.
        (4) Failure of the independent escrowee to comply with
    written closing instructions to the extent that such
    instructions require a determination by the independent
    escrowee of the validity, enforceability, or effectiveness
    of any document described in item (B) of paragraph (1) of
    subsection (b) of this Section.
        (5) Fraud, dishonesty, or negligence of an employee,
    agent, attorney, or broker, who is not also the independent
    escrowee or an independent contract closer of the
    independent escrowee, of the indemnified party to the real
    property transaction.
        (6) The settlement or release of any claim by the
    indemnified party to the real property transaction without
    the written consent of the independent escrowee.
        (7) Any matters created, suffered, assumed, or agreed
    to by, or known to, the indemnified party to the real
    property transaction without the written consent of the
    independent escrowee.
    The closing protection letter may also include reasonable
additional provisions concerning the dollar amount of
protection, provided the limit is no less than the amount
deposited with the independent escrowee, arbitration,
subrogation, claim notices, and other conditions and
limitations that do not materially impair the protection
required by this Section.
    (d) The Secretary shall adopt and amend rules as may be
required for the proper administration and enforcement of this
Section consistent with the federal Real Estate Settlement
Procedures Act and Section 24 of this Act.
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 9/8/2017