Cal. Code Regs. Tit. 10, § 1737 - Special Accounts
(a)
Except as provided in Section
1737.1 of these rules, all money
received by an escrow agent as part of an escrow transaction shall on or before
the close of the next full working day after such receipt be deposited in a
bank, a savings bank, or a savings and loan association in an account
designated "trust" or "escrow" account. No funds other than those received as
part of an escrow transaction shall be deposited in such account or otherwise
commingled with escrow money.
(b)
Pursuant to written instructions of the principals or electronic instructions
received by an Internet escrow agent from the principals containing at least
the provisions required by subsection (c), funds received in any particular
escrow transaction and deposited pursuant to subsection (a) may subsequently be
deposited into an interest-bearing escrow account established solely for such
purpose at a bank, savings bank, savings and loan association or credit union
("financial institution") in the name of the escrow agent as trustee for the
principals to the particular escrow identified by escrow number.
(c) The escrow instructions for
interest-bearing escrow deposits shall, at a minimum:
(1) authorize the opening of an
interest-bearing escrow account in the name of the escrow agent as trustee for
the particular escrow identified by escrow number;
(2) specify the type of account to be opened
and the amount of the deposit;
(3)
identify the name and location of the financial institution with which the
interest-bearing account is to be opened;
(4) specify
(A) the disposition of the interest at the
close of escrow,
(B) the
disposition of the interest in the event that the escrow fails to close,
and
(C) the disposition of any
accrued interest retained in the interest-bearing escrow account after the
close of escrow pursuant to subsection (g);
(5) indicate that the principals have been
advised by the escrow agent of possible restrictions and/or penalties for early
withdrawal of funds; and
(6)
prohibit the escrow agent from withdrawing funds from the interest-bearing
account except for redeposit into the "trust" or "escrow"
account.
(d) An escrow
agent is responsible for establishing and maintaining an interest-bearing
account so that the funds are fully insured or guaranteed, to the extent
available by law.
(e) An escrow
agent is responsible for establishing and maintaining adequate controls over
the passbooks and certificates issued by financial institutions in connection
with interest-bearing escrow accounts.
(f) An escrow agent depositing escrow funds
into interest-bearing escrow accounts shall establish and maintain a control
ledger summarizing the deposits in interest-bearing escrow accounts or shall
make a memo entry on each individual escrow ledger. The posting of the ledger
shall include the escrow number, interest-bearing account number, date of
deposit, and amount of deposit.
(g)
All funds deposited into an interest-bearing escrow account, including any
interest paid thereon, shall be transferred from such account into the "trust"
or "escrow" account before the close of escrow, except that a specified portion
or all of the interest accrued may be retained in the interest-bearing escrow
account until the end of the current calendar quarter if the escrow
instructions of the principals so provide.
(h) Disbursements from the "trust" or
"escrow" account shall not be made against funds deposited in an
interest-bearing escrow account until such funds have been transferred and
receipted into the "escrow" or "trust" account with proper posting to the
particular escrow.
(i) Electronic
fund transfers may be made between the "trust" or "escrow" account and any
interest-bearing account.
(j)
Interest paid on any interest-bearing escrow account shall be paid over to the
principal having deposited the moneys in escrow unless the escrow instructions
clearly specify that such interest is to be paid over to a named person other
than the escrow agent. Notwithstanding any provision in any escrow
instructions, the interest paid or payable on any interest-bearing account
shall not be transferred to the account of, accrue to the benefit of, or
otherwise be treated as an asset of the escrow agent.
(k) An escrow agent who wishes to transact
business as an escrow agent on a basis other than as provided by this section
may request in writing a variance to or waiver of any provisions of this
section, but may not engage in business in a manner not in compliance with this
section without first having received a waiver or variance in writing from the
Commissioner.
(1) Any request for a variance
or waiver shall include at least:
(A) a
statement of the basis upon which the escrow agent's business is proposed to be
transacted in connection with a particular named financial
institution;
(B) a description of
the plan of business and applicable procedures including copies of all
agreements or memoranda of understanding between the escrow agent and the
financial institution;
(C) a
showing that the proposed plan of business and applicable procedures provide
for administrative and accounting controls at least as adequate as those
provided in this section; and
(D) a
statement of the reasons why, under the escrow agent's circumstances, a
variance or waiver is requested.
(2) Any variance or waiver granted pursuant
to this subsection by the Commissioner shall be in writing and subject to such
terms and conditions as may be deemed necessary or advisable by the
Commissioner to protect any escrow transactions of such escrow agent, to
preserve the trust nature of the escrow relationship, and to insure compliance
with the Escrow Law and rules, including the other provisions of this
section.
Notes
2. Amendment filed 12-31-79 as an emergency; effective upon filing. Certificate of Compliance included (Register 80, No. 1).
3. Editorial correction of NOTE filed 4-6-83 (Register 83, No. 15).
4. Amendment filed 7-23-84 as an emergency; effective upon filing (Register 84 No. 30). A Certificate of Compliance must be transmitted to OAL within 120 days or all emergency language will be repealed on 11-20-84.
5. Editorial correction of subsection (i) (Register 84, No. 46).
6. Certificate of Compliance as to 7-23-84 order transmitted to OAL 10-23-84 and filed 11-26-84 (Register 84, No. 49).
7. Editorial correction of printing errors in subsections (b), (c)(2), and (k)(1)(C) (Register 96, No. 52).
8. Amendment of subsections (a) and (g) filed 12-16-97; operative 1-15-98 (Register 97, No. 51).
9. Amendment of subsections (a)-(b), (i) and (l)(2) and amendment of NOTE filed 7-21-2003; operative 7-21-2003 pursuant to Government Code section 11343.4 (Register 2003, No. 30).
Note: Authority cited: Section 17400, Financial Code. Reference: Sections 17403.5, 17409, 17410 and 17411, Financial Code.
2. Amendment filed 12-31-79 as an emergency; effective upon filing. Certificate of Compliance included (Register 80, No. 1).
3. Editorial correction of NOTE filed 4-6-83 (Register 83, No. 15).
4. Amendment filed 7-23-84 as an emergency; effective upon filing (Register 84 No. 30). A Certificate of Compliance must be transmitted to OAL within 120 days or all emergency language will be repealed on 11-20-84.
5. Editorial correction of subsection (i) (Register 84, No. 46).
6. Certificate of Compliance as to 7-23-84 order transmitted to OAL 10-23-84 and filed 11-26-84 (Register 84, No. 49).
7. Editorial correction of printing errors in subsections (b), (c)(2), and (k)(1)(C) (Register 96, No. 52).
8. Amendment of subsections (a) and (g) filed 12-16-97; operative 1-15-98 (Register 97, No. 51).
9. Amendment of subsections (a)-(b), (i) and (l)(2) and amendment of Note filed 7-21-2003; operative 7-21-2003 pursuant to Government Code section 11343.4 (Register 2003, No. 30).
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