Mont. Admin. R. 6.6.2202 - ESCROW, CLOSING, OR SETTLEMENT SERVICES
(1)
Escrow, closing, or settlement services are those activities undertaken by a
title insurer or title agent acting in a fiduciary capacity with regard to a
particular transaction or transactions, including the receipt and disbursement
of money and the proration of insurance and taxes. Activities coincidental to
the issuance of a title insurance policy such as accepting instruments for
recording and filing and handling funds to pay recording and filing fees and
property taxes are not considered escrow, closing, or settlement services.
(2) An escrow agent shall not
accept funds or papers in escrow without first receiving dated, written
instructions adequate to administer the escrow account and without receiving
collected or cleared funds and documents to carry out the terms of the escrow
instructions.
(3) An escrow agent
shall use documents or other property deposited in escrow only in accordance
with the written instructions of the principals to the escrow transaction or,
if not so directed, in accordance with sound escrow practice or order of a
court of competent jurisdiction.
(4) An escrow agent shall act without
partiality to any of the parties to the escrow. An escrow agent may not close a
transaction where he has, directly or indirectly, a monetary interest in the
subject property either as buyer or seller.
(5) If an escrow agent has a business
interest in the escrow transaction other than as escrow agent, the relationship
or interest must be disclosed in the written escrow instructions. After noting
such interest, an additional statement shall appear as follows:
"We call this interest to your attention for disclosure purposes. This interest will not, in our opinion, prevent us from being a fair and impartial escrow agent in this transaction, but you are, nevertheless, free to request that the transaction be closed by some other escrow agent."
(6) Upon completion of an escrow
transaction, the escrow agent shall deliver to each principal a verified
written, signed closing statement of the principal's account. The statement
shall show all receipts and disbursements of escrow funds for that account as
well as charges and credits to that account. Service charges made by the escrow
agent and all disbursements by the agent in connection with the transaction
shall be clearly designated. Payments outside of escrow, if shown in the
statement, shall be set forth separately from payments under the escrow. A copy
of the closing statement shall be retained by the escrow agent in the
appropriate escrow file. The statement shall be dated and signed, a copy
delivered to each interested real estate broker, and an additional copy
furnished to an appropriate principal upon his request.
(7) An escrow agent shall not authorize or
allow a bank to remove funds from the agent's trust account or escrow account
for payment of bank service charges, overdraft charges, printed check charges,
collection charges, bank fees, or service charges of any kind. Such charges
shall be paid from the escrow agent's own funds. If bank procedures require,
however, the deduction of such charges, the escrow agent must re-deposit to the
account non-trust funds equal to the amount of the deduction within one
business day of receipt of notification of the deduction.
(8) No escrow funds shall be placed in an
interest bearing account unless:
(a) the
escrow agent has received express written instructions to do so from the
principal; and
(b) all earnings
accruing to such account are credited to that account exclusively for the use
and benefit of the principal or such other persons as the principal has
designated in the written escrow instructions.
(9)
(a) An
escrow agent shall establish and maintain on a current basis the following
books of account pertaining to its escrow business:
(i) an escrow ledger containing a separate,
numbered sheet to record the accounting on each escrow agreement, and
(ii) an escrow liability control
account.
(b) All escrow
account disbursements shall be posted from checks or vouchers to the agent's
cash journal. When receipts or disbursements are posted as a total to the cash
journal or to the control account, the adding machine tape or other means of
tracing the individual transactions in an audit shall be preserved and filed in
a logical sequence.
(c) The escrow
liability control account shall be in balance with the escrow ledger at all
times. The balance of the escrow liability control account shall equal the
balance of the trust account or escrow account in the bank and shall be
reconciled at least once each month with the balance of such bank
account.
(10)
(a) A check against a particular escrow
account shall not be drawn, executed, or dated unless the escrow account
contains a sufficient credit balance consisting of collected or cleared funds
at the time of drawing and executing the check and at the date of the
check.
(b) Transfer of funds
between escrow account may not be accomplished by ledger entries alone, but
must be accomplished by writing checks and receipts which are charged and
credited to the respective escrow account. The reason and appropriate
authorization for the transfer must be included in the escrow files. However,
transfers between one collection escrow account and another collection escrow
account may be made on each of the escrow ledger accounts affected.
(c) An escrow agent shall not withdraw
payment or transfer money from any escrow account in excess of the credit
balance of the account at the time of the withdrawal payment or
transfer.
(d) Escrow fees from a
closing escrow account shall not be withdrawn from the account until it is
ready for closing in accordance with the escrow instructions, and must be
withdrawn no later than the day on which other final disbursements are made
from the escrow account.
(e) When
the collection service has been performed, escrow fees from a collection escrow
account shall be withdrawn from the account or posted to a separate fee ledger.
If escrow fees are posted in a separate fee ledger, the fees must be withdrawn
at least once each month.
(f) No
funds other than those received as part of an escrow transaction shall be
deposited in the bank trust account or escrow account, or otherwise commingled
with escrow funds.
(g) All money
deposited in a trust account or escrow account shall be withdrawn, paid out, or
transferred to other account only in accordance with the written instructions
of the principals to the escrow transaction or the order of a court of
competent jurisdiction.
(h) All
receipts and disbursements of money shall be posted in the escrow ledger as of
the date of the transaction, without regard to the date of posting.
(11) If any disbursement made out
of an escrow account results in a discount, refund, credit, or other benefit
directly or indirectly to an escrow agent or its officers or employees, such
benefit shall be credited to the principal for whose account the payment is
made.
(12)
(a) Records of the escrow agent shall be
based upon a method which provides accounting control and traceability and an
audit trail of the receipts and shall include:
(i) copies of all prenumbered receipts forms
used, with all numbers accounted for;
(ii) all cancelled checks, with all numbered
check forms accounted for; and
(iii) all prenumbered voucher or prenumbered
check stubs used, with all numbers accounted for.
(b) These records shall be made and kept by
the escrow agent to account for funds received in and disbursed from
escrow.
(c) No funds shall be
received in escrow or paid out of escrow without issuing a receipt or check,
respectively, to evidence the transaction. On closing escrows, the receipt
shall be issued as soon as practicable after the money is received. On
collection escrows, the receipt may be issued to show receipts over a period of
time not exceeding one year.
(d)
The receipt and check forms shall be prenumbered consecutively. All voided
forms shall be preserved in the records in numerical sequence, and all lost or
missing forms shall be accounted for with an explanation of why the form is
missing.
(13) The
offices, places of business, books, records, accounts, safes, files, and papers
of an escrow agent shall be maintained so as to be freely accessible and
available for audit, inspection, or examination by the commissioner at all
reasonable times.
(14) An escrow
agent shall preserve for at least six years all records required by this rule
and all bank statements of its trust accounts and escrow accounts.
(15) The commissioner may request, once
within a three-year period, an audit by an independent public accountant of an
escrow agent's escrow accounts. If the commissioner requests an audit of an
escrow agent's escrow accounts, and the independent public accountant
conducting the audit discovers discrepancies in the audited account, the
commissioner may require annual audits of the escrow account until the
commissioner believes the problems have been resolved. The scope of the audit
shall be limited to a sample check of closed escrow transactions, a
verification of open escrows, and a determination as to whether the escrow
agent's records are maintained in a manner to permit such audit. The audit
report shall contain a balance sheet of the close of the audit period; a
statement of receipts and disbursements of escrow funds showing reconciliation
between the beginning and ending balances; a list of all bank accounts of the
escrow agent containing escrow funds showing the name, address, and account
number; a list of any closing escrow accounts which have been open for more
than one year at the end of the audit period showing the name, number, and
amount of such escrow liability; an explanation of the method used to verify
the escrow account liabilities together with the number of escrows; the number
of confirmations requested; the number of discrepancies and approximate
percentage of escrow accounts checked; and a statement that the escrow agent
has compiled with the regulations of the commissioner as to escrow accounts
listing any exceptions as disclosed by such sampling and said statements and
lists.
Notes
AUTH: 33-1-313, MCA
IMP: 33-25-201, MCA
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