Hawaii Enacts Escrow Depository Rule, Amends Mortgage Servicing Regs
by: Lee Greenberg
Provisions Regarding Escrow Depositories
The state of Hawaii recently enacted provisions regarding escrow depositories in Senate Bill 1067. The provisions become effective on July 1, 2014.
The new law defines the powers and duties of the commissioner. Any person who violates the new law will be subject to an administrative fine of a maximum of $5,000 for each violation. Furthermore, the commissioner may impose an administrative fine on a licensee or person subject to the law if the commissioner finds that the licensee or person has violated or failed to comply with any requirements of the law or any rule prescribed by the commissioner. Any violation of the law that is directed toward, targets, or injures an elder may be subject to an additional civil penalty not to exceed $10,000 for each violation in addition to any other fines or penalties assessed for the violation.
The law requires the net capital of any corporation engaging in the escrow depository business to be no less than $100,000. The minimum net capital of $100,000 must be maintained at all times by the licensee.
The law requires the escrow depository business to be under the direct management of an officer, or an employee, designated by its board of directors as escrow officer for the corporation. The licensee must inform the commissioner in writing of any change to the designated escrow officer for the corporation at least fifteen days prior to the change, unless the change occurs so unexpectedly that the licensee is unable to provide fifteen days’ prior notice, provided that when unexpected circumstances prevent prior notice, the licensee provides notice within five business days after the change. Within five business days of the designation of a new escrow officer by its board of directors, the licensee shall inform the commissioner in writing of the new escrow officer for the corporation, setting forth the experience, integrity, and competency of the new designated escrow officer in handling escrow transactions. The fee for transfer and change in control of an escrow depository license is $5,000.
Under the law, a licensed escrow depository shall at all times maintain a fidelity bond executed by a surety insurer authorized to do business in Hawaii in an amount not less than $100,000, provided that any bond which is subject to a deductible thereunder in excess of $10,000, per occurrence, shall require the prior approval of the commissioner.
In addition, a licensed escrow depositor shall at all times maintain a policy of errors and omissions insurance executed by an insurer authorized to do business in Hawaii in an amount not less than $250,000, provided that any policy which is subject to a deductible thereunder in excess of $100,000, per occurrence, shall require the prior approval of the commissioner.
The following modified fees must be paid by licensed escrow depositories to the commissioner:
- For filing and investigation of an escrow depositor’s application for license, $5,000;
- For an application for approval to establish a branch office, $100;
- For an application for approval to relocate an existing office or branch, $100;
- For annual renewal of an escrow depository’s license, $2,000;
- For initial issuance and annual renewal of a branch office license, $100;
- For reissuance of a license for the change in the business address of its office, $50; provided that a reissuance caused by changes to the address by the United States Postal Service shall not require payment of a fee; and
- For an application for approval to cease business as an escrow depository, $0.
For all escrow depositories examined by the commissioner or the commissioner’s staff, the commissioner may charge an examination fee based upon the cost per hour per examiner. The hourly fee shall be $60.
Lastly, the law includes a new definition for “branch office”. Under the law, “branch office” means any location, separate from the principal place of business of the escrow depository, that is identified by any means to the public or customers as a location at which the licensee holds itself out as an escrow depository.
Provisions Regarding Mortgage Servicers
Hawaii also recently amended provisions regarding the annual license renewal date for mortgage servicers in Senate Bill 2818. The amendment is effective immediately.
Under this legislation, the annual license renewal date for mortgage servicers was changed from June 30th to December 31st of each calendar year.
Provisions Regarding Distressed Property Consultants
Finally, Hawaii recently modified provisions regarding distressed property consultants in House Bill 2275. The modified provisions are effective immediately.
This new law clarified the definition for “distressed property consultant” and specified that attorneys must be licensed by, and engaged in the practice of law in Hawaii in order to fall within the class of exceptions to the definition of “distressed property consultant.”
About the Author:
Lee Greenberg, J.D. is Vice President and Regulatory Compliance Director at Bankers Advisory. Lee is a graduate of the University of Colorado at Boulder and earned his J.D. at the New England School of Law. He is admitted to the bar in Massachusetts. He can be reached at lee@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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