HB4941 103RD GENERAL ASSEMBLY

LRB103 36347 RPS 66446 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB4941

Introduced 2/7/2024, by Rep. Terra Costa Howard

SYNOPSIS AS INTRODUCED:

215 ILCS 155/3	from Ch. 73, par. 1403
215 ILCS 155/5	from Ch. 73, par. 1405
215 ILCS 155/16	from Ch. 73, par. 1416
215 ILCS 155/16.2 new

Amends the Title Insurance Act. Provides for the licensure of title insurance agents (instead of registration of title insurance agents by title insurance companies). Makes changes in the definition of "financial interest". Defines "core title agent services". Sets forth requirements for licensure, including examination and educational requirements. Sets forth exemptions from the examination and educational requirements. Provides that it is unlawful for any person, firm, partnership, association, corporation, or other legal entity to act as or hold itself out to be a title insurance agent unless first procuring from the Secretary a license. Provides that no person, firm, association, partnership, or corporation may operate as a pre-licensing or continuing education provider or administer examinations unless the provider holds a certification issued by the Department of Financial and Professional Regulation. Sets forth provisions concerning the Department's approval of applications for a certificate. Makes other changes. Effective immediately.

A BILL FOR

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, 5, and 16 and by adding Section 16.2 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" or "agent" means a person, firm, partnership, association, corporation, or other legal entity licensed under this Act registered by a title insurance company and authorized by a title insurance such company to (i) perform core title agent services and (ii) 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. "Title ; provided, however, the term "title insurance agent" or "agent" does 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, of more than 1% in a privately held or except ownership of publicly traded company 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, 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.

(16) "Core title agent services" means the performance of the following services for which liability arises, and that is separate from and not duplicative of any other professional service, including, without limitation, the practice of law and the performance of services as a real estate licensee:

(A) reviewing and evaluating title, tax, judgment, lien, and other searches or search products; private title plant records; records of grantor-grantee and other indices; public records and other records; and any other information and materials that are relevant to a particular property and transaction to determine insurability of title to the property;

(B) issuing or causing to be issued the title commitments on behalf of a title insurance company, including the determination of the conditions under which the title insurance company will issue the required title insurance policies required in a particular transaction;

(C) determining whether, in accordance with applicable law and the title insurance company's underwriting requirements, principles, and guidelines, objections stated on the title insurance commitments may be cleared and the requirements that must be met prior to the issuance of the title insurance policies to waive or insure over the objections; and

(D) issuing or causing to be issued the title insurance policies for a particular transaction when all conditions for the issuance have been satisfied.

(17) "Affiliated business arrangements" has the meaning given to that term in 12 U.S.C. 2602(7).

(Source: P.A. 100-485, eff. 9-8-17.)

(215 ILCS 155/5) (from Ch. 73, par. 1405)

Sec. 5. Certificate of authority required to engage in activities under this Act.

(a) It is unlawful for any company to engage or to continue in the business of title insurance without first procuring from the Secretary a certificate of authority stating that the company has complied with the requirements of Section 4 of this Act. An insurer that transacts any class of insurance other than title insurance anywhere in the United States is not eligible for the issuance of a certificate of authority to transact title insurance in this State nor for a renewal of a certificate of authority.

(b) It is unlawful for any person, firm, partnership, association, corporation, or other legal entity to act as or hold itself out to be a title insurance agent unless first procuring from the Secretary a license subject to the conditions of Section 16.

(c) As used in this Act, the terms "license" and "certificate of authority" have the same meaning.

(d) All title insurance agents, including affiliated and unaffiliated business arrangements, must comply with 12 CFR 1024 and the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) and its associated regulations.

(Source: P.A. 94-893, eff. 6-20-06.)

(215 ILCS 155/16) (from Ch. 73, par. 1416)

Sec. 16. Title insurance agents.

(a) No person, firm, partnership, association, corporation or other legal entity shall act as or hold itself out to be a title insurance agent unless it (i) has been issued a license by the Secretary; and (ii) is authorized by at least one title insurance company to perform core title agent services duly registered by a title insurance company with the Secretary. Every title insurance agent registered after the effective date of this amendatory Act of the 103rd General Assembly shall satisfy the requirements for a license under this Act until January 1 of the calendar year immediately following the Department's adoption of rules necessary to administer the licensing of title insurance agents and until the related application is approved or disapproved. The continued recognition of such title insurance agent registrations during this period does not relieve title insurance agents or title insurance companies of their other obligations under this Act before or after the effective date of this amendatory Act of the 103rd General Assembly.

(b) Each application for a license registration shall be made on a form specified by the Secretary and prepared by each title insurance company which the agent represents. The title insurance company shall retain the copy of the application and forward a copy to the Secretary.

(c) (Blank). Every applicant for registration, except a firm, partnership, association, limited liability company, or corporation, must be 18 years or more of age. Included in every application for registration of a title insurance agent, including a firm, partnership, association, limited liability company, or corporation, shall be an affidavit of the applicant title insurance agent, signed and notarized in front of a notary public, affirming that the applicant and every owner, officer, director, principal, member, or manager of the applicant has never been convicted or pled guilty to any felony or misdemeanor involving a crime of theft or dishonesty or otherwise accurately disclosing any such felony or misdemeanor involving a crime of theft or dishonesty. No person who has had a conviction or pled guilty to any felony or misdemeanor involving theft or dishonesty may be registered by a title insurance company without a written notification to the Secretary disclosing the conviction or plea, and no such person may serve as an owner, officer, director, principal, or manager of any registered title insurance agent without the written permission of the Secretary.

(c-5) License applications shall comply with the following:

(1) Every applicant for a license, except a firm, partnership, association, corporation, or other legal entity, must be 18 or more years of age.

(2) Every applicant for a license that is a firm, partnership, association, corporation or other legal entity shall designate and name at least one licensed individual who (i) has a financial interest in the licensee or is an employee for the licensee, and (ii) is authorized by at least one title insurance company to perform core title agent services.

(3) The application, including an application from a firm, partnership, association, corporation, or other legal entity, must include an affidavit of the applicant title insurance agent, which must be signed and notarized in front of a notary public, either affirming that the applicant and every owner, officer, director, principal, member, or manager of the applicant has never been convicted of or pled guilty to any felony or misdemeanor involving a crime of theft or dishonesty or accurately disclosing any such felony or misdemeanor involving a crime of theft or dishonesty. No person who has been convicted of or pled guilty to any felony or misdemeanor involving theft or dishonesty may be issued a license by the Secretary or appointed by a title insurance company without a written notification to the Secretary disclosing the conviction or plea, and no such person may serve as an owner, officer, director, principal, or manager of any title insurance agent without the written permission of the Secretary.

(4) The initial application or the first renewal application after the effective date of this amendatory Act of the 103rd General Assembly for a license of a title insurance agent shall include:

(A) Proof that the applicant is exempt pursuant to subsection (c-10), (c-15), or (c-20) or has passed, within 365 days before submission of the application, with a score of no less than 70%, an examination required by the Secretary demonstrating reasonable familiarity with:

(i) ethical practices, duties, and responsibilities of a title agent;

(ii) how title insurance policy claims arise;

(iii) introduction to title insurance, including the requirements of the Title Insurance Act and administrative rules;

(iv) Illinois real property law, including, but not limited to, forms of ownership, conveyances, testate or intestate succession of title, taxes, judgments, liens, and surveys;

(v) core title agent services;

(vi) title examinations and methods, title objections, policy and endorsement forms, waivers of policy exceptions, and escrow procedures;

(vii) introduction to escrow and settlement regulations;

(viii) accounting practices for escrow agents and title agents;

(ix) financial responsibilities of a title agent outside of escrow; and

(x) principles of the federal Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.).

(B) Proof that the applicant has satisfied a pre-licensing education requirement of at least 8 credit hours on the subjects set forth in subparagraph (A) of this paragraph prior to taking the examination required by the Secretary.

(C) For initial applicants, the requirements in subparagraphs (A) and (B) of this paragraph must be met prior to filing the application, unless proof is provided with the application that the applicant is exempt pursuant to subsection (c-10), (c-15), or (c-20).

(c-10) Applicants who are attorneys in good standing and currently registered with the Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois are exempt from the requirements in subparagraphs (A) and (B) of paragraph (4).

(c-15) Applicants holding a current title of Illinois Title Professional or Illinois Escrow Professional issued by the Illinois Land Title Association or a current National Title Professional designation issued by the American Land Title Association are exempt from the requirements in subparagraphs (A) and (B) of paragraph (4).

(c-20) Applicants that have previously been registered by a title insurance company as a title insurance agent for no less than 10 years before the effective date of this amendatory Act of the 103rd General Assembly are exempt from the requirements in subparagraphs (A) and (B) of paragraph (4).

(c-25) Every applicant shall obtain and maintain errors and omissions insurance or its equivalent, such as malpractice insurance covering title insurance agent services, in a coverage and deductible amount acceptable to the title insurance company authorizing the agent, but in any event in an amount no less than $250,000 per claim and an aggregate limit of $500,000. A title insurance company shall not provide the insurance directly or indirectly on behalf of a title insurance agent. If errors and omissions insurance is unavailable generally, the Department shall adopt rules for alternative methods to comply with this paragraph.

(c-30) The Secretary shall review and approve all initial applications and renewal applications within a 30-day period from the date submitted by the applicant, unless the applicant has not met the requirements as set out in this Section. The Secretary shall notify any applicant of requirements that have not been met within a 60-day period.

(d) A license shall be renewed by the first day of February every 2 years by a filing with the Secretary. The applicable 2-year renewal deadline shall occur on the first day of February of even-numbered years for agents whose last names or entities with names that begin with the letters A through M, and on the first day of February of odd-numbered years for agents whose last names or entities with names that begin with the letters N through Z. The years of the first renewal periods for agents registered prior to the effective date of this amendatory Act of the 103rd General Assembly shall be set forth in the rules adopted by the Secretary to implement this amendatory Act of the 103rd General Assembly. Supplemental filings for a new title insurance agent to be added between license renewals shall be made from time to time in the manner provided by the Secretary. Licenses shall remain in effect during the applicable 2-year period unless revoked or suspended by the Secretary or voluntarily withdrawn by the title insurance agent, or the title insurance company.

(d-5) Agents applying for renewal must complete a continuing education requirement of at least 8 credit hours on the subjects set forth in subparagraph (A) of paragraph (4) of subsection (c-5) prior to submission of the renewal application. Proof the agent has completed the continuing education requirement must be submitted with the renewal application. Agents who are attorneys in good standing and currently registered with the Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois are exempt from the requirements in this subsection (d-5) by virtue of satisfying their minimum continuing legal education requirement if at least 8 hours of the minimum continuing legal education requirement is fulfilled with topics related to real estate transactions or title insurance. Registration shall be made annually by a filing with the Secretary; supplemental registrations for new title insurance agents to be added between annual filings shall be made from time to time in the manner provided by the Secretary; registrations shall remain in effect unless revoked or suspended by the Secretary or voluntarily withdrawn by the registrant or the title insurance company.

(e) Funds deposited in connection with any escrows, settlements, or closings 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. The 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 escrow agent. The 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.

Interest received on funds deposited with the escrow agent in connection with any escrow, settlement, or closing shall be paid to the depositing party unless the instructions provide otherwise.

The escrow agent shall maintain separate records of all receipts and disbursements of escrow, settlement, or closing funds.

The escrow agent shall comply with any rules adopted by the Secretary pertaining to escrow, settlement, or closing transactions.

(f) A title insurance agent shall not act as an escrow agent 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 the title insurance agent, title insurance company, or another authorized title insurance agent has committed for the issuance of title insurance in that transaction and the title insurance agent is authorized to act as an escrow agent on behalf of the title insurance company for which the commitment for title insurance has been issued. The authorization under the preceding sentence shall be given either (1) by an agency contract with the title insurance company which contract, in compliance with the requirements set forth in subsection (g) of this Section, authorizes the title insurance agent to act as an escrow agent on behalf of the title insurance company or (2) by a closing protection letter in compliance with the requirements set forth in Section 16.1 of this Act, issued by the title insurance company to the seller, buyer, borrower, and lender. A closing protection letter shall not be issued by a title insurance agent. The provisions of this subsection (f) shall not apply to the authority of a title insurance agent to act as an escrow agent under subsection (g) of Section 17 of this Act.

(g) If an agency contract between the title insurance company and the title insurance agent is the source of the authority under subsection (f) of this Section for a title insurance agent to act as escrow agent for a real property transaction, then the agency contract shall provide for no less protection from the title insurance company to all parties to the real property transaction than the title insurance company would have provided to those parties had the title insurance company issued a closing protection letter in conformity with Section 16.1 of this Act.

(h) A title insurance company shall be liable for the acts or omissions of its title insurance agent as an escrow agent if the title insurance company has authorized the title insurance agent under subsections (f) and (g) of this Section 16 and only to the extent of the liability undertaken by the title insurance company in the agency agreement or closing protection letter. The liability, if any, of the title insurance agent to the title insurance company for acts and omissions of the title insurance agent as an escrow agent shall not be limited or otherwise modified because the title insurance company has provided closing protection to a party or parties to a real property transaction escrow, settlement, or closing. The escrow agent shall not charge a fee for protection provided by a title insurance company to parties to real property transactions under subsections (f) and (g) of this Section 16 and Section 16.1, but shall collect from the parties the fee charged by the title insurance company and shall promptly remit the fee to the title insurance company. The title insurance company may charge the parties a reasonable fee for protection provided pursuant to subsections (f) and (g) of this Section 16 and Section 16.1 and shall not pay any portion of the fee to the escrow agent. The payment of any portion of the fee to the escrow agent by the title insurance company, shall be deemed a prohibited inducement or compensation in violation of Section 24 of this Act.

(i) The Secretary shall adopt and amend such rules as may be required for the proper administration and enforcement of this Section 16 consistent with the federal Real Estate Settlement Procedures Act and Section 24 of this Act.

(Source: P.A. 98-398, eff. 1-1-14; 98-832, eff. 1-1-15; 99-104, eff. 1-1-16.)

(215 ILCS 155/16.2 new)

Sec. 16.2. Education and testing providers.

(a) No person, firm, association, partnership, or corporation may operate as a pre-licensing or continuing education provider or administer examinations unless the provider holds a certification issued by the Department. The Department shall adopt rules regarding the approval of education and examination providers.

(b) Upon receipt of a properly executed application for certification, the Department shall investigate the qualifications of the provider applicant to determine whether to grant or deny the application for certification. The Department shall acknowledge receipt of the application within 30 days. If the Department has failed to notify the provider applicant of approval or basis for denial within 60 days after the date on which the Department acknowledged receipt of the application for certification, the approval of the Department shall be deemed to have been given.

(c) A certificate issued to a provider shall be valid for 5 years.

(d) A provider holding a provider certificate shall submit to the Department materials for courses of study and testing for approval. Upon receipt of materials, the Department shall review the materials for compliance with subparagraph (A) of paragraph (4) of subsection (c-5) of Section 16. Upon receipt of properly submitted materials, the Department shall acknowledge the receipt of the materials within 30 days. If the Department has failed to notify the provider of approval or the basis for denial of the materials within 60 days of the date on which the Department acknowledged receipt of the materials, the approval of the Department shall be deemed to have been given.

(e) If a provider wishes to substantially change approved materials for courses of study or testing, a copy of the proposed revisions must be sent to the Department for approval. The Department shall acknowledge receipt of the proposed revisions within 30 days. If the Department has failed to notify the provider within 60 days of the date on which the Department acknowledged receipt of the proposed revisions, the approval of the Department shall be deemed to have been given.

(f) The Department shall adopt rules regarding minimum standards for pre-licensing education, continuing education, and testing and may biennially review and approve pre-licensing education, continuing education, and testing content from approved providers.

Section 99. Effective date. This Act takes effect upon becoming law.