Rep. Jay Hoffman

Filed: 3/15/2017

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 2702

2    AMENDMENT NO. ______. Amend House Bill 2702 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Title Insurance Act is amended by changing
5Sections 3 and by adding Section 17.1 as follows:
 
6    (215 ILCS 155/3)  (from Ch. 73, par. 1403)
7    Sec. 3. As used in this Act, the words and phrases
8following shall have the following meanings unless the context
9requires otherwise:
10    (1) "Title insurance business" or "business of title
11insurance" means:
12        (A) Issuing as insurer or offering to issue as insurer
13    title insurance; and
14        (B) Transacting or proposing to transact one or more of
15    the following activities when conducted or performed in
16    contemplation of or in conjunction with the issuance of

 

 

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1    title insurance;
2            (i) soliciting or negotiating the issuance of
3        title insurance;
4            (ii) guaranteeing, warranting, or otherwise
5        insuring the correctness of title searches for all
6        instruments affecting titles to real property, any
7        interest in real property, cooperative units and
8        proprietary leases, and for all liens or charges
9        affecting the same;
10            (iii) handling of escrows, settlements, or
11        closings;
12            (iv) executing title insurance policies;
13            (v) effecting contracts of reinsurance;
14            (vi) abstracting, searching, or examining titles;
15        or
16            (vii) issuing insured closing letters or closing
17        protection letters;
18        (C) Guaranteeing, warranting, or insuring searches or
19    examinations of title to real property or any interest in
20    real property, with the exception of preparing an
21    attorney's opinion of title; or
22        (D) Guaranteeing or warranting the status of title as
23    to ownership of or liens on real property and personal
24    property by any person other than the principals to the
25    transaction; or
26        (E) Doing or proposing to do any business substantially

 

 

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1    equivalent to any of the activities listed in this
2    subsection, provided that the preparation of an attorney's
3    opinion of title pursuant to paragraph (1)(C) is not
4    intended to be within the definition of "title insurance
5    business" or "business of title insurance".
6    (1.5) "Title insurance" means insuring, guaranteeing,
7warranting, or indemnifying owners of real or personal property
8or the holders of liens or encumbrances thereon or others
9interested therein against loss or damage suffered by reason of
10liens, encumbrances upon, defects in, or the unmarketability of
11the title to the property; the invalidity or unenforceability
12of any liens or encumbrances thereon; or doing any business in
13substance equivalent to any of the foregoing. "Warranting" for
14purpose of this provision shall not include any warranty
15contained in instruments of encumbrance or conveyance. Title
16insurance is a single line form of insurance, also known as
17monoline. An attorney's opinion of title pursuant to paragraph
18(1)(C) is not intended to be within the definition of "title
19insurance".
20    (2) "Title insurance company" means any domestic company
21organized under the laws of this State for the purpose of
22conducting the business of title insurance and any title
23insurance company organized under the laws of another State,
24the District of Columbia or foreign government and authorized
25to transact the business of title insurance in this State.
26    (3) "Title insurance agent" means a person, firm,

 

 

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1partnership, association, corporation or other legal entity
2registered by a title insurance company and authorized by such
3company to determine insurability of title in accordance with
4generally acceptable underwriting rules and standards in
5reliance on either the public records or a search package
6prepared from a title plant, or both, and authorized by such
7title insurance company in addition to do any of the following:
8act as an escrow agent pursuant to subsections (f), (g), and
9(h) of Section 16 of this Act, solicit title insurance, collect
10premiums, or issue title insurance commitments, policies, and
11endorsements of the title insurance company; provided,
12however, the term "title insurance agent" shall not include
13officers and salaried employees of any title insurance company.
14    (4) "Producer of title business" is any person, firm,
15partnership, association, corporation or other legal entity
16engaged in this State in the trade, business, occupation or
17profession of (i) buying or selling interests in real property,
18(ii) making loans secured by interests in real property, or
19(iii) acting as broker, agent, attorney, or representative of
20natural persons or other legal entities that buy or sell
21interests in real property or that lend money with such
22interests as security.
23    (5) "Associate" is any firm, association, partnership,
24corporation or other legal entity organized for profit in which
25a producer of title business is a director, officer, or partner
26thereof, or owner of a financial interest, as defined herein,

 

 

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1in such entity; any legal entity that controls, is controlled
2by, or is under common control with a producer of title
3business; and any natural person or legal entity with whom a
4producer of title business has any agreement, arrangement, or
5understanding or pursues any course of conduct the purpose of
6which is to evade the provisions of this Act.
7    (6) "Financial interest" is any ownership interest, legal
8or beneficial, except ownership of publicly traded stock.
9    (7) "Refer" means to place or cause to be placed, or to
10exercise any power or influence over the placing of title
11business, whether or not the consent or approval of any other
12person is sought or obtained with respect to the referral.
13    (8) "Escrow Agent" means any title insurance company or any
14title insurance agent, including independent contractors of
15either, acting on behalf of a title insurance company, which
16receives deposits, in trust, of funds or documents, or both,
17for the purpose of effecting the sale, transfer, encumbrance or
18lease of real property to be held by such escrow agent until
19title to the real property that is the subject of the escrow is
20in a prescribed condition. An escrow agent conducting closings
21shall be subject to the provisions of paragraphs (1) through
22(4) of subsection (e) of Section 16 of this Act.
23    (9) "Independent Escrowee" means any firm, person,
24partnership, association, corporation or other legal entity,
25other than a title insurance company or a title insurance
26agent, which receives deposits, in trust, of funds or

 

 

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1documents, or both, for the purpose of effecting the sale,
2transfer, encumbrance or lease of real property to be held by
3such escrowee until title to the real property that is the
4subject of the escrow is in a prescribed condition. Federal and
5State chartered banks, savings and loan associations, credit
6unions, mortgage bankers, banks or trust companies authorized
7to do business under the Illinois Corporate Fiduciary Act,
8licensees under the Consumer Installment Loan Act, real estate
9brokers licensed pursuant to the Real Estate License Act of
102000, as such Acts are now or hereafter amended, and licensed
11attorneys when engaged in the attorney-client relationship are
12exempt from the escrow provisions of this Act. "Independent
13Escrowee" does not include employees or independent
14contractors of a title insurance company or title insurance
15agent authorized by a title insurance company to perform
16closing, escrow, or settlement services.
17    (10) "Single risk" means the insured amount of any title
18insurance policy, except that where 2 or more title insurance
19policies are issued simultaneously covering different estates
20in the same real property, "single risk" means the sum of the
21insured amounts of all such title insurance policies. Any title
22insurance policy insuring a mortgage interest, a claim payment
23under which reduces the insured amount of a fee or leasehold
24title insurance policy, shall be excluded in computing the
25amount of a single risk to the extent that the insured amount
26of the mortgage title insurance policy does not exceed the

 

 

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1insured amount of the fee or leasehold title insurance policy.
2    (11) "Department" means the Department of Financial and
3Professional Regulation.
4    (12) "Secretary" means the Secretary of Financial and
5Professional Regulation.
6    (13) "Insured closing letter" or "closing protection
7letter" means an indemnification or undertaking to a party to a
8real property transaction, from a principal such as a title
9insurance company, setting forth in writing the extent of the
10principal's responsibility for intentional misconduct or
11errors in closing the real property transaction on the part of
12a settlement agent, such as a title insurance agent or other
13settlement service provider, or a similar undertaking given by
14a title insurance company or an independent escrowee to a party
15to a real property transaction which indemnifies the party
16against the intentional misconduct or errors in closing the
17real property transaction on the part of the title insurance
18company or independent escrowee and includes protection
19afforded pursuant to subsections (f), (g), and (h) of Section
2016, and Section 16.1, and Section 17.1 of this Act even if such
21protection is afforded by contract.
22    (14) "Residential real property" means a building or
23buildings consisting of one to 4 residential units or a
24residential condominium unit where at least one of the
25residential units or condominium units is occupied or intended
26to be occupied as a residence by the purchaser or borrower, or

 

 

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1in the event that the purchaser or borrower is the trustee of a
2trust, by a beneficiary of that trust.
3    (15) "Financial institution" means any bank subject to the
4Illinois Banking Act, any savings and loan association subject
5to the Illinois Savings and Loan Act of 1985, any savings bank
6subject to the Savings Bank Act, any credit union subject to
7the Illinois Credit Union Act, and any federally chartered
8commercial bank, savings and loan association, savings bank, or
9credit union organized and operated in this State pursuant to
10the laws of the United States.
11(Source: P.A. 98-387, eff. 8-16-13.)
 
12    (215 ILCS 155/17.1 new)
13    Sec. 17.1. Independent escrowee prohibitions;
14indemnification under a closing protection letter.
15    (a) Notwithstanding the provisions of item (iii) of
16paragraph (B) of subsection (1) and subsection (9) of Section 3
17of this Act, an independent escrowee is not authorized to act
18pursuant to subsection (9) of Section 3 of this Act in a
19nonresidential real property transaction where the amount of
20settlement funds on deposit with the escrow agent is less than
21$2,000,000 or in a residential real property transaction
22unless, as part of the same transaction, closing protection
23letters protecting the buyer's or borrower's, lender's, and
24seller's interests have been issued by the independent
25escrowee.

 

 

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1    (b) Unless otherwise agreed to between an independent
2escrowee and a protected person or entity, a closing protection
3letter under this Section shall indemnify all parties to a real
4property transaction against actual loss, not to exceed the
5amount of the settlement funds deposited with the independent
6escrowee. The closing protection letter shall in any event
7indemnify all parties to a real property transaction when such
8losses arise out of:
9        (1) failure of the independent escrowee to comply with
10    written closing instructions to the extent that they relate
11    to (A) the status of the title to an interest in land or
12    the validity, enforceability, and priority of the lien of a
13    mortgage on an interest in land, including the obtaining of
14    documents and the disbursement of funds necessary to
15    establish the status of title or lien or (B) the obtaining
16    of any other document specifically required by a party to
17    the real property transaction, but only to the extent that
18    the failure to obtain such other document affects the
19    status of the title to an interest in land or the validity,
20    enforceability, and priority of the lien of a mortgage on
21    an interest in land; or
22        (2) fraud, dishonesty, or negligence of the
23    independent escrowee in handling funds or documents in
24    connection with closings to the extent that the fraud,
25    dishonesty, or negligence relates to the status of the
26    title to the interest in land or to the validity,

 

 

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1    enforceability, and priority of the lien of a mortgage on
2    an interest in land or, in the case of a seller, to the
3    extent that the fraud, dishonesty, or negligence relates to
4    funds paid to or on behalf of, or which should have been
5    paid to or on behalf of, the seller.
6    (c) The indemnification under a closing protection letter
7may include limitations on the liability of the independent
8escrowee for any of the following:
9        (1) Failure of the independent escrowee to comply with
10    closing instructions that require title insurance
11    protection inconsistent with that set forth in the title
12    insurance commitment for the real property transaction.
13    Instructions that require the removal of specific
14    exceptions to title or compliance with the requirements
15    contained in the title insurance commitment shall not be
16    deemed to be inconsistent.
17        (2) Loss or impairment of funds in the course of
18    collection or while on deposit with a bank due to bank
19    failure, insolvency, or suspension, except such as shall
20    result from failure of the independent escrowee closer to
21    comply with written closing instructions to deposit the
22    funds in a bank that is designated by name by a party to
23    the real property transaction.
24        (3) Mechanics' and materialmen's liens in connection
25    with sale, purchase, lease, or construction loan
26    transactions, except to the extent that protection against

 

 

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1    such liens is afforded by a title insurance commitment or
2    policy issued by the title insurance agent or title
3    insurance company.
4        (4) Failure of the independent escrowee to comply with
5    written closing instructions to the extent that such
6    instructions require a determination by the independent
7    escrowee of the validity, enforceability, or effectiveness
8    of any document described in item (B) of paragraph (1) of
9    subsection (b) of this Section.
10        (5) Fraud, dishonesty, or negligence of an employee,
11    agent, attorney, or broker, who is not also the independent
12    escrowee or an independent contract closer of the
13    independent escrowee, of the indemnified party to the real
14    property transaction.
15        (6) The settlement or release of any claim by the
16    indemnified party to the real property transaction without
17    the written consent of the independent escrowee.
18        (7) Any matters created, suffered, assumed, or agreed
19    to by, or known to, the indemnified party to the real
20    property transaction without the written consent of the
21    independent escrowee.
22    The closing protection letter may also include reasonable
23additional provisions concerning the dollar amount of
24protection, provided the limit is no less than the amount
25deposited with the independent escrowee, arbitration,
26subrogation, claim notices, and other conditions and

 

 

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1limitations that do not materially impair the protection
2required by this Section.
3    (d) The Secretary shall adopt and amend rules as may be
4required for the proper administration and enforcement of this
5Section consistent with the federal Real Estate Settlement
6Procedures Act and Section 24 of this Act.
 
7    Section 99. Effective date. This Act takes effect upon
8becoming law.".