Sen. Michael E. Hastings

Filed: 5/19/2017





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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 17 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
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 an indemnification or
14undertaking given by a title insurance company or an
15independent escrowee setting forth in writing the extent of the
16title insurance company's or independent escrowee's
17responsibility to a party to a real property transaction which
18indemnifies the party against the intentional misconduct or
19errors in closing the real property transaction on the part of
20the title insurance company or independent escrowee and
21includes protection afforded pursuant to subsections (f), (g),
22and (h) of Section 16, and Section 16.1, subsection (h) of
23Section 17, and Section 17.1 of this Act even if such
24protection is afforded by contract.
25    (14) "Residential real property" means a building or
26buildings consisting of one to 4 residential units or a



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1residential condominium unit where at least one of the
2residential units or condominium units is occupied or intended
3to be occupied as a residence by the purchaser or borrower, or
4in the event that the purchaser or borrower is the trustee of a
5trust, by a beneficiary of that trust.
6    (15) "Financial institution" means any bank subject to the
7Illinois Banking Act, any savings and loan association subject
8to the Illinois Savings and Loan Act of 1985, any savings bank
9subject to the Savings Bank Act, any credit union subject to
10the Illinois Credit Union Act, and any federally chartered
11commercial bank, savings and loan association, savings bank, or
12credit union organized and operated in this State pursuant to
13the laws of the United States.
14(Source: P.A. 98-387, eff. 8-16-13.)
15    (215 ILCS 155/17)  (from Ch. 73, par. 1417)
16    Sec. 17. Independent escrowees.
17    (a) Every independent escrowee shall be subject to the same
18certification and deposit requirements to which title
19insurance companies are subject under Section 4 of this Act.
20    (b) No person, firm, corporation or other legal entity
21shall hold itself out to be an independent escrowee unless it
22has been issued a certificate of authority by the Secretary.
23    (c) Every applicant for a certificate of authority, except
24a firm, partnership, association or corporation, must be 18
25years or more of age.



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1    (d) Every certificate of authority shall remain in effect
2one year unless revoked or suspended by the Secretary or
3voluntarily surrendered by the holder.
4    (e) An independent escrowee may engage in the escrow,
5settlement, or closing business, or any combination of such
6business, and operate as an escrow, settlement, or closing
7agent, provided that:
8        (1) Funds deposited in connection with any escrow,
9    settlement, or closing shall be deposited in a separate
10    fiduciary trust account or accounts in a bank or other
11    financial institution insured by an agency of the federal
12    government unless the instructions provide otherwise. Such
13    funds shall be the property of the person or persons
14    entitled thereto under the provisions of the escrow,
15    settlement, or closing and shall be segregated by escrow,
16    settlement or closing in the records of the independent
17    escrowee. Such funds shall not be subject to any debts of
18    the escrowee and shall be used only in accordance with the
19    terms of the individual escrow, settlement or closing under
20    which the funds were accepted.
21        (2) Interest received on funds deposited with the
22    independent escrowee in connection with any escrow,
23    settlement or closing shall be paid to the depositing party
24    unless the instructions provide otherwise.
25        (3) The independent escrowee shall maintain separate
26    records of all receipt and disbursement of escrow,



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1    settlement or closing funds.
2        (4) The independent escrowee shall comply with any
3    rules or regulations promulgated by the Secretary
4    pertaining to escrow, settlement or closing transactions.
5    (f) The Secretary or his authorized representative shall
6have the power and authority to visit and examine at any time
7any independent escrowee certified under this Act and to verify
8and compel compliance with the provisions of this Act.
9    (g) A title insurance company or title insurance agent, not
10qualified as an independent escrowee, may act in the capacity
11of an escrow agent when it is supplying an abstract of title,
12grantor-grantee search, tract search, lien search, tax
13assessment search, or other limited purpose search to the
14parties to the transaction even if it is not issuing a title
15insurance commitment or title insurance policy. A title
16insurance agent may act as an escrow agent only when
17specifically authorized in writing on forms prescribed by the
18Secretary by a title insurance company that has duly registered
19the agent with the Secretary and only when notice of the
20authorization is provided to and receipt thereof is
21acknowledged by the Secretary. The authority granted to a title
22insurance agent may be limited or revoked at any time by the
23title insurance company.
24    (h) An independent escrowee may, pursuant to Section 17.1
25of this Act, issue an insured closing letter if, in addition to
26complying with the same certification and deposit requirements



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1that title insurance companies are subject to under Section 4
2of this Act, the independent escrowee:
3        (1) Satisfies the Secretary that it has a minimum
4    capital and surplus of $2,000,000. The Secretary may
5    provide the forms and standards for this purpose by rule.
6    This paragraph applies only to independent escrowees
7    licensed under this Act for the first time on or after the
8    effective date of this amendatory Act of the 100th General
9    Assembly.
10        (2) Files with and has approved by the Secretary proof
11    of a fidelity bond in the minimum amount of $2,000,000 per
12    occurrence.
13        (3) Establishes and maintains a statutory closing
14    protection letter reserve for the protection of parties
15    named in warranties of services consisting of a sum of 25%
16    of the closing protection letter revenue received by the
17    independent escrowee on or after the effective date of this
18    amendatory Act of the 100th General Assembly. The reserve
19    shall be reported as a liability of the independent
20    escrowee in its financial statements. Amounts placed in the
21    statutory closing protection letter reserve shall be
22    deducted in determining the net profit of the independent
23    escrowee for the year. Except as provided in this
24    subsection, assets in value equal to the statutory closing
25    protection letter reserve are not subject to distribution
26    among creditors, stockholders, or other owners of the



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1    independent escrowee until all claims of parties named in
2    warranties of services have been paid in full and
3    discharged.
4        (4) Releases from the statutory closing protection
5    letter reserve a sum equal to 10% of the amount added to
6    the reserve during a calendar year on July 1 of each of the
7    5 years following the year in which the sum was added and
8    releases from the statutory closing protection letter
9    reserve a sum equal to 3 1/3% of the amount added to the
10    reserve during that year on each succeeding July 1 until
11    the entire amount for that year has been released.
12    The Secretary shall adopt and amend rules as may be
13required for the proper administration and enforcement of this
14subsection (h) consistent with the federal Real Estate
15Settlement and Procedures Act and Section 24 of this Act.
16(Source: P.A. 94-893, eff. 6-20-06.)
17    (215 ILCS 155/17.1 new)
18    Sec. 17.1. Closing or settlement protection; independent
20    (a) Notwithstanding the provisions of item (iii) of
21paragraph (B) of subsection (1) and subsection (9) of Section 3
22of this Act, an independent escrowee is not authorized to act
23pursuant to subsection (9) of Section 3 of this Act in a
24nonresidential real property transaction where the amount of
25settlement funds on deposit with the escrow agent is less than



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1$2,000,000 or in a residential real property transaction
2unless, as part of the same transaction, closing protection
3letters protecting the buyer's or borrower's, lender's, and
4seller's interests have been issued by the independent
6    (b) Unless otherwise agreed to between an independent
7escrowee and a protected person or entity, a closing protection
8letter under this Section shall indemnify all parties to a real
9property transaction against actual loss, not to exceed the
10amount of the settlement funds deposited with the independent
11escrowee. The closing protection letter shall in any event
12indemnify all parties to a real property transaction when such
13losses arise out of:
14        (1) failure of the independent escrowee to comply with
15    written closing instructions to the extent that they relate
16    to (A) the status of the title to an interest in land or
17    the validity, enforceability, and priority of the lien of a
18    mortgage on an interest in land, including the obtaining of
19    documents and the disbursement of funds necessary to
20    establish the status of title or lien or (B) the obtaining
21    of any other document specifically required by a party to
22    the real property transaction, but only to the extent that
23    the failure to obtain such other document affects the
24    status of the title to an interest in land or the validity,
25    enforceability, and priority of the lien of a mortgage on
26    an interest in land; or



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



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1    funds in a bank that is designated by name by a party to
2    the real property transaction.
3        (3) Mechanics' and materialmen's liens in connection
4    with sale, purchase, lease, or construction loan
5    transactions, except to the extent that protection against
6    such liens is afforded by a title insurance commitment or
7    policy issued by the title insurance agent or title
8    insurance company.
9        (4) Failure of the independent escrowee to comply with
10    written closing instructions to the extent that such
11    instructions require a determination by the independent
12    escrowee of the validity, enforceability, or effectiveness
13    of any document described in item (B) of paragraph (1) of
14    subsection (b) of this Section.
15        (5) Fraud, dishonesty, or negligence of an employee,
16    agent, attorney, or broker, who is not also the independent
17    escrowee or an independent contract closer of the
18    independent escrowee, of the indemnified party to the real
19    property transaction.
20        (6) The settlement or release of any claim by the
21    indemnified party to the real property transaction without
22    the written consent of the independent escrowee.
23        (7) Any matters created, suffered, assumed, or agreed
24    to by, or known to, the indemnified party to the real
25    property transaction without the written consent of the
26    independent escrowee.



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1    The closing protection letter may also include reasonable
2additional provisions concerning the dollar amount of
3protection, provided the limit is no less than the amount
4deposited with the independent escrowee, arbitration,
5subrogation, claim notices, and other conditions and
6limitations that do not materially impair the protection
7required by this Section.
8    (d) The Secretary shall adopt and amend rules as may be
9required for the proper administration and enforcement of this
10Section consistent with the federal Real Estate Settlement
11Procedures Act and Section 24 of this Act.
12    Section 99. Effective date. This Act takes effect upon
13becoming law.".