AZ Regulatory Bulletin 2003-06: Licensure as Title Insurance Agent and as Escrow Agent

STATE OF ARIZONA DEPARTMENT OF INSURANCE JANET NAPOLITANO 2910 NORTH 44th STREET, SUITE 210 CHARLES R. COHEN Governor PHOENIX, ARIZONA 85018-7256 Director of Insurance 602/912-8456 (phone) 602/912-8452 (fax) Regulatory Bulletin 2003-06* TO: Licensed Title Insurance Agents and Title Insurance Agent Applicants FROM: Charles R. Cohen Director of Insurance DATE: June 9, 2003 RE: Licensure as Title Insurance Agent and as Escrow Agent * This Substantive Policy Statement is advisory only. A Substantive Policy Statement does not include internal procedural documents that only affect the internal procedures of the Agency, and does not impose additional requirements or penalties on regulated parties or include confidential information or rules made in accordance with the Arizona Administrative Procedure Act. If you believe that this Substantive Policy Statement does impose additional requirements or penalties on regulated parties you may petition the agency under Arizona Revised Statutes Section 41-1033 for a review of the Statement. The Department is concerned that some licensed title insurance agents are engaging in unlicensed escrow activity. Escrow agents in Arizona are licensed and regulated by the Arizona State Banking Department pursuant to Arizona Revised Statutes (“A.R.S.”), Title 6, §6-801 et seq. Title insurers and title insurance agents in Arizona are governed by A.R.S. §20-1561 et seq. The unlicensed escrow activity may arise from a misunderstanding of A.R.S. §20-1581(B), which provides as follows: “A title insurance agent may engage in the business of handling escrows of real property transactions so long as it maintains a separate record of all receipts and disbursements of escrow funds and does not commingle any such funds with its own funds or with funds held by it in any other capacity.” This language does not, and was never intended to, create an exemption from the escrow agent licensing requirements of A.R.S. Title 6. Rather, it serves only to expressly allow a licensed title insurance agent to also engage in escrow business, in accordance with A.R.S. Title 6, provided that the records and funds relative to the escrow business are maintained separately from those of the title business. The plain language of A.R.S. §6-811, which enumerates the exemptions from the escrow agent licensing requirements, supports this conclusion. Licensed attorneys, licensed real estate brokers and licensed mortgage bankers are among the persons exempt from licensure. Licensed title insurance agents, however, are not exempt. Regulatory Bulletin 2003-06 06/19/03 Page 2 Therefore, licensed title insurance agents are advised that they should contact the State Banking Department regarding the appropriate licensure before engaging in any escrow agent activity. Likewise, prospective applicants for title insurance agent licenses are advised that obtaining the title agent license does not eliminate the need to also obtain an escrow agent license if they intend to transact both title and escrow business. Please direct any questions regarding this Bulletin to Gerrie Marks, 602-912-8456 or gmarks@id.state.az.us. For any questions regarding escrow agent licensing, please contact the Arizona State Banking Department at 602-255-4421 or consult their website at www.azbanking.com.