Requirements After an Escrow License Has Been Issued

Reporting Requirements

The following reports must be submitted by all Escrow licensees by the due date noted:

Audited Financial Statements, Due within 105 days of end of fiscal year

• Each escrow agent must submit to the Commissioner an audit report containing audited financial statements covering the calendar year or fiscal year within 105 days after the close of the calendar or fiscal year. Additional relevant information is also required (California Financial Code Section 17406 and 1741.5 of the California Code of Regulations).

Report of Escrow Liability for each Licensed location, due February 15

• Each escrow agent must file a Report of Escrow Liability for each licensed location no later than February 15 of each year (California Financial Code Section 17348).

All new officers, directors and employees must be reported within ten days of their employment.

Each escrow agent is required to notify the Department 30 days prior to a change in the address of the licensed location.

The closing audit is due within 105 days from the date of the application to surrender the license that was received by the Department (Financial Code Section 17600).

Assessments

• ANNUAL ASSESSMENT:
  On or before the 30th day of May every year, the Department will assess each licensee the costs and expenses reasonably incurred in the administration of the Escrow Law. The amount of the assessment is $2,800 for each licensed location. If the assessment is not sufficient to cover the costs and expenses of administering the Escrow Law, the Commissioner is authorized to seek a special assessment not exceeding $1,000 per location.
• EAFC Assessments:
  Each escrow agent that is required to be a member of EAFC will be subject to various assessments and must comply with the certificate program.

Bond Requirements

• Surety bond requirements
  Each escrow agent is required to maintain a surety bond at all times. The amount of the surety bond may be $25,000, $35,000 or $50,000 depending on the average trust liability. The surety bond amount is increased by $5,000 for each additional licensed location.
• Fidelity bond requirements
  Each escrow agent that is not required to be a member of EAFC or processes transactions that are not covered by EAFC must maintain a fidelity bond at all times.

Corporate Securities of Escrow Agents

Each escrow agent must obtain prior consent from the Department for any stock transfer, issuance of new shares or cancellation of shares regardless of the percentage of the shares being transferred or issued to new or existing owner. In addition, to prevent unauthorized stock transfer, the escrow holder requirement is imposed on each escrow agent by the Commissioner as long as the escrow agent remains licensed under this Department.

Liquid and Tangible Net Worth Requirements

Each escrow agent must maintain at all times liquid assets in excess of current liabilities of $25,000 and tangible assets in excess of total liabilities of $50,000. If branch offices are maintained by the escrow agent, they must increase tangible net worth by 50% of the requirement for the first branch office and 25% for each additional branch office.

Books and Records

Each escrow agent is required to maintain its trust and general account books and records current at all times.

Experience Requirement

An approved manager who has at least five years of qualifying experience must be at the licensed location at all times. An approved manager who has at least four years of qualifying experience must be at each licensed branch office at all times.

Regulatory Examination

Each escrow agent is subject to a regulatory examination by the Department once every two to four years and the escrow agent is responsible for the cost of the regulatory examination. The regulatory examination hours are dependent upon many factors. Those factors include, but not limited to, the type of escrow license held, quantity of licenses held by the licensee, volume of escrow activity, complexities in transactions or processes, quantity and condition of trust accounts and records, egregiousness of violations, level of cooperativeness, etc. For example, an escrow agent with one office location that provides real estate sales and mortgage refinance escrow services can generally expect the regulatory examination hours to be between 40 to 50 hours. If the escrow agent has branch locations, each location will generally be between 20 – 30 hours. The hours may vary depending on the factors mentioned above. Examiners are required to perform numerous procedures in a comprehensive examination program, which entails a thorough and documented review of the licensee’s activities for compliance. Every examination is reviewed for quality and efficiency.