H.B. 197

1

RESIDENTIAL MORTGAGE LOAN CLOSING
2 ACT
3 2008 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Larry B. Wiley
6 Senate Sponsor: ____________
7
8 LONG TITLE
9 General Description:
10 This bill addresses requirements related to a closing on a residential mortgage loan.
11 Highlighted Provisions:
12 This bill:
13 . requires a county, city, or town to issue certain documents;
14 . enacts the Residential Mortgage Loan Closing Act including:
15 . defining terms;
16 . providing exemptions;
17 . requiring certain documents;
18 . addressing the validity of a mortgage loan;
19 . providing for administrative enforcement by the Title and Escrow Commission
20 and the Insurance Department;
21 . granting rulemaking authority;
22 . providing for civil liability; and
23 . addressing the scope of the liability; and
24 . makes technical amendments.
25 Monies Appropriated in this Bill:
26 None
27 Other Special Clauses:

28 None
29 Utah Code Sections Affected:
30 AMENDS:
31 31A-23a-406, as last amended by Laws of Utah 2007, Chapter 325
32 ENACTS:
33 10-9a-522, Utah Code Annotated 1953
34 17-27a-521, Utah Code Annotated 1953
35 31A-40-101, Utah Code Annotated 1953
36 31A-40-102, Utah Code Annotated 1953
37 31A-40-103, Utah Code Annotated 1953
38 31A-40-201, Utah Code Annotated 1953
39 31A-40-202, Utah Code Annotated 1953
40 31A-40-301, Utah Code Annotated 1953
41 31A-40-302, Utah Code Annotated 1953
42
43 Be it enacted by the Legislature of the state of Utah:
44 Section 1. Section 10-9a-522 is enacted to read:
45 10-9a-522. Documents for closing of a residential mortgage loan.
46 (1) As used in this section:
47 (a) "Dwelling" means a residential structure attached to real property that contains one
48 to four units including any of the following if used as a residence:
49 (i) a condominium unit;
50 (ii) a cooperative unit;
51 (iii) a manufactured home; or
52 (iv) a house.
53 (b) "Mortgage lender" means a person who originates a loan secured by:
54 (i) a mortgage;
55 (ii) a deed of trust; or
56 (iii) a lien interest.
57 (c) "Mortgagor" means a person who executes a mortgage or is obligated to pay a
58 mortgage loan.

59 (d) "Residential mortgage loan" means a closed-end, first mortgage loan or extension
60 of credit, if:
61 (i) the loan or extension of credit is secured by a:
62 (A) mortgage;
63 (B) deed of trust; or
64 (C) lien interest; and
65 (ii) the mortgage, deed of trust, or lien interest described in Subsection (1)(c)(i):
66 (A) is on a dwelling located in the state; and
67 (B) is created with the consent of the owner of the residential real property.
68 (e) "Title insurance producer" means a person licensed as a title insurance producer
69 under Title 31A, Chapter 23a, Insurance Marketing - Licensing Producers, Consultants, and
70 Reinsurance Intermediaries.
71 (2) A city or town shall, at the request of one of the following provide a document that
72 states for purposes of Section 31A-40-201 that in relation to the real property or an
73 improvement to the real property that is the subject of the residential mortgage loan whether or
74 not the city or town has a record of an unresolved zoning issue:
75 (a) a mortgagor;
76 (b) a mortgage lender; or
77 (c) a title insurance producer.
78 (3) A city or town may charge a fee that reasonably reimburses the city or town only
79 for time spent and expenses incurred in providing a document described in Subsection (2).
80 (4) Title 63, Chapter 30d, Governmental Immunity Act of Utah, applies to an action
81 against a city or town for damages sustained as a result of the city or town providing
82 information under this section.
83 Section 2. Section 17-27a-521 is enacted to read:
84 17-27a-521. Documents for closing of a residential mortgage loan.
85 (1) As used in this section:
86 (a) "Dwelling" means a residential structure attached to real property that contains one
87 to four units including any of the following if used as a residence:
88 (i) a condominium unit;
89 (ii) a cooperative unit;

90 (iii) a manufactured home; or
91 (iv) a house.
92 (b) "Mortgage lender" means a person who originates a loan secured by:
93 (i) a mortgage;
94 (ii) a deed of trust; or
95 (iii) a lien interest.
96 (c) "Mortgagor" means a person who executes a mortgage or is obligated to pay a
97 mortgage loan.
98 (d) "Residential mortgage loan" means a closed-end, first mortgage loan or extension
99 of credit, if:
100 (i) the loan or extension of credit is secured by a:
101 (A) mortgage;
102 (B) deed of trust; or
103 (C) lien interest; and
104 (ii) the mortgage, deed of trust, or lien interest described in Subsection (1)(c)(i):
105 (A) is on a dwelling located in the state; and
106 (B) is created with the consent of the owner of the residential real property.
107 (e) "Title insurance producer" means a person licensed as a title insurance producer
108 under Title 31A, Chapter 23a, Insurance Marketing - Licensing Producers, Consultants, and
109 Reinsurance Intermediaries.
110 (2) A county shall, at the request of one of the following, provide a document that
111 states for purposes of Section 31A-40-201 that in relation to the real property or an
112 improvement to the real property that is the subject of the residential mortgage loan whether or
113 not the county has a record of an unresolved zoning issue:
114 (a) a mortgagor;
115 (b) a mortgage lender; or
116 (c) a title insurance producer.
117 (3) A county may charge a fee that reasonably reimburses the city or town only for time
118 spent and expenses incurred in providing a document described in Subsection (2).
119 (4) Title 63, Chapter 30d, Governmental Immunity Act of Utah, applies to an action
120 against a county for damages sustained as a result of the county providing information under

121 this section.
122 Section 3. Section 31A-23a-406 is amended to read:
123 31A-23a-406. Title insurance producer's business.
124 (1) A title insurance producer may do escrow involving a real property [transactions]
125 transaction if all of the following exist:
126 (a) the title insurance producer is licensed with:
127 (i) the title line of authority; and
128 (ii) the escrow subline of authority;
129 (b) the title insurance producer is appointed by a title insurer authorized to do business
130 in the state;
131 (c) one or more of the following is to be issued as part of the transaction:
132 (i) an owner's policy of title insurance; or
133 (ii) a lender's policy of title insurance;
134 (d) (i) all funds deposited with the title insurance producer in connection with [any] an
135 escrow:
136 (A) are deposited:
137 (I) in a federally insured financial institution; and
138 (II) in a trust account that is separate from all other trust account funds that are not
139 related to a real estate [transactions] transaction; and
140 (B) are the property of the persons entitled to them under the provisions of the escrow;
141 and
142 (ii) are segregated escrow by escrow in the records of the title insurance producer;
143 (e) earnings on funds held in escrow may be paid out of the escrow account to any
144 person in accordance with the conditions of the escrow; and
145 (f) the escrow does not require the title insurance producer to hold:
146 (i) construction funds; or
147 (ii) funds held for exchange under Section 1031, Internal Revenue Code.
148 (2) Notwithstanding Subsection (1), a title insurance producer may engage in the
149 escrow business if:
150 (a) the escrow involves:
151 (i) a mobile home;

152 (ii) a grazing right;
153 (iii) a water right; or
154 (iv) other personal property authorized by the commissioner; and
155 (b) the title insurance producer complies with all the requirements of this section
156 except for [the requirement of] Subsection (1)(c).
157 (3) Funds held in escrow:
158 (a) are not subject to [any debts] a debt of the title insurance producer;
159 (b) may only be used to fulfill the terms of the individual escrow under which the funds
160 [were] are accepted; and
161 (c) may not be used until all conditions of the escrow [have been] are met.
162 (4) [Assets] An asset or property other than escrow funds received by a title insurance
163 producer in accordance with an escrow shall be maintained in a manner that will:
164 (a) reasonably [preserve] preserves and [protect] protects the asset or property from
165 loss, theft, or damages; and
166 (b) otherwise [comply] complies with all general duties and responsibilities of a
167 fiduciary or bailee.
168 (5) (a) A check from the trust account described in Subsection (1)(d) may not be
169 drawn, executed, or dated, or funds otherwise disbursed unless the segregated escrow account
170 from which funds are to be disbursed contains a sufficient credit balance consisting of collected
171 or cleared funds at the time the check is drawn, executed, or dated, or funds are otherwise
172 disbursed.
173 (b) As used in this Subsection (5), funds are considered to be "collected or cleared,"
174 and may be disbursed as follows:
175 (i) cash may be disbursed on the same day the cash is deposited;
176 (ii) a wire transfer may be disbursed on the same day the wire transfer is deposited;
177 (iii) the following may be disbursed on the day following the date of deposit:
178 (A) a cashier's check;
179 (B) a certified check;
180 (C) a teller's check;
181 (D) a U.S. Postal Service money order; and
182 (E) a check drawn on a Federal Reserve Bank or Federal Home Loan Bank; and

183 (iv) [any other] another check or deposit may be disbursed:
184 (A) within the time limits provided under the Expedited Funds Availability Act, 12
185 U.S.C. Section 4001 et seq., as amended, and related regulations of the Federal Reserve
186 System; or
187 (B) upon written notification from the financial institution to which the funds [have
188 been] are deposited, that final settlement has occurred on the deposited item.
189 (c) Subject to Subsections (5)(a) and (b), [any] a material change to a settlement
190 statement made after the final closing documents are executed must be authorized or
191 acknowledged by date and signature on each page of the settlement statement by the one or
192 more persons affected by the change before disbursement of funds.
193 (6) [The] A title insurance producer shall maintain records of all receipts and
194 disbursements of escrow funds.
195 (7) [The] A title insurance producer shall comply with:
196 (a) Section 31A-23a-409 ;
197 (b) Title 46, Chapter 1, Notaries Public Reform Act; [and]
198 (c) [any rules] a rule adopted by the Title and Escrow Commission, subject to Section
199 31A-2-404 , that govern escrows[.]; and
200 (d) in relation to a residential mortgage loan, Chapter 40, Residential Mortgage Loan
201 Closing Act.
202 Section 4. Section 31A-40-101 is enacted to read:
203 CHAPTER 40. RESIDENTIAL MORTGAGE LOAN CLOSING ACT
204 Part 1. General Provisions
205 31A-40-101. Title.
206 This chapter is known as the "Residential Mortgage Loan Closing Act."
207 Section 5. Section 31A-40-102 is enacted to read:
208 31A-40-102. Definitions.
209 As used in this chapter:
210 (1) "Closing" means the day by which:
211 (a) all documents relating to a residential mortgage loan are executed and recorded; and
212 (b) all monies are accounted for under the terms of the escrow instructions.
213 (2) "Commission" means the Title and Escrow Commission created in Section

214 31A-2-403 .
215 (3) "Dwelling" means a residential structure attached to real property that contains one
216 to four units including any of the following if used as a residence:
217 (a) a condominium unit;
218 (b) a cooperative unit;
219 (c) a manufactured home; or
220 (d) a house.
221 (4) "Mortgage lender" means a person who originates a loan secured by:
222 (a) a mortgage;
223 (b) a deed of trust; or
224 (c) a lien interest.
225 (5) "Mortgagor" means a person who executes a mortgage or is obligated to pay a
226 mortgage loan.
227 (6) "Residential mortgage loan" means a closed-end, first mortgage loan or extension
228 of credit, if:
229 (a) the loan or extension of credit is secured by a:
230 (i) mortgage;
231 (ii) deed of trust; or
232 (iii) lien interest; and
233 (b) the mortgage, deed of trust, or lien interest described in Subsection (5)(a):
234 (i) is on a dwelling located in the state; and
235 (ii) is created with the consent of the owner of the residential real property.
236 (7) "Title insurance producer" means a person licensed as a title insurance producer
237 under Chapter 23a, Insurance Marketing - Licensing Producers, Consultants, and Reinsurance
238 Intermediaries.
239 Section 6. Section 31A-40-103 is enacted to read:
240 31A-40-103. Validity of a mortgage loan.
241 A violation of Section 31A-40-201 does not:
242 (1) affect the validity of a residential mortgage loan; or
243 (2) relieve any of the following of an obligation under the mortgage loan or mortgage:
244 (a) a mortgage lender;

245 (b) a title insurance producer; or
246 (c) a mortgagor.
247 Section 7. Section 31A-40-201 is enacted to read:
248 Part 2. Requirements for Closings
249 31A-40-201. Clearance document required to close.
250 (1) For a residential mortgage loan to be complete for purposes of this chapter, the
251 mortgagor must:
252 (a) receive:
253 (i) a certificate of occupancy if the residential mortgage loan relates to a dwelling for
254 which a certificate of occupancy is required before a person may occupy the dwelling; and
255 (ii) a document:
256 (A) stating that in relation to the real property or an improvement to the real property
257 that is the subject of the residential mortgage loan there is a record of an unresolved zoning
258 issue; and
259 (B) issued by:
260 (I) a city or town in accordance with Section 10-9a-522 , if the dwelling is located
261 within a city or town; or
262 (II) a county in accordance with Section 17-27a-521 , if the dwelling is located in an
263 unincorporated area of a county; or
264 (b) sign a waiver document described in Section 31A-40-202 .
265 (2) A title insurance producer may not consider a closing of a residential mortgage loan
266 complete unless the mortgagor:
267 (a) indicates in writing that the mortgagor received during the closing the documents
268 required by Subsection (1); or
269 (b) signs a waiver document described in Section 31A-40-202 .
270 Section 8. Section 31A-40-202 is enacted to read:
271 31A-40-202. Waiver of receipt of documents.
272 A mortgagor may waive the mortgagor's right to receive a document described in
273 Subsection 31A-40-201 (1)(a) by signing a document:
274 (1) as part of the closing of a residential mortgage loan; and
275 (2) that states that:

276 (a) the mortgagor has the right to receive as part of the closing a document described in
277 Subsection 31A-40-201 (1)(a); and
278 (b) in the absence of receiving a document described in Subsection 31A-40-201 (1)(a),
279 in relation to the dwelling that is the subject of the residential mortgage loan:
280 (i) a certificate of occupancy may be required, but may not have been issued; or
281 (ii) there may exist an unresolved zoning issue.
282 Section 9. Section 31A-40-301 is enacted to read:
283 Part 3. Administrative Enforcement and Civil Penalties
284 31A-40-301. Commission and department enforcement -- Rulemaking.
285 (1) The commission with the concurrence of the department may take an action against
286 a title insurance producer that violates this chapter in the same manner as the commission may
287 take an action for a violation of Section 31A-23a-406 .
288 (2) The commission may make a rule, subject to Section 31A-2-404 , to:
289 (a) promote disclosure of the requirements of this chapter related to a document
290 required by Subsection 31A-40-201 (1); and
291 (b) provide for the form of:
292 (i) the writing required under Subsection 31A-40-201 (2) that is used by a title
293 insurance producer; or
294 (ii) a waiver under Section 31A-40-202 .
295 Section 10. Section 31A-40-302 is enacted to read:
296 31A-40-302. Civil liability.
297 (1) A title insurance producer who violates this chapter is liable to a person who is
298 injured by the violation for actual damages.
299 (2) This chapter does not limit any civil liability that may exist against a title insurance
300 producer for breach of contract or another wrong committed against a mortgagor.




Legislative Review Note
as of 2-11-08 11:06 AM

Office of Legislative Research and General Counsel