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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.




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    as of 2-11-08 11:06 AM


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