BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 704


                                                                    Page  1





          Date of Hearing:  May 6, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          704 (Cooley) - As Amended April 6, 2015


           ----------------------------------------------------------------- 
          |Policy       |Insurance                      |Vote:|12 - 0       |
          |Committee:   |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
          |-------------+-------------------------------+-----+-------------|
          |             |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
          |-------------+-------------------------------+-----+-------------|
          |             |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
           ----------------------------------------------------------------- 


          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill modifies escrow rules for underwritten title companies  
          (UTCs), making them consistent with rules governing independent  
          escrow companies.









                                                                     AB 704


                                                                    Page  2






          FISCAL EFFECT:


          1)One-time costs to the California Department of Insurance  
            (CDI), under $100,000, and annual ongoing costs of less than  
            $100,000 to manage new bonding and regulatory requirements at  
            a state, instead of county, level (Insurance Fund). 


          2)Projected revenues of in the range of $50,000 annually  
            (Insurance Fund). 


          COMMENTS:


          1)Purpose. According to the author, this bill is designed to  
            level the playing field for independent escrow companies  
            licensed by the Department of Business Oversight (DBO) and the  
            companies that are authorized to perform escrow services that  
            are licensed by CDI (UTCs).  The author argues that UTCs face  
            unnecessarily burdensome regulatory requirements in comparison  
            to the independent escrow companies regulated by the DBO, and  
            the escrow rules that govern UTCs should be made consistent  
            with those rules.


          2)Background. Escrow is often used in real estate transactions,  
            where money is kept in custody of a neutral third party until  
            specified conditions have been fulfilled. The vast majority of  
            escrow services in California are performed by either  
            independent escrow companies or UTCs, who are also authorized  
            to issue title insurance policies.  Because the two business  
            arrangements are regulated by two different state agencies,  
            regulation is not consistent.  For example, bonding  
            requirements for a UTC are currently $7,500 in each county in  
            which business is transacted, while independent escrow  
            companies have one statewide amount.  This bill only addresses  








                                                                     AB 704


                                                                    Page  3





            the escrow component of a UTC regulatory structure, not the  
            title insurance component. 


          3)Opposition. CDI is opposed to this bill unless amended to  
            require a bond instead of being able to choose a bond, a  
            deposit, or a letter of credit; to increase the amount of the  
            security tenfold; to make the security amount fixed regardless  
            of the account activity; and clarify the regulation does not  
            apply to non-title insurance-related escrows.


          Analysis Prepared by:Lisa Murawski / APPR. / (916)  
          319-2081