BILL ANALYSIS Ó
AB 704
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Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
704 (Cooley) - As Amended April 6, 2015
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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
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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
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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