(a) All moneys deposited in escrow to be delivered upon the close of the escrow or upon any other contingency shall be deposited and maintained in a noninterest-bearing demand or checking account in a bank, a state or federal savings bank, or a state or federal savings association or in a noninterest-bearing account subject to immediate withdrawal in an industrial loan company insured by the Federal Deposit Insurance Corporation and approved to receive those moneys by the commissioner. Thereafter, these moneys may be deposited in an interest-bearing account in a bank, a state or federal savings bank, a state or federal savings association, an industrial loan company approved to receive those moneys by the commissioner, or a state or federal credit union, if the depositor is qualified for membership under the bylaws of that credit union, and the moneys are maintained separate, distinct, and apart from funds belonging to the escrow agent. Those funds, when deposited, are to be designated as “trust funds,” “escrow accounts,” or under some other appropriate name indicating that the funds are not the funds of the escrow agent.

Upon request of the commissioner, a licensee shall furnish to the commissioner an authorization for examination of financial records of any trust funds or escrow accounts, maintained in a financial institution, in accordance with the procedures set forth in § 7473 of the Government Code.

Terms Used In California Financial Code 17409

  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Escheat: Reversion of real or personal property to the state when 1) a person dies without leaving a will and has no heirs, or 2) when the property (such as a bank account) has been inactive for a certain period of time. Source: OCC
  • Escrow: Money given to a third party to be held for payment until certain conditions are met.
  • escrow agent: as used in this division includes joint control agents and Internet escrow agents. See California Financial Code 17005.6
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Trust account: A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies. Source: OCC

(b) A licensee engaged in the business of receiving escrows for deposit or delivery of the types specified in subdivision (c) of Section 17312 and of the types not specified therein shall maintain separate escrow trust accounts, for both types of escrow business in the same manner as provided in subdivision (a) of this section and Sections 17409.1, 17410, 17411, and 17411.1.

(c) Any agreement with a financial institution to establish a trust account pursuant to this section shall be accompanied by a letter from the licensee authorizing and requesting that the financial institution immediately notify the commissioner and Fidelity Corporation, in either electronic or paper form, when it becomes aware of either of the following:

(1) The closure of any account subject to this section, other than to transfer the funds to another designated trust account at the same financial institution in the name of the escrow agent or the remittance of the funds to the Controller’s office for escheat purposes.

(2) The occurrence of any overdraft balance in an account subject to this section.

This subdivision does not impose any duty or obligation on a financial institution to Fidelity Corporation, members of Fidelity Corporation, or the commissioner.

(Amended by Stats. 2009, Ch. 140, Sec. 72. (AB 1164) Effective January 1, 2010.)

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