Bulletin: CO000008

Date:
October 31, 1994
To:
All Owned Offices in Colorado
RE:
"Good Funds" in Colorado

Dear Associates:

It is apparent from the number of questions being asked by owned office personnel that the area of "Good Funds" is sometimes confusing. This bulletin offers an attempt to further clarify the rules in this area in order to promote a greater overall understanding of our role as settlement agents.

Colorado Title Insurance Regulation 88-5 (Now known as Regulation 3-5-1 Concerning Title Insurance) became effective June 1, 1988 rescinding and replacing former Regulation 72-3. The primary impetus for this new Title Insurance Regulation was the perceived need for a "Good Funds" law in Colorado as the result of the failure of a major mortgage lender in the Summer of 1987. Several million dollars were lost by title companies and consumers when "funding" checks issued by the lender were not honored by the bank on which they were drawn.

Regulation 3-5-1 ("The Regulation") together with C.R.S. 38-35-125 ("The Statute"), the Colorado legislature's response to the "Good Funds" problem, collectively prohibit any title entity that provides closing and settlement services from disbursing funds in connection with closing and settlement services until the funds to be disbursed have been received and are either available for immediate withdrawal:

"1. As a matter of right from the financial institution in which the funds have been deposited; or

2. As a consequence of the agreement of the financial institution in which the funds are to be deposited or the financial institution upon which the funds are drawn. Any such agreement shall be made with or for the benefit of the person or entity providing closing and settlement services for a real estate transaction...
'Available for immediate withdrawal as a matter of right' includes funds transferred by any of the following means: (I) any wire transfer; (II) any certified check, cashier's check, teller's check, or any other instrument as defined by Federal Regulation CC, 12 CFR part 229.10(c)."

The Regulation and The Statute both permit disbursement of funds from a closing if the financial institution upon which the funds are drawn agrees to grant the right of immediate withdrawal of those funds. Consistent with this provision, many commercial banks utilize tri-party agreements which run among themselves, their mortgage company customers and the title insurance companies used by the mortgage company. Many of your offices are presently using tri-party agreements reviewed and approved by State underwriting personnel. Please continue to forward these agreements for underwriting approval as you as asked by the mortgage company to use them.

If you are not utilizing a tri-party agreement as authorized by The Regulation and The Statute, you must receive incoming funds in one of the following manners:

  1. A wire transfer into your escrow account.

  2. An intrabank transfer if the banking institutions are the same.

  3. Receipt of a regular check into your escrow account at least five days prior to closing so that the funds can "clear".

  4. A certified check, cashier's check, teller's check, official check or any other instrument as defined by Federal Regulation CC, 12 CFR part 229.10(c).

It is this last option under number four that has provided an element of confusion for some of our offices. First of all, very few banks are willing to provide certified checks, that is a check drawn from an individual's account and then stamped or punched by the bank to guaranty that the necessary funds are put aside for that check. Cashier's checks are the commonly received checks and state on their face that they are a "cashier's check". A "teller's check" is the check drawn by a bank, savings and loan, credit union or other depository institution (not a mortgage company), and drawn on another bank, savings and loan, credit union or other depository institution. Similarly, an "official check" is a check drawn by a bank savings and loan, credit union or other depository institution, and drawn on itself. Both "teller's checks" and "official checks" are considered to be "Good Funds" in Colorado.

The Regulation and The Statute by reference to Federal Regulation CC, 12 CFR part 229.10(c) provide the following checks are also "Good Funds" in Colorado:

  1. A check drawn on the Treasury of the United States.

  2. A U.S. Postal Service money order.

  3. A check drawn by a state or a unit of general local government.

Please use this bulletin as a guide, but do not hesitate to contact State Underwriting Personnel if you have any questions regarding our internal procedures in this area of "Good Funds"

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
5.16 Escrow Closings
Exceptions Manual:
None
Forms:
None