- August 05, 2008
- All Issuing Offices
- FDIC Requirements for "Pass-through" Deposit Insurance for Escrow Accounts
The Federal Deposit Insurance Corporation (FDIC) insures deposit accounts in an insured institution generally up to a maximum of $100,000 for each depositor. (Although in some instances the insured amount may be more than $100,000, that issue is not the focus of this Bulletin.) For escrow accounts and other types of fiduciary accounts, deposits are held in the name of the escrow agent but actually belong to others. FDIC rules will permit the insurance to “pass-through” the escrow agent to the true owner(s) of the funds if certain requirements are met, as follows:
- The fiduciary status of the accountholder must be clearly stated in the depository institution’s account records. To satisfy this requirement each escrow account opened at a bank (or other insured institution) must be named in the bank’s records as "____________ Title Company, as Escrow Agent", "___________ Title Company Escrow Account", "____________, Attorney at Law, Trust Account", or the like, which makes clear the named company or depositor is acting as a fiduciary for others who are actual owners of the account funds.
- The identity of the actual owners of the account funds, and their respective interests in the funds, must be ascertainable either (a) from the bank’s account records or (b) from records maintained by the escrow agent in its regular course of business. To satisfy this requirement, the escrow agent can include the names of the actual owners of the account, a reference to the particular file number and the dollar amount or percentage interest belonging to each owner at the time it opens the account so that this information appears in the bank’s records. On the other hand, if this is impractical (i.e., the owners are too numerous and/or constantly changing such as for a general escrow account covering many files and closings) the escrow agent must open and name the account in accordance with the first requirement set forth above and then must meticulously keep its own records as to each escrow account up-to-date with the owners’ names and the amount of account funds belonging to each. This is something all Associates should be doing in any event but everyone needs to remind all to be diligent in following these practices.
- The account funds must actually belong to the owners named in either the bank’s or the escrow agent’s records. This final requirement is a factual matter that depends upon the specific facts and circumstances of the transaction for which the particular escrow account was established.
All three requirements must be met. With the recent failure of IndyMac Bank and its takeover by the FDIC, and the possibility of additional bank failures to come, all Associates need to focus on properly naming each of their escrow accounts and maintaining their records so as to maximize FDIC deposit insurance coverage for their customers. All existing accounts need to be reviewed and confirmed with your bank (and updated as needed) to be sure the above requirements are met. In addition, make sure each of your deposits are placed with institutions insured by the FDIC. You can check this with the FDIC at its website http://www.fdic.gov/ and click on “Bank Find”.
A related concern is the financial health of the banks/institutions you do business with. There are various independent rating services which provide financial ratings for banking institutions. LACE Financial, Highline Financial and Bankrate are some available rating services and each has a website. You should regularly check the ratings provided for the banks with which you do business. Certainly, if you are concerned or become concerned about the stability of the bank or financial institutions in which you are currently doing business, it is prudent to move escrow and other accounts to another financial institution.
REMEMBER: Escrow functions, including the escrow accounts, are the responsibility of each escrow agent, not that of the title insurer.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.
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.