Bulletin: VA000021

Dear Associates:

All agents and agencies issuing policies on Virginia properties must be aware of, and comply with, Virginia and Federal law.  Following are highlights of the more important areas

• Consumer Real Estate Settlement Protection Act ("CRESPA"), §6.1-2.19, et. seq., Code of Virginia:  All agents, including attorneys, conducting closings or handling funds MUST register under CRESPA with the Virginia State Bar.  This applies to ALL agents, whether or not domiciled in Virginia.  Some of the key provisions are:
  1. The agent must have errors and omissions insurance, a surety bond, and a fidelity bond from a bonding agent licensed in Virginia.  The E&O policy must be in an amount not less than $250,000.00, and the surety and fidelity bonds not less than $100,000.00
  2. Funds for closings on Virginia properties must be segregated from all other funds and deposited in a separate, dedicated escrow account in an institution licensed to do business in Virginia.
  3. If an agent employs contract closers to close its transactions, the contract closers must also be registered under CRESPA.
  4. Legal documents may only be prepared by a licensed attorney.  The agent may provide purely ministerial acts, such as filling in the blanks in a deed of trust.
  5. No interest may be earned on escrowed funds.
  6. Once registered, the agent must be appointed by an underwriter licensed to do business in Virginia.
  7. The agent must have its escrow accounts audited once a year by its underwriter or by an independent C.P.A.
     
• Wet Settlement Act, §6.1-2.10, et. seq., Code of Virginia:  Also known as a "good funds" law, the Wet Settlement Act applies to lenders who make first trust loans on 1-4 family residential property:
  1. "Lender" includes individuals, if the individual is regularly engaged in making loans.
  2. The lender must, at or before closing, (or within one business day of the expiration of a rescission period) disburse the loan funds to the settlement agent.  The funds must be in the form of one of the eight possible categories defining "good funds?, the most common of which are wire transfers or certified checks. 
  3. The settlement agent must record the loan documents and disburse the loan funds within two business days of settlement.  The settlement agent may not disburse any funds prior to recordation except (1) refunds of overpayments; (2) recording fees; and (3) funds which the PROVIDER directs in writing be disbursed prior to recording.
  4. "Kickbacks" for referral of business are strictly prohibited.  Affiliated business relationships must be disclosed in writing, similar to the requirement of RESPA (Federal).  Kickbacks and splitting of premiums for the referral of business are further prohibited by §38.2-4614 of the Code of Virginia.
     
• Notice of Availability:  In resales, the settlement agent must provide the purchaser with notice that Owner's title insurance is available.  Prior to the disbursement of any loan funds, the agent must obtain a statement in writing that the purchaser has received the notice.  §38.2-4616, Code of Virginia.  Contact your Stewart Representative for forms.
  
• Title Insurance Companies are strictly prohibited from practicing law.  Settlement agents may not give advice to any party to a transaction, and may not "represent" one party to a transaction, whether or not the agent is conducting the closing, and whether or not the other party is represented by independent counsel.

Failure to comply with Virginia laws may subject the offender to action by the appropriate Virginia authorities, which may include fines, and suspension or revocation of license.