Are financial institutions required to wire funds to settlement agents for real estate loan closings? We have had instances where we have had to wire funds from one account at our bank to another account at our bank. Is there an amount limit? Would we be exempt as a national bank?

No, we do not believe financial institutions are required to wire funds to settlement agents for closings. Although the use of cashier’s checks generally is limited to disbursements of less than $50,000, Illinois law does allow options other than wired funds for disbursements of $50,000 or more at real estate closings (including cashier’s checks in limited circumstances).

The Title Insurance Act prohibits title insurance companies, title insurance agents, and independent escrowees from disbursing $50,000 or more in connection with a real estate closing unless the funds are “good funds” or “collected funds.”

For disbursements of $50,000 or more, ”good funds” are limited to (a) wired funds unconditionally credited, (b) a check issued by the State of Illinois, the United States, or a political subdivision of either, or (c) a check drawn on the fiduciary trust account of a title insurance company, title insurance agent, or independent escrowee, provided there are “reasonable grounds to believe that sufficient funds are available for withdrawal in the account upon which the check is drawn at the time of disbursement.” “Collected funds” are funds deposited, finally settled, and credited to a title insurance company, title insurance agent, or independent escrowee’s fiduciary trust account.

Also, a financial institution may agree with a title insurance company, title insurance agent, or independent escrowee to use a cashier’s check, teller’s check, or certified check, provided the check is delivered in sufficient time for it to be deposited into the relevant fiduciary trust account before disbursement.

For disbursements of less than $50,000, the definition of “good funds” is much more expansive, including United States money, cashier’s checks, certified checks, bank money orders, official bank checks, or teller’s checks drawn on or issued by a financial institution, personal checks not exceeding $5,000 per closing, and checks drawn on the trust account of any lawyer or real estate broker.

We are not aware of an exemption from the requirements in the Title Insurance Act for national banks, as these requirements apply to title insurance companies, title insurance agents, and independent escrowees.

We note that some title insurance companies continue to instruct Illinois lenders that the Title Insurance Act requires them to unconditionally wire funds a specified number of days before a closing. That is not a requirement of the law, but rather a unilateral business decision by the title insurance company, presumably to facilitate their compliance with the law at the closing. Whether you choose to comply with such a demand is a business decision for your bank.

For resources related to our guidance, please see:

Title Insurance Act, 215 ILCS 155/26(a) (“A title insurance company, title insurance agent, or independent escrowee shall not make disbursements in connection with any escrows, settlements, or closings out of a fiduciary trust account or accounts unless the funds in the aggregate amount of $50,000 or greater received from any single party to the transaction are good funds as defined in paragraphs (2), (6), or (7) of subsection (c) of this Section; or are collected funds as defined in subsection (d) of this Section.”)

Title Insurance Act, 215 ILCS 155/26(c) (“‘Good funds’ means funds in one of the following forms:

(1) lawful money of the United States;

(2) wired funds unconditionally held by and credited to the fiduciary trust account of the title insurance company, the title insurance agent, or independent escrowee;

(3) cashier’s checks, certified checks, bank money orders, official bank checks, or teller’s checks drawn on or issued by a financial institution and unconditionally held by the title insurance company, title insurance agent, or independent escrowee;

(4) a personal check or checks in an aggregate amount not exceeding $5,000 per closing, provided that the title insurance company, title insurance agent, or independent escrowee has reasonable grounds to believe that sufficient funds are available for withdrawal in the account upon which the check is drawn at the time of disbursement;

(5) a check drawn on the trust account of any lawyer or real estate broker licensed under the laws of any state, provided that the title insurance company, title insurance agent, or independent escrowee has reasonable grounds to believe that sufficient funds are available for withdrawal in the account upon which the check is drawn at the time of disbursement;

(6) a check issued by this State, the United States, or a political subdivision of this State or the United States; or

(7) a check drawn on the fiduciary trust account of a title insurance company, title insurance agent, or independent escrowee, provided that the title insurance company, title insurance agent, or independent escrowee has reasonable grounds to believe that sufficient funds are available for withdrawal in the account upon which the check is drawn at the time of disbursement.”)

Title Insurance Act, 215 ILCS 155/26(d) (“‘Collected funds’ means funds deposited, finally settled, and credited to the title insurance company, title insurance agent, or independent escrowee’s fiduciary trust account.”)

Title Insurance Act, 215 ILCS 155/26(a-5) (“In addition to the good funds disbursement authorization set forth in subsection (a) of this Section, a title insurance company, title insurance agent, or independent escrowee is authorized to make disbursements in connection with any escrows, settlements, or closings out of a fiduciary trust account or accounts where the funds in the aggregate amount of $50,000 or greater are received from any single party to the transaction if:

(1) the funds are transferred by a cashier’s check, teller’s check, or certified check, as defined in the Uniform Commercial Code, that is drawn on or issued by a financial institution, as defined in this Act;

(2) the title insurance company, title insurance agent, or independent escrowee and the financial institution, as defined in this Act, agree to the use of cashier’s checks, teller’s checks, or certified checks to disburse the loan and related closing costs being funded by the financial institution as good funds under item (3) of subsection (c) of this Section; and

(3) the cashier’s check, teller’s check, or certified check is delivered to the title insurance company, title insurance agent, or independent escrowee in sufficient time for the check to be deposited into the title insurance company’s, title insurance agent’s, or independent escrowee’s fiduciary trust account prior to disbursement from the fiduciary trust account of the title insurance company, title insurance agent, or independent escrowee.”)

Title Insurance Act, 215 ILCS 155/26(b) (“A title insurance company or title insurance agent shall not make disbursements in connection with any escrows, settlements, or closings out of a fiduciary trust account or accounts unless the funds in the amount of less than $50,000 received from any single party to the transaction are collected funds or good funds as defined in subsection (c) of this Section.”)