Senate File 2348     

                            AN ACT
PROVIDING FOR THE LICENSING AND REGULATION OF REAL
   ESTATE CLOSING AGENTS, MAKING PENALTIES APPLICABLE, AND
   INCLUDING EFFECTIVE DATE PROVISIONS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
   Section 1.  Section 535B.1, Code Supplement 2009, is amended
to read as follows:
   535B.1  Definitions.
   As used in this chapter unless the context otherwise
requires:
   1.  "Administrator" means the superintendent of the division
of banking of the department of commerce.
   2.  Reserved.  "Closing agent" means a person who is not a
party to the real estate transaction, who provides real estate
closing services.
   3.  "Licensee" means a person licensed under this chapter;
 however, any individual natural person who is acting solely as
an employee or agent of a mortgage banker or, mortgage broker,
or closing agent licensed under this Act chapter need not be
separately licensed under this chapter.
   4.  a.  "Mortgage banker" means a person who does one or more
of the following:
   (1)  a.  Makes at least four mortgage loans on residential
real property located in this state in a calendar year.
   (2)  b.  Originates at least four mortgage loans on
residential real property located in this state in a calendar
year and sells four or more such loans in the secondary market.
   (3)  c.  Services at least four mortgage loans on residential
real property located in this state.  However, a natural
person, who services less than fifteen mortgage loans
on residential real estate within the state and who does
not sell or transfer mortgage loans, is exempt from this
subparagraph paragraph if that person is otherwise exempt from
the provisions of this chapter.
   b.  "Mortgage banker" does not include a person who is a
licensed mortgage loan originator under chapter 535D.
   5.  "Mortgage broker" means a person who arranges or
negotiates, or attempts to arrange or negotiate, at least four
mortgage loans or commitments for four or more such loans on
residential real property located in this state in a calendar
year.  "Mortgage broker" does not include a person who is a
licensed mortgage loan originator under chapter 535D.
   6.  "Mortgage loan" means a loan of money secured by a lien
on residential real property and includes a refinancing of a
contract of sale, an assumption of a prior mortgage loan, and a
refinancing of a prior mortgage loan.
   7.  "Party to the real estate transaction" means, with respect
to a particular real estate transaction, a lender, seller,
purchaser, or borrower.
   7.  8.  "Person" means an individual a natural person,
an association, joint venture or joint stock company,
partnership, limited partnership, business corporation,
nonprofit corporation, or any other group of individuals
however organized.
   8.  9.  "Natural person" means an individual who is not
an association, joint venture, or joint stock company,
partnership, limited partnership, business corporation,
nonprofit corporation, other business entity, or any other
group of individuals or business entities, however organized.
   9.  10.  "Registrant" means a person registered under section
535B.3.
   11.  "Real estate closing services" means the administrative
and clerical services required to carry out the conveyance or
transfer of real estate or an interest in real estate located
in this state to a purchaser or lender.  "Real estate closing
services" include but are not limited to preparing settlement
statements, determining that all closing documents conform
to the parties' contract requirements, ascertaining that the
lender's instructions have been satisfied, conducting a closing
conference, receiving and disbursing funds, and completing
form documents and instruments selected by and in accordance
with instructions of the parties to the transaction.  "Real
estate closing services" do not include performing solely notary
functions.
   12.  "Residential real estate" means the same as defined in
section 535D.3.
   10.  13.  "Residential real property" means real property,
which is an owner=occupied single=family or two=family
dwelling, located in this state, occupied or used or intended
to be occupied or used for residential purposes, including an
interest in any real property covered under chapter 499B.
   14.  "Trust account" means a checking account with a
federally insured bank, savings and loan association, credit
union, or savings bank, which is used exclusively for the
deposit of funds transferred electronically or otherwise, cash,
money orders, or negotiable instruments that are received by a
closing agent to effect a real estate closing.
   Sec. 2.  Section 535B.2, Code 2009, is amended to read as
follows:
   535B.2  Exemptions.
This chapter, except for sections 535B.3, 535B.11, 535B.12,
and 535B.13, does not apply to any of the following:
   1.  A bank, bank holding company, savings bank, savings
and loan association, or credit union organized under the
laws of this state, another state, or the United States, or a
subsidiary owned or controlled by such a bank, bank holding
company, savings bank, savings and loan association, or credit
union.
   2.  A loan company licensed under chapter 536 or 536A, except
when acting as a closing agent.
   3.  An insurance company or a subsidiary or affiliate of
an insurance company organized under the laws of this state,
another state, or the United States, and subject to regulation
by the commissioner of insurance.
   4.  Mortgage lenders or mortgage bankers maintaining an
office in this state whose principal business in this state is
conducted with or through mortgage lenders or mortgage bankers
otherwise exempt under this section and which maintain a place
of business in this state.
   5.  An individual who is employed by a person otherwise
exempt under this section, or who, by contract, operates
exclusively on behalf of a person otherwise exempt under this
section to the extent that the individual is acting within the
scope of the individual's employment or exclusive contract with
the exempt person and is acting within the scope of the exempt
person's charter, license, authority, approval, or certificate.
   6.  A real estate broker licensed under chapter 543B while
engaged in practice as a real estate broker.
   7.  A nonprofit organization qualifying for tax=exempt
status under the Internal Revenue Code as defined in section
422.3 which offers housing services to low and moderate income
families.
   8.  An attorney licensed to practice law in this state or
the attorney's employees or agents acting under the attorney's
direction, in a transaction where the conduct of the attorney
is regulated by the Iowa supreme court in its capacity as
disciplinary authority over attorneys.
   9.  An officer or employee of the federal government, any
state government, or a political subdivision of the state
acting in an official capacity.
   10.  A qualified intermediary or an exchange accommodation
titleholder facilitating an exchange under section 1031 of the
Internal Revenue Code whose role in the transaction is limited
to acting in such a capacity.
   Sec. 3.  NEW SECTION.  535B.2A  Closing agents affiliated with
attorneys.
   1.  A closing agent affiliated with an attorney is not exempt
from licensure under this chapter if the closing agent engages
in transactions not exempt under section 535B.2, subsection 8.
   2.  Licensure under, and compliance with the provisions of,
this chapter shall not exempt any attorney from discipline by
the Iowa supreme court in its capacity as regulatory authority
over attorneys licensed to practice in this state, nor from
discipline by the regulatory authorities over attorneys
licensed in other jurisdictions.
   3.  If a complaint is filed with the administrator against a
closing agent affiliated with an attorney licensed to practice
in this state, the administrator shall promptly give notice of
the complaint to the Iowa supreme court or its designee, and
cooperate in any disciplinary investigation which the court
initiates against the attorney.  On request of the court, the
administrator shall stay any pending disciplinary action to the
extent that the court determines necessary to avoid prejudice
to a disciplinary action against the attorney.
   Sec. 4.  Section 535B.4, Code Supplement 2009, is amended to
read as follows:
   535B.4  General licensing requirements.
   1.  A person shall not act as a mortgage banker, or mortgage
broker, or closing agent in this state or use the title
"mortgage banker" or "mortgage broker" without first obtaining a
license from the administrator.
   2.   a.  License applicants shall submit to the administrator
an application on forms provided by the administrator.  The
forms shall include, at a minimum, all addresses at which
business is to be conducted, the names and titles of each
director and principal officers of the business, and a
description of the activities of the applicant in such detail
as the administrator may require.
   b.  The administrator may require applicants and licensees to
be licensed through the nationwide mortgage licensing system
and registry as defined in section 535D.3, and may participate
in the nationwide mortgage licensing system and registry if
this requirement is implemented.  In the event the requirement
is implemented, the administrator may establish by rule or
order new requirements as necessary and appropriate, including
but not limited to requirements that applicants, and officers,
directors, and others in a position of authority in relation to
the applicant, submit to fingerprinting and criminal history
checks, and pay associated fees relating thereto.
   3.  The applicant shall also submit a recently prepared
certified financial statement.
   4.  The applicant for an initial license shall submit a fee
in the amount of five hundred dollars.
   5.  Licenses granted under this chapter are not assignable.
   6.  Licenses granted under this chapter expire on the next
December 31 after their issuance.
   7.  Applications for renewals of licenses under this chapter
must be filed with the administrator before December 1 of the
year of expiration on forms prescribed by the administrator.
A renewal application must be accompanied by a fee of two
hundred dollars for a license to transact business solely as
a mortgage broker, and four hundred dollars for a license to
transact business as a mortgage banker, and two hundred dollars
for a licensee to transact business as a closing agent.  The
administrator may assess a late fee of ten dollars per day for
applications or registrations accepted for processing after
December 1.
   8.  A mortgage banker or mortgage broker licensee shall not
conduct business under any other name than that given in the
license.  A fictitious name may be used, but a mortgage banker
or mortgage broker licensee shall conduct business only under
one name at a time.  However, the administrator may issue more
than one license to the same person to conduct business under
different names at the same time upon compliance for each such
additional mortgage banker or mortgage broker license with
all of the provisions of this chapter governing an original
issuance of a license.
   9.  In addition to the application and renewal fees provided
for in subsections 4 and 7, the administrator may assess
application and renewal fees for each branch location of the
licensee, sponsor fees, and change of sponsor fees.
   Sec. 5.  Section 535B.5, subsection 1, Code 2009, is amended
to read as follows:
   1.  Upon the filing of an application for a license, if
the administrator finds that the financial responsibility,
character, and general fitness of the applicant and of the
members thereof if the applicant is a partnership, association,
or other organization and of the officers, directors, and
principal employees if the applicant is a corporation, are
such as to warrant belief that the business will be operated
honestly, soundly, and efficiently in the public interest
consistent with the purposes of this chapter, the administrator
shall issue the applicant a license to engage in mortgage
lending, brokering, and servicing as a mortgage broker,
mortgage banker, or closing agent.  The administrator shall
approve or deny an application for a license within ninety days
after the filing of the application for a license.
   Sec. 6.  Section 535B.8, Code Supplement 2009, is amended to
read as follows:
   535B.8  Operating without a license.
   A person who, without first obtaining a license under
this chapter, engages in the business or occupation of, or
advertises or holds the person out as, or claims to be, or
temporarily acts as, a mortgage banker, or mortgage broker, or
closing agent in this state is guilty of a class "D" felony and
may be prosecuted by the attorney general or a county attorney.
   Sec. 7.  Section 535B.9, Code Supplement 2009, is amended to
read as follows:
   535B.9  Bonds required of license applicants.
   1.  An applicant for a license shall file with the
administrator a bond furnished by a surety company authorized
to do business in this state, together with evidence of whether
the applicant is seeking to transact business as a mortgage
broker, or as a mortgage banker, or closing agent.  Until
such time as the superintendent pursuant to administrative
rule determines a bond amount that reflects the dollar value
of loans originated, the bond shall be in the amount of one
hundred thousand dollars for applicants seeking to transact
business as a mortgage broker or mortgage banker.  For
applicants seeking to transact business as a closing agent,
the bond shall be in the amount of twenty=five thousand
dollars, unless the administrator by rule establishes a higher
bond amount.  The bond shall be continuous in nature until
canceled by the surety with not less than thirty days' notice
in writing to the mortgage broker, or mortgage banker, or
closing agent and to the administrator indicating the surety's
intention to cancel the bond on a specific date. The bond
shall be for the use of the state and any persons who may have
causes of action against the applicant.  The
   1A.  For applicants seeking to transact business as a
mortgage broker or mortgage banker, the bond shall be for the
use of the state and any persons who may have causes of action
against the applicant.  The bond shall be conditioned upon
the applicant's faithfully conforming to and abiding by this
chapter and any rules adopted under this chapter and shall
require that the surety pay to the state and to any persons all
moneys that become due or owing to the state and to the persons
from the applicant by virtue of this chapter.
   1B.  For applicants seeking to transact business as a closing
agent, the bond shall be conditioned upon the applicant's
faithfully conforming to and abiding by this chapter and any
rules adopted under this chapter and shall require that the
surety pay to the state all moneys that become due or owing to
the state from the applicant by virtue of this chapter.
   2.  In lieu of filing a bond, the applicant may pledge an
alternative form of collateral acceptable to the administrator,
if the alternative collateral provides protection to the state
and any aggrieved person that is equivalent to that provided
by a bond.
   3.  A licensee may not act as a closing agent unless the bond
requirements in this section are in place at the time of a real
estate closing.
   Sec. 8.  Section 535B.13, Code 2009, is amended by striking
the section and inserting in lieu thereof the following:
   535B.13  Civil enforcement authority.
   1.  If the administrator believes that a person has
engaged in, or is about to engage in, an act or practice that
constitutes or will constitute a violation of this chapter,
the administrator may apply to the district court for an
order enjoining such act or practice.  Upon showing by the
administrator that such person has engaged, or is about to
engage, in any such act or practice, the district court shall
grant an injunction.
   2.  The administrator may investigate or initiate a
complaint against a person who is not licensed under this
chapter to determine whether the person is violating this
chapter.
   3.  In addition to or as an alternative to applying to the
district court for an injunction, the administrator may issue
an order to a person who is not licensed under this chapter to
require compliance with this chapter, including to cease and
desist from conducting business or from any harmful activities
or violations of law or regulation; may impose a civil penalty
against such person for any violation of this chapter in an
amount up to five thousand dollars for each violation; may
order the person to pay restitution; and may order the person
to pay the costs for the investigation and prosecution of the
enforcement action including attorney fees.
   4.  Before issuing an order under subsection 3, the
administrator shall provide the person written notice and
the opportunity to request a hearing.  The hearing must be
requested within thirty days after receipt of the notice
and shall be conducted in the same manner as provided for
in disciplinary proceedings involving a licensee under this
chapter.
   5.  A person aggrieved by the imposition of a civil penalty
under subsection 3 may seek judicial review pursuant to section
17A.19.
   6.  An action to enforce an order under this section may be
joined with an action for an injunction.
   7.  This chapter does not limit the power of the attorney
general to determine that any other practice is unlawful under
the Iowa consumer fraud Act contained in section 714.16, and to
file an action under that section.
   Sec. 9.  Section 535B.14, Code Supplement 2009, is amended
by striking the section and inserting in lieu thereof the
following:
   535B.14  Administrative authority.
   The administrator shall have broad administrative authority
to administer, interpret, and enforce this chapter and
to promulgate rules implementing this chapter, including
rules providing the grounds for denial of a license based
on information received as a result of a background check,
character and fitness grounds, and any other grounds for which
a licensee may be disciplined.
   Sec. 10.  NEW SECTION.  535B.19  Trust account requirements
 for closing agents.
   A licensee acting as a closing agent shall comply with all
of the following:
   1.  All moneys received for disbursement during a real
estate closing shall be deposited in a trust account and, when
deposited, the moneys shall be designated as trust funds or
trust accounts or under some other appropriate name indicating
that the moneys are not the moneys of the licensee.
   2.  All trust account moneys shall be deposited in a
financial institution that is insured by the federal deposit
insurance corporation or national credit union share insurance
fund unless the transaction does not involve residential real
estate and another financial institution has been designated in
writing in the escrow instructions.
   3.  If the trust account earns interest and the interest
earned is retained by any party other than the party to the
real estate transaction who is the owner of the funds, the
licensee shall disclose this fact in writing to the parties to
the transaction.
   4.  A licensee shall enter into a written agreement to pay
interest to a party to a transaction, or to a third party if
requested by the parties to a transaction, if the client's
trust funds can earn net interest.  In determining whether a
client can earn net interest on funds placed in trust, the
licensee shall take into consideration all relevant factors
including the following:
   a.  The amount of interest that the funds would earn
during the period in which they are reasonably expected to be
deposited.
   b.  The cost of establishing and administering an individual
interest=bearing trust account in which the interest would be
transmitted to the client, including any needed tax forms.
   c.  The capability of the financial institution to calculate
and pay interest to individual clients through subaccounting
or otherwise.
   5.  The licensee shall notify the administrator of the name
of each financial institution in which a trust account is
maintained and the name of the account on forms acceptable to
the administrator.  A licensee may maintain more than one trust
account provided it advises the administrator of the multiple
accounts.
   6.  A licensee shall only deposit trust funds in a trust
account and shall not commingle the licensee's personal funds
or other funds in the trust account with the exception that a
licensee may deposit and keep a sum not to exceed one thousand
dollars in the trust account from the licensee's personal
funds, which sum shall be specifically identified and deposited
to cover bank service charges relating to the trust account or
to advance funds to pay incidental fees as permitted in section
535B.20, subsection 2.
   7.  Moneys deposited in a trust account are not subject to
execution or attachment or to any claim against the licensee.
   8.  A licensee shall not knowingly keep or cause to be
kept any money in any bank, credit union, or other financial
institution under any name designating the moneys as belonging
to a client of the licensee, unless the money was actually
entrusted to the licensee for deposit in trust.
   Sec. 11.  NEW SECTION.  535B.20  Disbursing from a trust
account.
   A licensee acting as a closing agent shall not make, in a
real estate closing, a disbursement from a trust account on
behalf of another person, unless the following conditions are
met:
   1.  The cash, funds, money orders, checks, or negotiable
instruments necessary for the disbursement have been
transferred electronically to or deposited into the trust
account of the closing agent and are available for withdrawal
and disbursement, or have been physically received by the agent
prior to disbursement and are intended for deposit no later
than the next banking day after the date of disbursement.
   2.  Nothing in this section prohibits a closing agent
licensee from advancing funds not exceeding one thousand
dollars from a trust account or otherwise on behalf of a party
to a real estate closing for the purpose of paying incidental
fees, such as conveyance and recording fees, in order to effect
and close the sale, purchase, exchange, transfer, encumbrance,
or lease of residential real property that is the subject of
the real estate closing.
   Sec. 12.  REPEAL.  Section 535B.17, Code Supplement 2009, is
repealed.
   Sec. 13.  EFFECTIVE DATE.  This Act takes effect July 1,
2011.


                                                            
                              JOHN P. KIBBIE
                              President of the Senate


                                                            
                              PATRICK J. MURPHY
                              Speaker of the House
   I hereby certify that this bill originated in the Senate and
is known as Senate File 2348, Eighty=third General Assembly.


                                                            
                              MICHAEL E. MARSHALL
                              Secretary of the Senate
Approved                , 2010


                                                            
                              CHESTER J. CULVER
                              Governor

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