Rep. Norm Thurston — Voting Record

Bill

Number

S.B. 161 (2020GS)

Sponsor

Sen. Hemmert, D.

Final action

Governor Signed 4/1/2020

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• removes an unused definition;
• defines "producer";
• amends a provision related to disciplinary action against a title entity or a person previously licensed as a title entity for an act the person committed while licensed;
• amends a provision related to adjudicative proceedings; and
• makes technical and conforming changes.

Every vote on this bill

Bill text

TITLE INSURANCE AMENDMENTS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Daniel Hemmert
House Sponsor: 
Mike Schultz
LONG TITLE
General Description:
This bill amends provisions related to affiliated business in title insurance.
Highlighted Provisions:
This bill:
▸ removes an unused definition;
▸ defines "producer";
▸ amends a provision related to disciplinary action against a title entity or a person
previously licensed as a title entity for an act the person committed while licensed;
▸ amends a provision related to adjudicative proceedings; and
▸ makes technical and conforming changes.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
31A-23a-1001
, as enacted by Laws of Utah 2019, Chapter 475
31A-23a-1003
, as enacted by Laws of Utah 2019, Chapter 475
31A-23a-1004
, as enacted by Laws of Utah 2019, Chapter 475
31A-23a-1006
, as enacted by Laws of Utah 2019, Chapter 475
31A-23a-1007
, as enacted by Laws of Utah 2019, Chapter 475
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
31A-23a-1001
 is amended to read:
31A-23a-1001.
Definitions.
As used in this part:
(1) "Affiliated business" means the gross transaction revenue of a title entity's title
insurance business in the state that is the result of an affiliated business arrangement.
(2) "Affiliated business arrangement" means the same as that term is defined in 12
U.S.C. Sec. 2602, except the services that are the subject of the arrangement do not need to
involve a federally related mortgage loan.
(3) "Applicable percentage" means:
(a) on February 1, 2020, through January 31, 2021, 0.5%;
(b) on February 1, 2021, through January 31, 2022, 1%;
(c) on February 1, 2022, through January 31, 2023, 1.5%;
(d) on February 1, 2023, through January 31, 2024, 2%;
(e) on February 1, 2024, through January 31, 2025, 2.5%;
(f) on February 1, 2025, through January 31, 2026, 3%;
(g) on February 1, 2026, through January 31, 2027, 3.5%;
(h) on February 1, 2027, through January 31, 2028, 4%; and
(i) on February 1, 2028, through January 31, 2029, 4.5%.
(4) "Associate" means the same as that term is defined in 12 U.S.C. Sec. 2602.
(5) "Division" means the Division of Real Estate created in Section 
61-2-201
.
(6) "Essential function" means:
(a) examining and evaluating, based on relevant law and title insurance underwriting
principles and guidelines, title evidence to determine the insurability of a title and which items
to include or exclude in a title commitment or title insurance policy to be issued;
(b) preparing and issuing a title commitment or other document that:
(i) discloses the status of the title as the title is proposed to be insured;
(ii) identifies the conditions that must be met before a title insurance policy will be
issued; and
(iii) obligates the insurer to issue a title insurance policy if the conditions described in
Subsection (6)(b)(ii) are met;
(c) clearing underwriting objections and taking the necessary steps to satisfy any
conditions to the issuance of a title insurance policy;
(d) preparing the issuance of a title insurance policy; or
(e) handling the closing or settlement of a real estate transaction when:
(i) it is customary for a title entity to handle the closing or settlement; and
(ii) the title entity's compensation for handling the closing or settlement is customarily
part of the payment or retention from the insurer.
(7) "New or newly affiliated title entity" means a title entity that:
(a) is licensed as a title entity for the first time on or after May 14, 2019; or
(b) (i) is licensed as a title entity before May 14, 2019; and
(ii) enters into an affiliated business arrangement for the first time on or after May 14,
2019.
[
(8) "Ownership affiliated business arrangement" means an affiliated business
arrangement based on a person or a person's affiliate having a direct or beneficial ownership
interest of more than 1% in a title entity.
]
(8) "Producer" means the same as the term "person who is in a position to refer
settlement service business" is defined in 12 C.F.R. Sec. 1024.15(c).
(9) "RESPA" means the federal Real Estate Settlement Procedures Act, 12 U.S.C. Sec.
2601 et seq. and any rules made thereunder.
(10) "Section 8 of RESPA" means 12 U.S.C. Sec. 2607 and any rules promulgated
thereunder.
(11) "Sufficient capital and net worth" means:
(a) for a new or newly affiliated title entity:
(i) $100,000 for the first five years after becoming a new or newly affiliated title entity;
or
(ii) after the first five years after becoming a new or newly affiliated title entity, the
greater of:
(A) $50,000; or
(B) on February 1 of each year, an amount equal to 5% of the title entity's average
annual gross revenue over the preceding two calendar years, up to $150,000; or
(b) for a title entity licensed before May 14, 2019, who is not a new or newly affiliated
title entity:
(i) for the time period beginning on February 1, 2020, and ending on January 31, 2029,
the lesser of:
(A) an amount equal to the applicable percentage of the title entity's average annual
gross revenue over the two calendar years immediately preceding the February 1 on which the
applicable percentage first applies; or
(B) $150,000; and
(ii) beginning on February 1, 2029, the greater of:
(A) $50,000; or
(B) an amount equal to 5% of the title entity's average annual gross revenue over the
preceding two calendar years, up to $150,000.
(12) "Title entity" means:
(a) a title licensee as defined in Section 
31A-2-402
; or
(b) a title insurer as defined in Section 
31A-23a-415
.
(13) (a) "Title evidence" means a written or electronic document that identifies and
describes or compiles the documents, records, judgments, liens, and other information from the
public records relevant to the history and current condition of a title to be insured.
(b) "Title evidence" does not include a pro forma commitment.
Section 2. Section 
31A-23a-1003
 is amended to read:
31A-23a-1003.
Affiliated business arrangements.
(1) An affiliated business arrangement between a person and a title entity violates
Section 8 of RESPA for purposes of state law if:
(a) the title entity does not have sufficient capital and net worth in a reserve account in
the title entity's name; or
(b) more than 70% of the title entity's annual title insurance business is affiliated
business on or after the later of:
(i) two years after [
a
] 
the
 title entity begins an affiliated business arrangement; or
(ii) June 1, 2021.
(2) In addition to Subsection (1), the division may find that an affiliated business
arrangement between a person and a title entity violates Section 8 of RESPA after evaluating
and weighing the following factors in light of the specific facts before the division:
(a) whether the title entity:
(i) is staffed with [
its
] 
the title entity's
 own employees to conduct title insurance
business;
(ii) manages [
its
] 
the title entity's
 own business affairs;
(iii) has a physical office for business that is separate from any 
producer's or
 associate's
office and pays market rent;
(iv) provides the essential functions of title insurance business for a fee, including
incurring the risks and receiving the rewards of any comparable title entity; and
(v) performs the essential functions of title insurance business itself;
(b) if the title entity contracts with another person to perform a portion of the title
entity's title insurance business, whether the contract:
(i) is with an independent third party; and
(ii) provides payment for the services that bears a reasonable relationship to the value
of the services or goods received; and
(c) whether the person from whom the title entity receives referrals under the affiliated
business arrangement also sends title insurance business to other title entities.
Section 3. Section 
31A-23a-1004
 is amended to read:
31A-23a-1004.
Annual affiliated business report.
Before March 1 each year, each 
new or newly affiliated
 title entity shall submit a report
to the division that:
(1) contains the following for the preceding calendar year:
(a) the name and address of any 
producer or
 associate that owns a financial interest in
the 
new or newly affiliated
 title entity;
(b) for each 
producer and
 associate identified under Subsection (1)(a), the percentage
of the 
new or newly affiliated
 title entity's affiliated business that is the result of an affiliated
business arrangement with the 
producer or
 associate;
(c) a description of any affiliated business arrangement the 
new or newly affiliated
 title
entity has with a person other than [
an
] 
a producer or
 associate identified under Subsection
(1)(a);
(d) the percentage of the 
new or newly affiliated
 title entity's annual title insurance
business that is affiliated business;
(e) proof of sufficient capital and net worth; and
(f) any other information required by the division by rule; 
and
(2) is certified by an officer of the 
new or newly affiliated
 title entity that the
information contained in the report is true to the best of the officer's knowledge, information,
and belief.
Section 4. Section 
31A-23a-1006
 is amended to read:
31A-23a-1006.
Disciplinary action.
(1) Subject to the requirements of Section 
31A-23a-1007
, the division may impose a
sanction described in Subsection (2) against a person if the person is:
(a) a title entity or a person previously licensed as a title entity for an act the person
committed while licensed; and
(b) violates a provision of this part, including Section 8 of RESPA.
(2) The division may, against a person described in Subsection (1):
(a) impose an educational requirement;
(b) impose a civil penalty in an amount not to exceed $5,000 for each violation;
(c) do any of the following to a title entity:
(i) suspend;
(ii) revoke; or
(iii) place on probation;
(d) issue a cease and desist order; [
and
] 
or
(e) impose any combination of sanctions described in this Subsection (2).
(3) (a) If the presiding officer in a disciplinary action under this part issues an order
that orders a fine as part of a disciplinary action against a person, including a stipulation and
order, the presiding officer shall state in the order the deadline, that is no more than one year
after the day on which the presiding officer issues the order, by which the person shall comply
with the fine.
(b) If a person fails to comply with a stated deadline:
(i) the person's license is automatically suspended:
(A) beginning the day specified in the order as the deadline for compliance; and
(B) ending the day on which the person complies in full with the order; and
(ii) if the person fails to pay a fine required by an order, the division may begin a
collection process:
(A) established by the division by rule made in accordance with Title 63G, Chapter 3,
Utah Administrative Rulemaking Act; and
(B) subject to Title 63A, Chapter 3, Part 5, Office of State Debt Collection.
(4) The division may delegate to an administrative law judge the authority to conduct a
hearing under this part.
Section 5. Section 
31A-23a-1007
 is amended to read:
31A-23a-1007.
Adjudicative proceedings -- Review -- Coordination with
department.
(1) (a) Before an action described in Section 
31A-23a-1006
 may be taken, the division
shall:
(i) give notice to the person against whom the action is brought; and
(ii) commence an adjudicative proceeding.
(b) If after the adjudicative proceeding is commenced under Subsection (1)(a) the
presiding officer determines that a title entity has violated a provision of this part, including
Section 8 of RESPA, the division may take an action described in Section 
31A-23a-1006
 by
written order.
(2) In accordance with Title 63G, Chapter 4, Administrative Procedures Act, a person
against whom action is taken under this part may seek review of the action by the executive
director of the Department of Commerce.
(3) If a person prevails in a judicial appeal and the court finds that the state action was
undertaken without substantial justification, the court may award reasonable litigation expenses
to that individual or entity as provided under Title 78B, Chapter 8, Part 5, Small Business
Equal Access to Justice Act.
(4) (a) An order issued under this section takes effect 30 days after the service of the
order unless otherwise provided in the order.
(b) If a person appeals an order issued under this section, the division may stay
enforcement of the order in accordance with Section 
63G-4-405
.
(5) (a) Except as provided in Subsection (5)(b), the division shall commence a
disciplinary action under this chapter no later than the earlier of the following:
(i) four years after the day on which the violation is reported to the division; or
(ii) 10 years after the day on which the violation occurred.
(b) The division may commence a disciplinary action under this part after the time
period described in Subsection (5)(a) expires if:
(i) (A) the disciplinary action is in response to a civil or criminal judgment or
settlement; and
(B) the division initiates the disciplinary action no later than one year after the day on
which the judgment is issued or the settlement is final; or
(ii) the division and the person subject to a disciplinary action enter into a written
stipulation to extend the time period described in Subsection (5)(a).
(6) (a) Within two business days after the day on which a presiding officer issues an
order under this part that suspends or revokes a title entity's license, the division shall deliver
written notice to the department that states the action the presiding officer ordered against the
title entity's license.
(b) Upon receipt of the notice described in Subsection (6)(a), the department shall
implement the action ordered against the title entity's license.
[
(7) Upon receipt of a notice described in Subsection (6), the department shall take the
action described in the notice upon the title entity's license.
]