1.A monthly escrow trial balance for each individual escrow bank account must be prepared which, at a minimum, lists all open escrow balances. Each month's escrow trial balance must be completed no later than the end of next month.

2.A three-way reconciliation of bank balance, book balance and escrow trial balance for each individual escrow bank account shall be performed monthly. Each three-way reconciliation must be completed within ten (10)* days from the closing date of the bank statement of the account.

3.Each reconciliation should be approved by a manager or supervisor. If this is not possible or practical, each reconciliation shall be reviewed by another employee.

4.Each reconciliation should be prepared by someone not associated with the receipt and disbursement function. Where size does not permit this, each reconciliation shall be reviewed by the manager or owner.

5.Two signatures are required on all escrow checks, but this requirement is waived if the escrow agent has four or fewer employees. Only one signature must be that of a licensed escrow officer, but this requirement is waived if the escrow agent is a sole proprietorship or partnership and the owner or individual partner signs the escrow checks.

6.Company records must include copies of all checks, deposit slips, and receipt items.

7.An interest-bearing (investment) escrow account must meet the following criteria:

1.The investment account must be styled in the name of the owner/beneficiary of the escrow funds, with the escrow agent named as trustee or escrow agent.

2.The escrow agent must receive written instructions from the owner/beneficiary of the escrow funds to open an investment account. Such written instructions must be maintained in the escrow agent's records.

3.The Tax Identification number used to open the interest-bearing escrow account must be that of the owner/beneficiary of the funds, not that of the escrow agent.

4.The interest-bearing escrow account must be included in a control ledger or record identifying all interest-bearing accounts. The interest must be posted within seven business days after receipt of the statement or other documentation reporting the interest accrued.

8.Each guaranty file must be assigned a unique number. Name identification is not acceptable.

9.All accounts must be styled as "Escrow" or "Trust". "Escrow account" "trust account" must appear on the bank statement, the signed bank agreement, disbursement checks and deposit tickets and must be FDIC insured.

10.Accounts open for longer than six months should be thoroughly investigated monthly. Disbursements from these accounts should not be allowed without management approval.

11.Voided checks should have their signature blocks removed or otherwise rendered ineffective.

12.Management approval should be required for any transfers of funds between guaranty files or escrow accounts and transfers between guaranty files must be documented in both files.

13.If after the escrow agent has received and deposited an earnest money check, and the check is returned to the escrow agent by a financial institution due to insufficient funds, the escrow agent shall notify the seller by written notice deposited in the mail and addressed to the seller's address as shown in the escrow agent's file relating to the transaction within seven business days after the returned check is received by the escrow agent unless the check is replaced by collected funds within the seven-day time period. The escrow agent shall retain copies of written notices.

14.All escrow checks and deposit tickets must display related guaranty file numbers directly on the document to provide a clear and direct connection between the document and related guaranty file.

15.Each guaranty file must contain a complete, current disbursement sheet which lists the date, source and type of all receipts; date, check number, item description, payee and amount of all checks; date, amount and type of any other disbursements (i.e.: outgoing wire-transfers) and any remaining balance. Voided checks which have been canceled where funds have been credited back to the account shall be shown on the disbursement sheet.

16.Invoices substantiating or sufficient evidence to support all disbursements shall be kept in the guaranty files.

17.Reimbursement of all escrow receivables and other escrow shortages shall be made by the appropriate party(ies) or from the escrow agent's operating account within forty-five (45) days from the closing date of the bank statement of the account which reflects therein the transaction(s) creating the escrow receivable(s) or shortage(s).

18.If a settlement statement requires changes, a new statement must be prepared or pen-and-ink changes must be initialed by all parties affected by the changes, or sufficient evidence to support the changes must be maintained in the guaranty file. A copy of the revised, final settlement statement must be provided to the lender and borrower.

19.A signed, pre-numbered receipt must be issued for any escrow funds received in cash.

20.If a bank does not return actual canceled checks with bank statements, then copies of all checks must be available in agency records, or the agency must

obtain a signed acknowledgement from the bank that they will be provided upon request, and must meet the following criteria:

1.The copies of checks must be clearly legible.

2.There must be a copy of both sides of every check so that endorsements can be verified; and

3.It must be unmistakable which front and back images belong together.

21.All escrow or trust accounts maintained by licensed Texas title insurance companies, title insurance agents or direct operations shall be in financial institutions or branches of financial institutions located within the geographic bounds of the State of Texas.

22.If an escrow agent as defined herein detects a defalcation regarding its trust or escrow funds, the agent must file the following notice with the Title Division Examinations Section of the Department within forty-five (45) days of the end of the month in which the defalcation is believed to have occurred: "We have detected circumstances regarding our escrow or trust funds that may warrant an investigation by the Title Division of the Department. The amount of funds involved is believed to be $____________." If the agent comes into possession of an indictment or conviction concerning the defalcation, a copy of that document should be forwarded to the Department within 10 business days of the date the agent comes into possession of same.

*Three Way Reconciliation completions requirements (under entry number 2. of Minimum Escrow Accounting Procedures and Internal Controls outlined in Pillar 2) has been altered reflect the ALTA requirement of 10 days. Texas Department of Insurance, Minimum Escrow Accounting Procedures and Internal Controls actually states 45 days.

Revision History:

Revision 1.0, 09/01/2014

Revision 2.0, 10/29/2015

Revision 3.0, 12/10/2015