Escrow Committee Meeting Agenda Thursday, January 12, 2017 9:00 a.m. - PDF document

Escrow Committee Meeting Agenda Thursday, January 12, 2017 9:00 a.m. Webinar Call in number: 1-877-668-4490 Meeting number: 927 172 012 Meeting password: Jan122017 1. Welcome 2. Approve Meeting Minutes from October 19, 2016 3. Licensing Update 4. Examination Update 5. Enforcement Update 6. Old Business 7. New Business Committee Members Consumer Services Division Representatives: Philip Dryden, Chair Charles Clark, Division Director Laurie LeMay Cindy Fazio, Chief of Regulatory Affairs Patricia Maddux Steven Sherman, Enforcement Program Manager Susan Berry Lorenda Lillard, Licensing Program Manager Angela Kosoff Rick St. Onge, Examinations Program Manager Joepaul Wong, Examinations Supervisor Alan Leingang, Examinations Supervisor Devon Phelps, Financial Legal Examiner Dawn Woolery, Licensing Management Analyst Michele Gill, Webinar Facilitator

Escrow Committee Meeting Minutes October 19, 2016 Attendees: Committee Members Present: Philip Dryden, Chair Laurie LeMay Susan Berry Patricia Maddux Consumer Services Division Representation: Cindy Fazio, Chief of Regulatory Affairs Lorenda Lillard, Licensing Program Manager Steven Sherman, Enforcement Program Manager Rick St. Onge, Examinations Program Manager Devon Phelps, Financial Legal Examiner Ellen Daly, Webinar Facilitator Guests: * Guest list as generated by the webinar program – may not be complete. Tammie Warnke Patricia Kirk Alga Robson Cyril Zoldak Kay Oliver Peter Stevens Shalini Chhabra Michele McGhuey Mark Kimber Meeting Called to Order at 9:00 a.m. Welcome Phil noted the retirement of Scott Jarvis. He said the Committee appreciated Scott’s support over the years and wished him well in his retirement. Approve Minutes from July 14, 2016 Meeting By a motion, second, and vote the July 14, 2016 meeting minutes are approved. October 19, 2016 | Draft Escrow Committee Meeting Minutes 1

Licensing Update Escrow Agent Numbers as of September 30, 2016:  58 Main offices (60 reported at July 2016 meeting)  9 Branch offices (9 reported at July 2016 meeting)  88 Active Escrow Officers (90 reported at July 2016 meeting)  59 Inactive Escrow Officers (55 reported at July 2016 meeting)  147 Total Escrow Officers (145 reported at July 2016 meeting) Escrow renewal mailing sent October 14, 2016. Contact at DFI for the time being is Kari Jacobson. Examinations Update Exams completed as of September 30, 2016:  3 Exams completed in July 10 Exams Completed from  5 Exams completed in August July – September 2016  2 Exams completed in September 2 Common Violations Overdue outstanding checks Escrow Agents must take appropriate action prior to an outstanding check aging greater than 90 days (e.g. remit a due diligence letter to the payee when the outstanding check reaches 60 days outstanding). Internal Routine and Control Recommendations Please note the following findings are related to EARA requirements that became effective April 30, 2016. As the requirements are new, the Department granted the Agents a one - time exception and cited the findings as Internal Routine and Control recommendations instead of violations conditional on management agreeing to timely implement corrective action(s). 1. Information security plan Per WAC 208 - 680 - 532, the Agent must implement a written information security plan tailored to its specific business model ensuring reasonable measures have been implemented to protect sensitive consumer information. At a minimum, the plan must: a. Designate an information security plan coordinator b. Identify security risks c. Detail safeguards implemented to mitigate the aforementioned risks October 19, 2016 | Draft Escrow Committee Meeting Minutes 2

d. Be evaluated on an annual basis 2. Business resumption plan Per WAC 208 - 680 - 538, the Agent must have a written business resumption plan detailing the Agent’s response to and recovery of any event that results in the destruction to or damage of its books and records. The plan may also address other issues such as what actions will be taken if the DEO is unable to fulfill her or his duties for an extended period of time. Enforcement Update From July 1 – September 30, 2016, DFI’s Enforcement Unit received 3 complaints and closed 10 complaints. Investigations Investigations – Pending (EARA only) 13 Investigations – Open (all industries) 175 No Escrow Act orders issued in this period. Old Business Following up with a July item regarding an increasing amount of title companies not getting their recording done promptly or waiting until late in the business day to process. This holds up client’s ability to move into their homes as Escrow Agents can’t pay out disbursements until the recording is filed. Susan Berry described how King County’s e - recording program will probably resolve this issue. Susan is following that process and will report back to the Committee on it. New Business 2017 Escrow webinar dates and times presented. All were approved by the committee and webinar information will be provided. Thursday, January 12, 2017 9 a.m. Thursday, April 13, 2017 9 a.m. Tuesday, July 11, 2017 9 a.m. Thursday, October 12, 2017 9 a.m. Phil asked a question about the Rulemaking process and proposal for WAC 208 - 08. These are the rules that DFI uses in adjudicative processes. The Agency’s Rulemaking Docket can been found at: http://www.dfi.wa.gov/cs/current_rulemaking.htm October 19, 2016 | Draft Escrow Committee Meeting Minutes 3

DFI will host a Pre CR - 102 meeting via webinar November 15. The CR - 102 is not anticipated to be filed until next spring. Meeting adjourned at 9:26 a.m. You may listen to a recording of the entire meeting at: http://dfi.wa.gov/escrow - agents/committee October 19, 2016 | Draft Escrow Committee Meeting Minutes 4

Escrow Committee Licensing Unit Quarterly Report January 12, 2017 12/31/16 9/30/16 6/30/16 3/31/16 Main Offices 59 58 60 60 Branch Offices 10 9 9 6 Active EOs 82 88 90 88 Inactive EOs 48 59 55 55 Total EOs 130 147 145 143

CS - Examination Unit Report Escrow Program Escrow Commission Meeting January 12, 2017 Examination Summary  1 Exam completed in October  4 Exams completed in November 7 exams completed from October  2 Exams completed in December through December 2016 Average number of violations per exam: 2 Composite Number of Previous Current Exam Cost Rating Exams Avg. Exam Cost Avg. Exam Cost Change 1 2 $ 1,467.40 $ 1,465.89 ($ 1.51) 2 3 $ 1,965.71 $ 1,957.93 ($ 7.78) 3 2 $ 2,634.11 $ 2,587.74 ($ 46.37) 4 0 $ 4,187.50 N/A N/A 5 0 $ 19,343.75 N/A N/A Common Violations 1. Failure to clear old balances Three Escrow Agents failed to clear old trial balance amounts in which they held no valid instruction to continue to hold the funds or all conditions had been met to disburse the funds to the appropriate party.

Escrow Committee Enforcement Unit Quarterly Report October 1, 2016 – December 31, 2016 EARA EARA All Industries Complaints Quarter 2016 Quarter Received in period 7 28 1143 Closed in period 6 33 1203 Total Complaints EARA Other Industries Open as of Open 12/31/2016 4 242 251 Investigations Investigations – Open (EARA only) 12 Investigations – Open (all industries) 154 Enforcement Actions 4th Quarter CCSA 0 CLA 20 EARA 2 MBPA 7 UMSA 1 Enforcement Actions – EARA Statement of Charges (issued in period) 0 Consent Orders (issued in period) 2 Criminal Referrals 0 Final Orders (issued in period) 0 Civil Actions: (injunction, enforce subpoena) 0

Barrett Escrow, Inc. and Jenny Barrett 11/17/2016 [C-12-0938-16-CO01] After a failure to respond to the Examination Unit’s manager’s questionnaire, failure to provide requested examination documents, failure to reconcile trust accounts, failure to file 2 nd quarter 2014 report, and filed 2013 and 3 quarters of 2014 late, the Department entered a TCD. Failure to comply with this TCD and after Barrett’s escrow agent license expired and bond was cancelled the Department entered a second TCD. The Consent Order in this case fully resolves TCD1 and TCD2. • Respondent Barrett Escrow, Inc.’s escrow agent license is expired • Respondent Barrett’s escrow officer license is cancelled • Respondents are permanently prohibited from the industry in any capacity • Respondents returned to depositors all deposits received June 2016 – current from trust account 1 (contract collections), then closed the account and provided proof to the Department • Respondents will escheat to the Department of Revenue all funds from trust account 2 (escrow), close the account, and provide proof to the Department Preferred Choice Escrow 10/6/2016 [C-15-1820-16-CO01] Between February 2011 and December 2015 the Respondent provided escrow services for at least 45 mortgage loan transactions without proper licensing or meeting the requirements for a licensing waiver. In order to resolve the findings, the Department has entered a Consent Order agreeing to these terms: • Respondent will cease and desist from engaging in the business of an escrow agent in Washington until they obtain a license or a license exception • Fine $20,000 • Investigation fee $600