Bulletin: NM2021001

Dear Associates:

This bulletin reviews various changes which occurred as a result of the revised promulgated title insurance rules which went into effect January 1, 2021, related to agent operations.

Attached to this bulletin is a summary of these changes with certain substantive revisions highlighted. You should be sure to review all rule changes to determine if your agency or operations are impacted by other changes not addressed in this bulletin or summary. You can find the complete set of new rules in the New Mexico Register here.

Rule 13.14.2.9 Adds a lease of a title plant to the definition of control.

What you should know

All title plant leases must be approved by OSI . Initial lease terms must be a minimum of five years with three year renewals, and no early terminations are allowed without the express written consent of OSI. Requires you notify OSI if you are denied access to a leased plant.

Rule 13.14.2.11 Changes the rule related to audits.

What you should know

The new rule allows OSI to audit insurers and agents without limitations on the purpose of the audit and if the audit shows cause, provides for further examination.

Rule 13.14.2.12 Adds requirements for ceasing operations.

What you should know

It provides notice requirements 45 days prior to ceasing operations to include specified information. It further provides for an audit of the agent’s trust fund accounts, the records pertaining thereto and the unused forms in the agency's possession and requires delivery of the audit to OSI and each insurer within 90 days. It also requires a wind down plan, in consultation with OSI, within 10 days of notifying OSI of its cessation of business and it terminates any agent license affiliated with an agency which ceases business.

Rule 13.14.3.8 Adds additional requirements for agency agreements.

What you should know

It requires agency agreements be filed with OSI within 30 days of execution and requires an amendment of agency agreements within 60 days of any applicable rule change. It also requires that agency agreements specify that the title insurance agency or agent has no authority to negotiate or settle policy claims.

Rule 13.14.3.13 Adds additional financial reporting requirements.

What you should know

It requires agents to provide each insurer with which it has an agency agreement a certified statement of financial condition. The statement must include an income statement of title insurance business done during the preceding year and a balance sheet showing the condition of affairs as of the prior December 31. It requires insurers to annually conduct a review of the underwriting, claims, and escrow practices of an agent, including a review of the title insurance policy form inventory and processing operations.

Rule 13.14.4.8 Adds requirements related to escrow services.

What you should know

It requires escrow agents disburse funds only out of an escrow account deposited for that transaction, that you comply with all escrow audits by OSI and provide all requested information.

Rule 13.14.4.9 Adds additional escrow record keeping requirements.

What you should know

It requires that escrow agents, on a daily basis, reconcile the book balance and escrow account balance and, at least once each calendar month, and within 10 business days of the closing date of the bank statement, prepare a three-way reconciliation for each escrow account. It requires the three-way reconciliation to be approved by a title insurance agent who did not perform the reconciliation and contains specific requirements for the three-way reconciliation.

Rule 13.14.4.10 Adds additional escrow accounting procedures and internal controls.

What you should know

It requires, on a monthly basis, an owner, officer or director review and approve the reconciliation for escrow accounts open for longer than six months. It requires that you notify the seller within one day after receiving notice an earnest money check deposited in the account is returned by the financial institution to the title insurer or agency due to insufficient funds, unless the check is replaced by available funds within a one day time period, and requires you retain a copy of written notices. It further requires you reimburse all shortages from the title insurer's or agency's operating account within three days that reflects the transaction creating the escrow receivable or shortage, unless the shortage is the result of fraud or suspected fraud, in which case the shortage shall be cured within 45 days, unless otherwise ordered by the superintendent.

Rule 13.14.4.11 Adds a requirement that any CPA retained to conduct the annual audit of escrow compliance procedures be licensed and in good standing.

Rule 13.14.4.12 Makes changes to matters which require notice to OSI.

What you should know

It requires notice to OSI within 5 days of notice of any civil or criminal action against the title insurer, title insurance agency, or title insurance agent involving any alleged misconduct or liability of the title insurer, title insurance agency, or title insurance agent concerning a New Mexico escrow; or any disciplinary action taken by the disciplinary board or by the supreme court of New Mexico involving misconduct concerning an escrow by a title insurer or title insurance agent who is a licensed attorney.

It requires notice to OSI within 2 days in any instance in which you discover theft or fraud of an escrow account.

Rule 13.14.16.8 Adds requirements for reporting on the agency statistical report.

What you should know

It adds a requirement that you report income and expenses annually on both county-by-county and summary-of-all counties bases. It provides that OSI give notice of the agency statistical report filing deadline at least sixty days in advance (which deadline will not be before May 15) and requires you maintain such minimum basic records on each New Mexico transaction as are necessary to accurately report such transactions.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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