Ohio’s Good Funds Legislation Signed Into Law
Sub. H. B. 463, pages 50 and 51 amend R.C. 1349.21 “Disbursing from an escrow account.” The statute was effective, originally on January 1, 1996 and has not been amended until December 16, 2016, to become effective 90 days from the signing by Governor Kasich. Governor Kasich signed H.B. 463 on January 4, 2017. The new law will be effective April 6, 2017.
Ohio’s Good Funds legislation is a consumer protection statute, not enacted to create business efficiencies for service providers, nor created to provide for maximum convenience to the parties involved with the real estate transactions. The goal of the original legislation was and remains to protect against fraud and to preserve the integrity of the consumer’s funds that are held and disbursed in the real estate transaction.
When this new law takes effect all transactions closing on or after that effective date, title agents will be required to abide by stricter controls over the handling of escrow and closing funds. The revised law requires that all funds to be held for disbursement in real property transactions, whether received from or on behalf of a consumer or a lender, meet the following criteria:
- First, if the funds are in an aggregate amount of $1,000 or less, the funds may be personal checks, business checks, certified checks, cashier’s checks, official checks or money orders, as long as they are drawn on an existing account at a federally insured bank, savings and loan association, credit union or savings bank. Note that money orders from a convenience store or similar location are not permitted. It is also important to note that if these types of funds are accepted, they must be physically received by the agent prior to disbursement and deposited no later than the next banking day after disbursement.
- Second, if the funds are drawn on a real estate broker’s trust account [as described in ORC 4735.18(A) (26)], they may be in the form of a business check.
- Third, if the funds are initiated by the United States, State of Ohio, or by an agency, instrumentality or political subdivision of either, they may be in the form of a check or Electronic ACH and must be deposited into the account of the agent and be immediately available for withdrawal by the agent prior to disbursement.
With more incoming wires, more opportunities for cyber fraud may occur using email compromise schemes. Therefore the transmission of wire instructions to and from customers must be done in a highly secure fashion. It is recommended that agents obtain a phone log at the onset of an order that can be used as a trusted source when contacting customers.
All wires should be verbally confirmed directly with the customer prior to receiving or sending. Additionally, agents should advise customers not to accept any changes in wiring instructions in the form of an email, letters, voice mail or any other form of communication without first calling the agent’s office at the trusted number the agent gives them when the order is opened. Agents should warn them of the cyber fraud schemes and let them know the agent is the only person they should trust for instructions.
Real estate agents should avoid communicating wiring instructions to clients, as that information could be considered nonpublic and personal information.
While these new controls will create greater security in the real estate transaction, they will require advance planning and coordination by all involved parties so that funds may be delivered in a timely manner and delays in disbursement may be avoided.
For more on H.B. 463:
- Fast-Track Foreclosure: HB 463 Ohio’s Overdue Answer to Vacant and Abandoned Homes
- Legislation To Expedite Vacant Property Foreclosure Process Passes Ohio House
- House Bill 463, via the Ohio Legilsature
This article was updated on January 12, 2017 at 9:48 a.m.