Senate Bill No. 298
(By Senator Minard)
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[Introduced January 28, 2004; referred to the Committee on the
Judiciary.]
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A BILL to amend the code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §46A-6K-1, §46A-6K-2,
§46A-6K-3, §46A-6K-4, §46A-6K-5 and §46A-6K-6, all relating to
having funds available for settlement of a real estate
mortgage transaction; defining applicability of the law;
providing definition of terms used; providing for duty of
lender and settlement agent in a loan settlement; maintaining
validity of loan documents; and providing a penalty for
violations of the article.
Be it enacted by the Legislature of West Virginia:
That the code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §46A-6K-1, §46A-6K-2,
§46A-6K-3, §46A-6K-4, §46A-6K-5 and §46A-6K-6, all to read as
follows:
ARTICLE 6K. GOOD FUNDS SETTLEMENT ACT.
§46A-6K-1. Applicability.
This article applies to transactions involving loans made by lenders, which loans will be secured by deeds of trust or mortgages
on owner-occupied residential dwellings with accommodations for not
more than four families.
§46A-6K-2. Definitions.
(a) "Collected funds" means funds deposited and irrevocably
credited to a settlement agent's account used to fund the
disbursement of settlement proceeds.
(b) "Disbursement of loan funds" means the delivery of the
loan funds by the lender to the settlement agent in the form of:
(1) Cash;
(2) Wired funds;
(3) Certified check;
(4) Checks issued by the United States Treasury, the state of
West Virginia or an instrumentality of the United States or state
of West Virginia;
(5) Cashier's check or teller's check or other similar draft
or obligation of a federally insured bank, savings bank, savings
and loan association or credit union or of any holding company or
wholly owned subsidiary of the foregoing;
(6) Checks issued by a licensed lender qualified to do
business in West Virginia which has posted the surety bond required
by subsection (b), section four, article seventeen, chapter thirty-
one of the code;
(7) Checks issued by an insurance company licensed and
regulated by the West Virginia insurance commission, which checks
are drawn on a federally insured financial institution;
(8) Checks drawn on the escrow account of an attorney licensed
to practice law in West Virginia or on the escrow account of a real
estate broker licensed in West Virginia; or
(9) Personal check or checks in an aggregate amount not
exceeding five thousand dollars per loan closing.
(c) "Disbursement of settlement proceeds" means the payment of
all proceeds of the transaction by the settlement agent to the
persons entitled thereto.
(d) "Lender" means any person regularly engaged in making
loans secured by mortgages or deeds of trust to secure debt on real
estate. A person is considered to be regularly engaged in making
loans if he or she makes more than five such loans in any one
calendar year.
(e) "Loan closing" means that time agreed upon by the
borrower, lender, seller, if applicable, and settlement agent when
the execution by the borrower and delivery of the loan documents to
the settlement agent occur.
(f) "Loan documents" means the note evidencing the debt due
the lender, the deed of trust, or mortgage securing the debt due to
the lender, and any other documents required by the lender to be
executed by the borrower as a part of the transaction.
(g) "Loan funds" means the gross or net proceeds of the loan
to be disbursed by or on behalf of the lender at loan closing.
(h) "Parties" as used in this subsection means the seller,
purchaser, borrower, lender and the settlement agent, as
applicable.
(i) "Settlement" means the time when the settlement agent has
received the duly executed deed, loan funds, loan documents and
other documents and funds required to carry out the terms of the
contract between the parties.
(j) "Settlement agent" means the person responsible for
conducting the settlement and disbursement of the settlement
proceeds and includes any individual, corporation, partnership or
other entity conducting the settlement and disbursement of loan
proceeds.
§46A-6K-3. Duty of lender.
The lender shall, at or before loan closing, cause
disbursement of loan funds to the settlement agent; however, in the
case of a refinancing, or any other loan where a right of
rescission applies, the lender shall, within one business day after
the expiration of the rescission period required under the federal
Truth-in-Lending Act (15 U.S.C. §1601 et seq.), cause disbursement
of loan funds to the settlement agent, unless the loan is rescinded
by the customer. All funds disbursed by the lender to the
settlement agent must be collected funds. The lender is not
entitled to receive or charge any interest on the loan until
disbursement of loan funds and loan closing has occurred.
§46A-6K-4. Duty of settlement agent.
The settlement agent shall cause recordation of the deed, the
deed of trust or mortgage, and any other documents required to be
recorded and shall cause disbursement of settlement proceeds within
one business day of settlement. A settlement agent may not disburse any or all loan funds or other funds coming into its
possession prior to the recordation of any instrument, except: (i)
Funds received which are overpayments to be returned to the
provider of such funds; (ii) funds necessary to effect the
recordation of instruments; or (iii) funds which the provider of
such funds has by separate written instrument directed to be
disbursed prior to recordation of any instrument.
§46A-6K-5. Validity of loan documents.
Failure to comply with the provisions of this chapter shall
not affect the validity or enforceability of any loan documents
executed.
§46A-6K-6. Penalty.
Any persons suffering losses due to the failure of the lender
or the settlement agent to cause disbursement as required by this
chapter, shall be entitled to recover, in addition to other actual
damages, double the amount of any interest collected in violation
of section three of this article plus reasonable attorneys' fees
incurred in the collection thereof.
NOTE: The purpose of this bill is to require lenders to have
the funds for mortgage loans available at the time the loan closes,
or in the case of a refinanced loan, after the expiration of the
right to rescind.
This article is new; therefore, strike-throughs and
underscoring have been omitted.
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