During the 2009 session of the General Assembly a bill was passed which is commonly referred to as “Good Funds” legislation. This language was included in Senate Bill 2111 and is now Public Act 096-0645. The provisions of the good funds legislation are effective January 1, 2010. Good funds legislation will not have a direct impact upon members of the Illinois Association of REALTORS®. However, there may be and probably will be some tangential effect to members of the Association. Good funds legislation deals with title insurance companies, title insurance agents and independent escrowees who are making disbursements from a fiduciary trust account in connection with an escrow, settlement or closing. Thus, the primary impact for members of IAR will be if you have a real estate closing that occurs with a title insurance company, title insurance agent or independent escrowee acting as closing agent.
If you have a closing with a title insurance, title insurance agent or independent escrowee acting as the closing agent the good funds legislation includes specific provisions dealing with when funds can be disbursed by the closing agent. Specifically, the closing agent will not be able to make disbursements at closing when the amounts held for disbursement include funds from any single party in excess of $50,000 unless those funds are:
- Wired funds unconditionally held by and credited to the closing agent;
- In the form of a check issued by the State of Illinois, the United States or a political subdivision of Illinois or the United States;
- In the form of a check drawn on the fiduciary account of another title insurance company or title insurance agent so long as there are reasonable grounds to believe the funds are available to back the check; or
- The funds have been received by the closing agent and are finally settled and credited to the account of the closing agent.
One example of good funds would be monies transferred to the closing agent by a lender in excess of $50,000 that are wired unconditionally to, held by and credited to the closing agent. Another example would be a check from a lender which is negotiated by and credited to the closing agent. A check, cashier’s or certified, from the lender received by the closing agent at the time of closing will not be sufficient for the closing agent to disburse the funds until that check is negotiated and credited to the closing agent’s fiduciary account.
There is another provision in the good funds bill for amounts of less than $50,000 from a single party. The restrictions are much less stringent in this situation. For example, if one of the parties to the transaction brings funds to the table for closing good funds would include a personal check not exceeding $5,000 as long as there are reasonable grounds to believe that sufficient funds are available to back the check. Cash monies up to $49,999.99 can be provided at closing by a party and be considered good funds. Also, cashier’s checks or certified checks drawn on or issued by a financial institution chartered by any state in the United States up to $49,999.99 will be considered as good funds.
The good funds bill is intended to help protect the closing agent from being asked to fund the closing when funds are not actually available to the closing agent. The good funds bill does not apply to a lender who is actually closing their own transaction or any party other than a title insurance company, title insurance agent or independent escrowee, closing a transaction.