Escrow Licensee Bond - Statewide in California

Brief Summary

The $25,000 you post with a California escrow license application is only the starting figure. After that the required amount follows your trust fund obligations and can reach $50,000, and DFPI adds $5,000 for each additional licensed office. A surety bond covers the requirement for an annual premium instead of a cash deposit assigned to the Commissioner, and the amount can be raised as your volume grows.

California Financial Code 17202 requires every escrow agent licensed by the Department of Financial Protection and Innovation to keep a surety bond running to the State of California. Applicants deposit at least $25,000. After that the bond is $25,000, $35,000 or $50,000 depending on 150 percent of the previous year's average annual trust fund obligations, and DFPI adds $5,000 for each additional licensed office. An irrevocable letter of credit or a cash deposit approved by the Commissioner can be used instead.

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How to Apply for a Escrow Licensee Bond:

• Calculate 150 percent of the previous year's average annual trust fund obligations under Financial Code 17348 to find your tier.
• Add $5,000 for each additional licensed office, per DFPI.
• Use the licensee's exact legal name as principal.
• Have the surety's attorney in fact sign with a notarial jurat and attach the surety's power of attorney.
• Sign the bond as licensee before a notary.
• File the bond with the Commissioner of Financial Protection and Innovation with the license application.
• Increase the bond whenever your trust fund obligations move you into a higher tier.

Detailed Information About the California Escrow Licensee Bond:

Which tier you are in

Financial Code 17202 sets the amount in two stages. At application, the bond must be at least $25,000. After that, the licensee keeps a bond sized to 150 percent of the previous year's average annual trust fund obligations, as calculated under Section 17348:

• $25,000 if that figure is $250,000 or less
• $35,000 if it is $250,001 to $500,000
• $50,000 if it is $500,001 or more

DFPI's Escrow Law FAQ adds $5,000 for each additional licensed office. The figure on your original application does not adjust on its own, so check your tier each year against your trust fund obligations.

Who has to post it

Anyone licensed as an escrow agent under the Escrow Law, Financial Code Division 6. Section 17006 exempts banks, trust companies, savings associations, credit unions and insurance companies doing business under their own laws, California attorneys with a bona fide client relationship who are not actively engaged in the escrow business, title abstractors whose searches support title insurance, and real estate brokers acting in a transaction where they are an agent or a party.

What the bond guarantees

Under Section 17203 the bond is conditioned on the licensee following the Escrow Law and the Commissioner's rules, honestly applying all funds received, performing its obligations under the Escrow Law, and paying amounts owed to the state or any person, including the costs of a conservatorship or liquidation. It runs to the state for the use of the state and anyone with a cause of action against the licensee. Actions must be brought within two years of the act or default complained of, and the Commissioner does not decide disputed claims. Those go to court.

Alternatives and the bond form

Section 17202 allows an irrevocable letter of credit approved by the Commissioner. Section 17202.1 and 10 CCR 1718 allow a cash bond in the form of an FDIC insured bank deposit, industrial loan company investment certificate or savings association account assigned to the Commissioner. A deposit made instead of the bond cannot be counted as an asset toward the tangible net worth requirement of Section 17210.

Under 10 CCR 1718.1 the bond must carry the signature and notarial jurat of the surety's attorney in fact, a power of attorney from the surety, the licensee's legal name, and the licensee's signature with a notarial jurat. The surety cannot cancel, withdraw or decline to renew until 30 days after the Commissioner receives written notice. Under 10 CCR 1726.1, a corporate surety admitted in California is satisfactory to the Commissioner.

This is not the fidelity bond

The Section 17202 surety bond protects the state and the public. It is separate from fidelity coverage on officers and employees, from the surety bond required to cover a fidelity bond deductible, and from Escrow Agents' Fidelity Corporation membership. Each is its own filing.

Eligibility and Requirements for a California Escrow Licensee Bond:

• At least $25,000 at application, then $25,000, $35,000 or $50,000 by tier.
• Runs to the State of California and is filed with the DFPI Commissioner.
• Corporate surety admitted in California (10 CCR 1726.1).
• Bond terms under 10 CCR 1718.1, including the two year limit on actions and 30 days notice before cancellation.
• Separate from the fidelity bond and from any fidelity deductible bond.

California Escrow Licensee Bond FAQs:

Official and Additional Resources for the California Escrow Licensee Bond: