SB646.DOC

THE SENATE	S.B. NO.	646
TWENTY-SIXTH LEGISLATURE, 2011
STATE OF HAWAII

A BILL FOR AN ACT

relating to escrow depositories.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Chapter 449, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§449- Nationwide Mortgage Licensing System unique identifier required; reporting requirement. (a) In every real estate transaction involving a person required by chapter 454F to maintain a unique identifier through the Nationwide Mortgage Licensing System, an escrow depository shall require that the person include the person's unique identifier on all documents relating to the real estate transaction submitted to the escrow depository. An escrow depository shall not accept any documents subject to this section that do not include the required unique identifier.

(b) A person acting as an escrow depository shall verify the validity of the unique identifier included on all documents subject to this section. If a document includes a unique identifier that is not current and valid, the person acting as an escrow depository shall report the name of the person who submitted the document and the purported unique identifier to the commissioner.

(c) For purposes of this section only, the term "escrow depository" includes every person who acts as an escrow depository in a real estate transaction, including those persons normally exempt from this chapter pursuant to section 449-3."

SECTION 2. Section 449-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Unique identifier" means the unique identifier issued by the Nationwide Mortgage Licensing System and required for all persons subject to section 454F-1.5."

SECTION 3. Section 449-15, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The audited financial statements shall be prepared in accordance with generally accepted accounting principles and the examination by the independent certified public accountant shall be performed in accordance with generally accepted auditing standards. The financial statements and the independent certified public accountant's report required by this section shall include but not be limited to the following:

(1) An unqualified opinion on the fair presentation of the financial statements taken as a whole[~~. To~~]; provided that to the extent that this is not possible, then a detailed footnote explaining the reason why an unqualified opinion could not be given shall suffice;

(2) A direct verification of escrow funds and escrow liabilities~~[. If~~]; provided that if less than a one hundred per cent verification is performed, there shall be a separate letter from the independent certified public accountant indicating: the number of accounts verified; the percentage of the verification; the basis for determining the sample size; the method used in selecting the sample items to verify; a description of the sampling technique used; the discrepancies noted; and how the discrepancies were resolved;

(3) Footnotes to the audited financial statement showing the escrow funds and escrow liabilities and, to the extent that these amounts differ, a reconciliation of the amounts; [~~and~~]

(4) A listing of all information regarding unique identifiers reported to the commissioner pursuant to section 449- and the date that the information was reported; and

[~~(4)~~] (5) A statement as to whether the escrow depository is in compliance with this chapter[~~. If~~]; provided that if the independent certified public accountant reports any incident involving noncompliance, the statement shall address whether the noncompliance may have a material adverse impact on the ongoing operations of the company."

SECTION 4. Section 454F-19, Hawaii Revised Statutes, is amended to read as follows:

"§454F-19 Unique identifier shown. (a) The unique identifier of any person originating a residential mortgage loan, except a person who is exempt from this chapter, shall be clearly shown on all residential mortgage loan application forms, solicitations, or advertisements, including business cards or websites, and any other documents as established by rule or order of the commissioner.

(b) Every person subject to section 454F-1.5 shall include the person's unique identifier on every document submitted to an escrow depository in every real estate transaction involving an escrow depository."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2011.

INTRODUCED BY:	_____________________________