GENERAL ASSEMBLY OF NORTH CAROLINA
1995 SESSION
CHAPTER 714
The General Assembly of North Carolina enacts:
Section 1. The General Statutes are amended by adding a new Chapter to read:
"Chapter 45A.
"Good Funds Settlement Act.
"§ 45A-1. Short title.
This Chapter shall be known as the Good Funds Settlement Act.
"§ 45A-2. Applicability.
This Chapter applies only to real estate transactions involving a one- to four-family residential dwelling or a lot restricted to residential use.
"§ 45A-3. Definitions.
As used in this Chapter, unless the context otherwise requires:
(1) 'Bank' means a financial institution, including but not limited to a national bank, state chartered bank, savings bank, or credit union that is insured by the Federal Deposit Insurance Corporation or a comparable agency of the federal or state government.
(2) 'Borrower' means the maker of the promissory note evidencing the loan to be delivered at the closing.
(3) 'Cashier's check' means a check that is drawn on a bank, is signed by an officer or employee of the bank on behalf of the bank as drawer, is a direct obligation of the bank, and is provided to a customer of the bank or acquired from the bank for remittance purposes.
(4) 'Certified check' means a check with respect to which the drawee bank certifies by signature on the check of an officer or other authorized employee of the bank that (i) the signature of the drawer on the check is genuine and the bank has set aside funds that are equal to the amount of the check and will be used to pay the check or (ii) the bank will pay the check upon presentment.
(5) 'Closing' means the time agreed upon by the purchaser, seller, and lender (if applicable), when the execution and delivery of the documents necessary to consummate the transaction contemplated by the parties to the contract occurs, and includes a loan closing.
(6) 'Closing funds' means the gross or net proceeds of the real estate transaction, including any loan funds, to be disbursed by the settlement agent as part of the disbursement of settlement proceeds on behalf of the parties.
(7) 'Collected funds' means funds deposited and irrevocably credited to a settlement agent's account used to fund the disbursement of settlement proceeds which account is a trust account, escrow account, or an account held by a company or its subsidiary which is licensed and supervised by the North Carolina Commissioner of Banks.
(8) 'Disbursement of settlement proceeds' means the payment of all closing funds from the transaction by the settlement agent to the persons or entities entitled to that payment.
(9) 'Lender' means any person or entity engaged in making or originating loans secured by mortgages or deeds of trust on real estate.
(10) 'Loan closing' means the time agreed upon by the borrower and lender, as applicable, when the execution and delivery of loan documents by the borrower occurs.
(11) 'Loan documents' means the note evidencing the debt due to the lender, the deed of trust or mortgage to secure that debt to the lender, and any other documents required by the lender to be executed by the borrower as part of the loan closing transaction.
(12) 'Loan funds' means the gross or net proceeds of the loan to be disbursed by the settlement agent as part of the disbursement of settlement proceeds on behalf of the borrower and lender.
(13) 'Party' or 'parties' means the seller, purchaser, borrower, lender, and settlement agent, as applicable to the subject transaction.
(14) 'Settlement' means the time when the settlement agent has received the duly executed deed, deed of trust or mortgage, and other loan documents and funds required to carry out the terms of the contracts between the parties.
(15) 'Settlement agent' means the person or persons 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 the closing funds.
(16) 'Teller's check' means a check provided to a customer of a bank or acquired from a bank for remittance purposes, that is drawn by the bank, and drawn on another bank or payable through or at a bank.
"§ 45A-4. Duty of settlement agent.
The settlement agent shall cause recordation of the deed, if any, the deed of trust or mortgage, or other loan documents required to be recorded at settlement. The settlement agent shall not disburse any of the closing funds prior to the recordation of any deeds or loan documents required to be filed by the lender, if applicable, and verification that the closing funds used to fund disbursement are deposited in the settlement agent's trust or escrow account in one or more forms prescribed by this Chapter. Unless otherwise provided in this Chapter, a settlement agent shall not cause a disbursement of settlement proceeds unless those settlement proceeds are collected funds. Notwithstanding that a deposit made by a settlement agent to its trust or escrow account does not constitute collected funds, the settlement agent may cause a disbursement of settlement proceeds from its trust or escrow account in reliance on that deposit if the deposit is in one or more of the following forms:
(1) A certified check;
(2) A check issued by the State of North Carolina, the United States, or a political subdivision of the State of North Carolina or the United States;
(3) A cashier's check, teller's check, or official bank check drawn on or issued by a financial institution insured by the Federal Deposit Insurance Corporation or a comparable agency of the federal or state government;
(4) A check drawn on the trust account of an attorney licensed to practice in the State of North Carolina;
(5) A check or checks drawn on the trust or escrow account of a real estate broker licensed under Chapter 93A of the General Statutes;
(6) A personal or commercial check or checks in an aggregate amount not exceeding five thousand dollars ($5,000) per closing if the settlement agent making the deposit has reasonable and prudent grounds to believe that the deposit will be irrevocably credited to the settlement agent's trust or escrow account;
(7) A check drawn on the account of or issued by a lender which is approved by the United States Department of Housing and Urban Development as either a supervised or nonsupervised mortgagee as defined in 24 C.F.R. section 202.2.
"§ 45A-5. Duty of lender, purchaser, or seller.
The lender, purchaser, or seller shall, at or before closing, deliver closing funds, including the gross or net loan funds, if applicable, to the settlement agent either in the form of collected funds or in the form of a negotiable instrument described in G.S. 45A-4(1) through (7), provided that the lender, purchaser, or seller, as applicable, shall cause that negotiable instrument to be honored upon presentment for payment to the bank or other depository institution upon which the instrument is drawn. However, in the case of a refinancing, or any other loan where a right of rescission applies, the lender shall, no later than the 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 in one or more of the forms prescribed by provisions in this Chapter.
"§ 45A-6. Validity of loan documents.
Failure to comply with the provisions of this Chapter shall not govern the validity or enforceability of any document, including a deed or any loan document, executed and delivered at any settlement occurring after October 1, 1996.
"§ 45A-7. Penalty.
Any party violating this Chapter is liable to any other party suffering a loss due to that violation for that other party's actual damages plus reasonable attorneys' fees. In addition, any party violating this Chapter shall pay to the party or parties suffering a loss an amount equal to one thousand dollars ($1,000) or double the amount of interest payable on any loan for the first 60 days after the loan closing, whichever amount is greater."
Sec. 2. G.S. 53-234(6) reads as rewritten:
"(6) 'Exempt person or organization' means:
(a) Any supervised or
any nonsupervised institution, as these terms are defined in 24 C.F.R. section
202.2, approved by the United States Department of Housing and Urban
Development, or any Any lender authorized to engage in
business as a bank, a farm credit system, life insurance company, savings
institution, or credit union, or HUD-approved mortgagee under
the laws of the United States or the State of North Carolina and subsidiaries
and affiliates of such lenders, which subsidiaries and affiliates are subject
to the general supervision or regulation of the lender or subject to audit or
examination by a regulatory body or agency of the United States or the State of
North Carolina; the entities listed in this sub-subdivision, and their officers
and employees, are not subject to any of the provisions of this Article; or
(b) Any licensed real estate agent or broker, who is performing those activities subject to the regulation of the North Carolina Real Estate Commission. Notwithstanding the above, an exempt person does not include a real estate agent or broker who receives direct compensation or income in connection with the placement of a mortgage loan; or
(c) Any person who, as seller, receives in one calendar year no more than ten mortgages, deeds of trust, or other security instruments on real estate as security for a purchase money obligation; or
(d) The North Carolina Housing Finance Agency as established by Chapter 122A of the General Statutes and the North Carolina Agricultural Finance Authority as established by Chapter 122D of the General Statutes; or
(e) Any agency of the federal government or any state or municipal government granting first mortgage loans under specific authority of the laws of any state or the United States."
Sec. 3. This act becomes effective October 1, 1996, and applies to settlements occurring on or after that date.
In the General Assembly read three times and ratified this the 21st day of June, 1996.
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Dennis A. Wicker
President of the Senate
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Harold J. Brubaker
Speaker of the House of Representatives