Opening Titles and Closing Remarks

A client asked me yesterday "How much FDIC Insurance does your escrow account get?" Wow! Is this a sign of the Apocalypse or what?

The quick answer to my client's question is that if the escrow account is set up and administered correctly, then the FDIC will treat each individual closing or escrow as a separate account. For example, if there are funds from 10 closings in my escrow account, each escrow receives the $100,000 maximum protection. It's like 10 accounts, not one.

To get the full benefit of FDIC insurance, the escrow account needs to be labeled as such in the account name. This is done when the title company establishes the account with the bank. Words to the effect of "Escrow Account" or "Trust Account" should be somewhere on the check from a title company, usually following the company name.

The title company must also be able to demonstrate through its own accounting procedures that it is managing multiple escrows through the single bank account. Separate ledgers showing deposits and disbursements for each closing and tracking of balances by closing file, not just aggregating the total, is required. We take the extra step on our bank deposit slip to put our file number next to each check we've received.

For many years now, title underwriters in their escrow audits, check for compliance with these procedures. So chances are that the vast majority of title companies are correctly administering their accounts.

With all that's going on now, at least I'm not worrying about this.