La. Admin. Code tit. 10 § XV-909

Current through Register Vol. 50, No. 11, November 20, 2024

Section XV-909 - Irrevocable Letter of Credit, Surety Bond, Other Security

A. No person shall engage in business as a bond for deed escrow agent without having first issued, in favor of the Office of Financial Institutions, an irrevocable letter of credit in an amount to be determined by the commissioner, but in no event less than $10,000, which letter of credit shall be issued by a federally insured financial institution. Each applicant shall enter into an Irrevocable Letter of Credit Agreement, an Escrow and Regulatory Agreement and Power of Attorney with the Office of Financial Institutions on forms supplied by the commissioner before being issued a license to commence business.

B. In lieu of such irrevocable letter of credit as required in Subsection A above, each applicant may post and maintain a surety bond issued by a bonding company or insurance company, either of which must be authorized to do business in Louisiana, in the amount of $10,000, to cover the first year of operation as a licensed bond for deed escrow agent. The bond shall be in a form acceptable to the commissioner and shall run to the Office of Financial Institutions for the benefit and use of the Office of Financial Institutions, parties to the bond for deed agreement or any persons with a right to the payments made on behalf of any parties to a bond for deed escrow agreement for any liability incurred as a result of the failure of the licensee to perform under a bond for deed escrow agent agreement. Persons who have claims against the licensee or its agents may bring suit directly on the bond. The Louisiana attorney general may bring suit on the bond on behalf of claimants either in one action or successive actions.

C. In lieu of such an irrevocable letter of credit, corporate surety bond, or any portion of such instruments required by this Section, the licensee may deposit in escrow with any federally-insured depository institution, or branch thereof, located in Louisiana, the substitution of cash in an amount not less than that required by the irrevocable letter of credit or corporate surety bond, or any portion thereof to be determined by the commissioner. A deposit of cash shall be made in an interest bearing account which must be pledged to the commissioner. The licensee shall be entitled to receive all interest and dividends on the deposit placed in escrow.

D. The amount of the irrevocable letter of credit, surety bond or cash escrow deposit after the first year of operation may be determined by the commissioner based upon the following nonexclusive factors:

1. the highest level of bond for deed transaction activity performed by the licensee during any one month in the preceding calendar year;

2. the risk to the general public, if any, commensurate with the continuance of the existing surety bond amount established during the preceding period;

3. in no event shall the total amount of security be less than $10,000.

La. Admin. Code tit. 10, § XV-909

Promulgated by the Department of Economic Development, Office of Financial Institutions, LR 20:412 (April 1994), amended LR 22:188 (March 1996).

AUTHORITY NOTE: Promulgated in accordance with R.S. 6:414(B).