Texas title agents and escrow officers: licences, bonds and audits

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In a Texas home sale the buyer's money, the lender's money and the seller's proceeds all pass through one office for a few days. That office is usually a title insurance agent, and the person at the table who signs the escrow cheques is an escrow officer. Neither role is open to anyone who cares to take it up. Texas treats both as part of the insurance business, and the Texas Department of Insurance (TDI) licenses the firm and the individual, sets the paperwork they use and fixes the premium they charge.

This guide looks at the supervision, not at the policy. It sets out who needs a licence, what financial backing the state asks for, what an escrow officer is in the state's own definition, why the premium is the same in every office, how the money held for customers is audited each year, what happens when an agency closes, and where a complaint goes. It draws on Chapter 2651 of the Texas Insurance Code and on the pages of the title insurance manual that TDI publishes. Everything in it is Texas law; none of it carries over to another state, and how a rule applies to a particular office depends on the facts of that office.

Texas Insurance Code, sections 2651.101 and 2651.151; Texas Department of Insurance, Basic Manual, Section VI, administrative rules on escrow officers (page last updated 23 November 2015).

One regulator and one manual

Title insurance in Texas is supervised by the state's insurance department. TDI's title insurance FAQ, last updated on 19 March 2024, says that selling title insurance without a licence is illegal in Texas. It tells consumers to buy only from a licensed company and to verify the licence through the department's consumer help line or its online search.

The rules themselves are gathered in one place. TDI publishes what it calls the basic manual for rules, rates and forms for the writing of title insurance in the state of Texas, a page it last updated on 21 January 2025. The manual is an index to the statute and to the department's own rules, and the page lists eight numbered sections and an appendix. Its introduction speaks of seven sections and an appendix, a small mismatch the page does not explain.

Three kinds of business appear throughout the rules. The title insurance company is the insurer. The title insurance agent is the licensed firm appointed by one or more of those companies. A direct operation is the arrangement in which a title insurance company holds its own licence to do an agent's work: the manual's administrative rules have the application for that licence signed by a corporate officer of the title insurance company itself.

Who may act as a title agent

Section 2651.001 of the Insurance Code states the starting rule. No individual, firm, association or corporation may act as a title insurance agent without a licence issued by the department and without a bond or deposit on file. The duty runs in both directions: a title company may not allow an unlicensed entity, or one that has not met those conditions, to act as its agent.

The application is not made by the agent alone. Under section 2651.002 the title company files it, together with a non-refundable fee, and both the company and the proposed agent sign and swear to it. An agent is licensed in connection with a company that has agreed to appoint it, and the statute sets a separate fee for each additional title company appointment.

The same section lists who qualifies. The agent must be an individual who is a Texas resident, a firm or association made up only of Texas residents, or a corporation that meets the statute's conditions. It must have unencumbered assets that exceed its liabilities, reasonable experience in title insurance and a good business reputation. Section 2651.002(d) adds a training condition: a professional training programme completed within the year before the application.

Fees are modest and capped by the statute. Chapter 2651 says the licence fee is not to exceed US$50, the renewal fee is not to exceed US$50, a duplicate licence is not to exceed US$20 and each additional title company appointment is not to exceed US$16. The chapter states ceilings; the pages read for this guide do not give the amounts the department currently charges agents.

A licence does not run indefinitely. Under sections 2651.006 and 2651.007, unless staggered renewal applies, a licence expires on 1 June after the second anniversary of its issue. Renewal takes a completed form and the fee. The statute also puts the department on a clock: it must report any deficiency in a renewal within 20 business days, and a renewal is automatically approved on the 30th business day after it is complete unless the department gives written notice that it proposes to deny it.

The money behind an agent's licence

Texas asks a title agent for three layers of financial backing, each measured differently.

The first is the bond. Section 2651.101 requires each licensed agent and each direct operation to file a surety bond payable to the department. The amount is the greater of US$10,000 or 10 per cent of the gross premium written, with a ceiling of US$100,000. Section 2651.102 allows a deposit of cash, a letter of credit or securities in place of the bond.

Three worked examples show how the formula moves, each assuming a different yearly figure for gross premium written. An agent that wrote US$60,000 has a 10 per cent figure of US$6,000, which is below the floor, so the bond is US$10,000. An agent that wrote US$450,000 files a bond of US$45,000. An agent that wrote US$2 million has a 10 per cent figure of US$200,000, which is above the ceiling, so the bond is US$100,000. The floor applies up to US$100,000 of gross premium and the ceiling from US$1 million.

The second layer is capital, which the statute calls unencumbered assets. Section 2651.012 defines them to include cash, liquid assets free of liens, equity in real estate, investments, surety bonds, deposits made in place of a bond, qualifying letters of credit and solvency accounts. The minimum depends on the population of the county where the agent has its principal office, defined as the place in Texas where the organisation's decision makers run its daily affairs.

An agent licensed in several counties does not add the figures together. Section 2651.012(e) says it must meet the standard for the largest county in which it holds a licence. A certification of unencumbered assets accompanies the yearly audit, under section 2651.158, unless the agent has made a deposit.

The third layer is the solvency account described in section 2651.0121. For each policy, the minimum deposit is the greater of US$5 or 1 per cent of the agent's retained share of the premium, rounded to the nearest dollar, and deposits are made at least quarterly. As a worked example, assume an agent keeps US$1,200 of the premium on one policy: 1 per cent is US$12, so US$12 goes into the account. If the retained share were US$300, 1 per cent would be US$3 and the US$5 minimum would apply. The two methods meet at a retained share of US$500.

The bond is not a formality. If a loss appears, section 2651.103 lets the department require an examination in Travis County on a date between 10 and 15 days after notice, and section 2651.104 gives the attorney general the task of investigating and of collecting on the deposit or suing on the bond.

What an escrow officer is and does

The administrative rules in Section VI of the manual define the escrow officer by the work. An escrow officer is an attorney, or a bona fide employee of a licensed escrow officer attorney, of a direct operation or of a title insurance agent, who does one or more of four things: countersigns forms, supervises the preparation and delivery of forms, signs escrow cheques, or closes transactions.

The TDI FAQ ties this to the premium: in Texas the premium pays for the title search, the title examination and closing the transaction, so closing is part of the regulated service and the person who performs it is licensed for it.

The licensing rule follows. According to the manual, nobody may act as an escrow officer without a licence from the department and the surety bond required by Chapter 2652 of the Insurance Code, and an agent or direct operation may not employ an escrow officer who is unlicensed or unbonded.

Attorneys are treated differently. The manual says an attorney need not be licensed to perform an escrow officer's duties, while a non-attorney employee who performs them must be. An attorney may choose to become licensed; one who does must use a title agency escrow account, close the transaction in the title agent's name and follow the same trust fund requirements as a title insurance agent.

Ownership matters too. Sole owners and individual partners of an agent do not need an escrow officer's licence, the manual says, but corporate officers and employees who perform escrow duties do.

One point of care on dates. The manual page that sets out these rules was last updated on 23 November 2015, and it marks the escrow officer rules as effective from 3 January 2014. The index of the manual, updated in January 2025, flags new additions to Chapter 2652. The text of that chapter was not available for this guide, so the details below are the manual's, as published on that page.

The escrow officer's licence, bond and renewal

An escrow officer's licence is tied to an employer. The figures in this section are those of the manual page last updated on 23 November 2015. The application has two parts, and the second must be signed by the title insurance agent or direct operation. The fee is US$35 and is not refunded.

The bond is arranged and paid for by the agent or direct operation, not by the officer. The manual calls it the Texas Escrow Officer's Schedule Bond, and allows a cash deposit, an irrevocable letter of credit or approved securities instead. Its size depends on a head count: US$5,000 for each escrow officer who is a bona fide Texas resident and US$10,000 for each who lives in an adjacent state, up to a total of US$50,000. The full sum is available for a loss caused by any one of the officers it covers, or by all of them.

Worked examples, each assuming a different staff list. An agency with four escrow officers, all Texas residents, needs a schedule bond of four times US$5,000, or US$20,000. An agency with 12 Texas-resident officers would reach US$60,000 on the head count, so the US$50,000 ceiling applies; the ceiling is reached at ten Texas-resident officers.

The bond moves with the staff. To add an escrow officer, the agent notifies the department immediately and files an application, another US$35 fee and a bond rider that raises the bond by US$5,000 or US$10,000. When an officer stops acting, the agent must immediately tell both the officer and the department, return the notice of cancellation printed on the back of the licence certificate and file a rider that lowers the bond. The department cancels the licence when it receives the notice, whether or not the rider has arrived.

Renewal follows the employer's calendar: an escrow officer's licence expires on the same date as the licence of the agent or direct operation. The renewal fee is US$35, pro-rated by the month when the renewal covers less than two years. Missing the date means the licence expires automatically. For up to 90 days it can still be renewed late, at the US$35 renewal fee plus half the initial fee, which is US$17.50, for a total of US$52.50. After 90 days there is no renewal and a new application is needed.

Training and continuing education

The pre-licence training programme of section 2651.002(d) is set by the commissioner by rule under section 2651.0021. Its hours may count towards continuing education, and management personnel with at least five years in a comparable position in Texas are exempt.

After a licence, section 2651.204(b) provides for continuing education of not more than 15 hours in each two-year licence period. Extensions or exemptions are available for illness or other extenuating circumstances under section 2651.204(e).

The detail sits in the manual. Its index of procedural rules lists rule P-28, on continuing education and the professional training programme for management personnel. The text of that rule was not read for this guide, so any hours it sets for escrow officers are not stated here.

A premium nobody can discount

On price, the Texas rule is short. TDI's FAQ says the state regulates rates, that all title companies charge the same premium for a policy, based on the sale value of the property, and that premiums cannot be negotiated: the department sets the rate and each title agent must charge the same premium. The only thing buyer and seller may bargain over, the FAQ says, is which of them pays it.

The premium is a regulated figure in the manual, not a commercial one. Section III of the manual opens with rate rule R-1, the schedule of basic premium rates. The FAQ gives two reference points, a basic premium of US$496 on a US$50,000 property and US$832 on a US$100,000 property, as of its March 2024 update. The index of Section III read for this guide lists a rate chart effective 1 September 2019 and marks rate rule R-5 as effective 1 November 2024. The FAQ's two figures are therefore dated illustrations from March 2024, not a statement of today's premiums. The rates in force are those on the department's current rate page, which was not read for this guide and may show different amounts.

The rules against rebates sit in two places. The second rate rule, R-2, is titled "Rebates and Discounts", and procedural rule P-53 is titled "Rebates and Discounts Prohibited". The titles show that rebates and discounts on the premium are prohibited. The exact wording of the two rules, including what each allows by way of exception, was not read for this guide; it is in the manual.

What can differ between offices is everything around the premium. The FAQ says escrow fees and closing costs vary between agents and can be compared. It lists tax certificates, escrow fees, recording fees and delivery expenses among possible extra charges, and suggests asking for documentation of what they actually cost, asking for the closing papers in advance, and considering whether to have an attorney attend the closing. The FAQ also says a buyer is not required to use a title company chosen by a real estate agent, a builder or a lender.

One state charge appears on every closing. Under rule G.1 of the manual, a policy guaranty fee is collected from the purchaser at closing for each owner's policy and each loan policy, and must appear on the settlement statement as "State of Texas Policy Guaranty Fee". The agent holds it in an audited escrow or trust account and may use it only to pay the guaranty association. Remittances are quarterly, due on 1 May, 1 August, 1 November and 1 February. The rule adds that the fee may not be counted as an expense when rates are set.

The yearly audit of trust funds

Customer money in a title office is trust money, and Texas has it audited every year. Section 2651.151 requires each agent and direct operation to have an annual audit of its trust fund accounts, at its own expense. The audit is filed with the department not later than the 90th day after the end of the agent's fiscal year, and a copy goes to each title company the agent represents.

The auditor must be independent. Section 2651.154 names an independent certified public accountant, a licensed public accountant or a qualifying firm. The standards and the report forms are set by the commissioner's rules under section 2651.153, and Section V of the manual holds the minimum standards, instructions and forms. Title companies that operate in their own name audit their trust accounts county by county on the same 90-day timetable, under section 2651.152.

The underwriters are part of the enforcement. A title company must report an agent's missing audit within 30 days after the deadline has passed, under section 2651.156, and section 2651.251 lets the company examine an agent's trust accounts at any time, at the company's cost. If an audit is late, or shows irregularities or unsound practices, section 2651.157 allows the department to revoke the licence after notice and a hearing.

Separation of funds is a licensing matter in its own right. Failing to keep separate escrow accounting and separate escrow bank accounts is one of the grounds for discipline listed in section 2651.301. How money leaves those accounts is governed by procedural rule P-27, on disbursement from escrow or trust fund accounts, which the manual marks as effective 10 June 2018; its text was not read for this guide.

The audits are not public documents. Section 2651.011 says information submitted to the department under the subchapter is generally privileged and not public. Rule G.2 of the manual adds a further check: at the commissioner's request, money from the guaranty fee account may pay for people to audit and review agents' escrow and trust accounts, statistical reports, accounting records and complaints, under the commissioner's direction.

Discipline, and what happens when an agency closes

Section 2651.301 lists seven grounds on which the department may deny an application or discipline an agent or direct operation: wilful violation of the title code; an intentional material misstatement in the application; obtaining or trying to obtain a licence by fraud or misrepresentation; misappropriating or illegally withholding money that belongs to a title company, an insured or another person; fraudulent or dishonest practices; materially misrepresenting the terms of a policy; and failing to keep escrow accounting and escrow bank accounts separate.

The procedure has protections for the licence holder. Before an examination report becomes final, section 2651.206 gives the agent a copy of it and of the supporting evidence, with at least 10 days to respond. Under section 2651.303(c), a disciplinary action is dismissed with prejudice unless notice of the hearing is served by the 60th business day after a hearing is requested. An applicant whose licence was denied or revoked may not apply again before the first anniversary of that decision, under section 2651.302. Chapter 2651 itself sets no schedule of fines.

Leaving the business is regulated as closely as entering it. An agent may surrender its licence by notifying the department and the title company, and ending the agency contract forfeits the licence with that company; section 2651.201 adds that surrender does not erase liability for earlier conduct. The manual's rule on ceasing business sets a timetable.

The manual's rule on direct operations refers to a wind-down plan under rule D-1 when a licence is surrendered, and the rule on ceasing business has the title companies share the cost of the final audit in proportion to their share of the agent's premium over the previous 12 months.

Where a complaint goes

TDI's FAQ sets out an order. A dispute about a premium or a claim goes first to the title agent or the title company; item No. 10 of the policy conditions should list the company's toll-free number.

The department comes next. TDI's complaint page says it can help with an insurance complaint against companies, agents and adjusters. The consumer begins by choosing the type of insurance involved, and title is one of the categories offered; the page then guides the consumer through the steps. A Consumer Complaint Portal lets someone who has already filed log in and add a document. For questions of legal representation the complaint page points to a separate page on getting legal help.

One limit is worth stating. The complaint page read for this guide does not give a timetable for the department's handling of a complaint, so none is stated here.

In Texas the premium is the one part of a closing that no office can change. The licence, the bond and the yearly audit are what the state checks in every office that charges it.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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