Funds can be electronically transferred to us either by wire or by an automated clearing house (ACH).  There are differences between wires and transfers via ACH and the latter are more vulnerable to recall.  This does not happen frequently, but funds transferred through an ACH can be reversed, provided the guidelines of the ACH are adhered to.  ACH transfers have regularly been used by some subprime lenders and unsuspecting title agents have been surprised by recalls of funds they thought were collected and not reversible. 

What can a title company do to protect itself from this possibility?  One possibility is to confirm with your bank its procedures regarding reversal of funds.  Some banks will not authorize this practice without the consent of the account holder.  If your bank authorizes funds reversal without your consent you may inquire as to whether the bank will set up a hold or block (commonly called "debit blockers" or debit filters") on your account so that any reversal or recall must be authorized by you.  If your bank will not, the following guidelines may help:

1. Do not transfer via wire transfer if you receive funds via ACH.  They are not the same.
2. If you must receive an ACH transfer, treat it as you would treat a personal check with an appropriate holding time to "clear", usually one to three business days (discuss this with your bank).
3. Consider establishing a separate account for incoming transfers only, and then transfer the money immediately to your escrow account upon receipt.  It may be harder to recall a transfer once it leaves the receiving account.
4. If you are unsure of the financial stability of a lender with which you are doing business, require a wire transfer.

Should you have any questions, please contact our underwriting counsel: Steve Gratman; Sue Swick or Dwight Edwards.