Good Funds Background
The use of various payment rails in real estate transactions is governed by state Good Funds laws. These laws set requirements for acceptable forms of closing funds. They help to ensure final and disbursable funds are received prior to real estate transfers or closings.
Requirements in Good Funds statutes act as a deterrent to fraud, provide certainty in real estate transactions for consumers, and create stability in the economic marketplace.
Protection Principles
Many Good Funds laws are decades old and were drafted prior to the contemplation or use of new payment rails, such as FedNow or Real Time Payments (RTP). Given the increased payment rail options available in today’s marketplace the title industry supports the adoption of updated Good Funds laws, especially those that enable “instant” or “real-time” payments, in a safe and compliant manner.
To protect consumers and the real estate economy, Good Funds laws should:
- Enable the use of modern payment rails, such as FedNow or Real Time Payments (RTP).
- Facilitate the use of technology linked to approved payment rails that provides consumer convenience and anti-fraud protections.
- Provide certainty in real estate financing and transfer through use of finally settled funds.
- Require funds not be subject to exchange risk when transferred to US dollars and be transferred within or between Federally Insured Depository Institutions.
- Establish funds received should be directly transferred from a consumer’s Federally Insured Depository Institution, and not sourced from a credit card, cryptocurrency, or any other non-depository source.
Ensure transactions are not finalized unless a real estate professional has receipt of funds equal to or greater than the disbursement amount, appropriately transferred via an approved payment rail or from a Federally Insured Depository Institution that has provided written affirmation funds are final and disbursable.