Good Funds Laws and Real Time Payments.

Background on Good Funds in Real Estate Transactions

In the realm of real estate transactions, the utilization of diverse payment channels is subject to the regulations set forth in state Good Funds laws. These laws establish specific criteria for the acceptable forms of closing funds, with the primary objective of ensuring that conclusive and disbursable funds are in place before any real estate exchanges or closures occur.

The mandates within Good Funds statutes serve several critical purposes. They act as a safeguard against fraudulent activities, impart confidence to consumers involved in real estate transactions, and contribute to the overall stability of the economic marketplace.

Guiding Principles for Protection

Many of the existing Good Funds laws were crafted decades ago, well before the introduction and widespread use of innovative payment channels like FedNow or Real Time Payments (RTP). Given the expanded array of payment rail options in today's market, Tidal Money advocates for the adoption of updated Good Funds laws, particularly those that permit "instant" or "real-time" payments while adhering to safety and compliance standards.

In order to safeguard the interests of consumers and the real estate economy, Good Funds laws should encompass the following key principles:

1. Embrace Modern Payment Channels: Enable the use of contemporary payment rails, including FedNow and Real Time Payments (RTP).

2. Leverage Technology for Convenience and Security: Promote the use of technology integrated with approved payment channels to enhance consumer convenience and bolster defenses against fraudulent activities.

3. Ensure Certainty in Real Estate Financing: Guarantee the use of funds that are definitively settled to underpin certainty in real estate financing and transfers.

4. Mitigate Exchange Risk: Mandate that funds, when transferred to US dollars, are shielded from exchange risk and are moved within or between Federally Insured Depository Institutions.

5. Source of Funds: Demand that the funds received are directly transferred from a consumer's Federally Insured Depository Institution and cannot originate from sources such as credit cards, cryptocurrencies, or any other non-depository entities.

Ensure that transactions are not deemed final unless a real estate professional possesses funds equal to or greater than the disbursement amount, which must be appropriately transferred via an approved payment rail or from a Federally Insured Depository Institution that has provided written confirmation that the funds are indeed final and ready for disbursement. Tidal Money uses such institutions for all disbursements and real estate payments.