senate Bill S3671

Provides a definition of the word "timely" for purposes of real property insurance escrow accounts

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Sponsor

Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 01 / Mar / 2011
    • REFERRED TO BANKS
  • 04 / Jan / 2012
    • REFERRED TO BANKS

Summary

Provides a definition of the word "timely" for purposes of real property insurance escrow accounts.

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Bill Details

Versions:
S3671
Legislative Cycle:
2011-2012
Current Committee:
Senate Banks
Law Section:
Banking Law
Laws Affected:
Amd ยง6-k, Bank L
Versions Introduced in Previous Legislative Cycles:
2009-2010: A167, S3491
2007-2008: A55

Sponsor Memo

BILL NUMBER:S3671

TITLE OF BILL:
An act
to amend the banking law, in relation to the definition of the word
"timely" for real property insurance escrow accounts

PURPOSE:
This bill defines timely payment for the purpose of the requirements
applicable to real property insurance escrow accounts maintained by
mortgage investing institutions.

SUMMARY OF PROVISIONS:
This bill adds a new paragraph (f) to subdivision (1) (Definitions) of
Section 6-k of the banking law. The new paragraph defines the term
"timely" for the purposes of this section, to mean 10 days prior to
the date on which real property insurance premiums are due and payable.

JUSTIFICATION:
Section 6-k sets forth various provisions applicable to real property
insurance escrow accounts maintained by mortgage investing
institutions.
Such institutions are required by paragraph (a) of subdivision (2) of
section 6-k to "make all payments for insurance for which they hold
real property insurance escrow accounts in a timely manner." However,
the standard for timely payments is not defined. Despite the
existence of this section, late payments by these institutions
continue to be a problem. When the payment is not received by the
insurer by the due date, a cancellation notice is issued by the
insurer on the policy, with a copy to the mortgagor and the
mortgagor's insurance agent or broker. Some mortgage investing
institutions appear to time their payments not by the premium due
date but according to the terms of New York's statutory "grace
period" which provides an additional 15 days after issuance of a
nonpayment cancellation notice by the insurance company before an
actual cancellation can be affected. But waiting until the policy has
gone into cancellation mode causes untold problems for the other
parties involved in the insurance transaction. A cancellation notice,
in the insurance world, creates an emergency.

Much anxiety and many costly activities ensue when such a notice is
received. Insurance agents and their clients must take immediate action
to determine the cause of the cancellation notice and prevent its
taking effect. Yet this remains a common occurrence despite the
requirements of Section 6-k. Since escrow accounts are required
primarily to protect the mortgage companies' interests, they should
be run in a way that does not inconvenience the mortgagor and others
with whom the mortgagor chooses to do business. It is unfair to
insurance consumers, insurance producers and insurers for mortgage
investing institutions to remit escrow payments so late that the
insurer must issue a cancellation notice. This process entails extra

costs in terms of time spent, mailings, phone calls and processing.
It is poor public policy to tolerate business practices which
routinely cause insurers to issue cancellation notices.
This bill will further specify the standard for timely payment to
clearly rule out payments that are received after the due date
specified on the premium billing notice. Requiring payments to be
remitted from escrow accounts at least 10 days prior to the due date
will prevent cancellation notices from being necessary.

LEGISLATIVE HISTORY:
S.3491 of 2010 - Referred to Banks

FISCAL IMPLICATIONS:
None.

LOCAL FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
This act shall take effect on the ninetieth day after it shall have
become a law.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  3671

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              March 1, 2011
                               ___________

Introduced  by  Sen.  SMITH  -- read twice and ordered printed, and when
  printed to be committed to the Committee on Banks

AN ACT to amend the banking law, in relation to the  definition  of  the
  word "timely" for real property insurance escrow accounts

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Subdivision 1 of section 6-k of the banking law is  amended
by adding a new paragraph (f) to read as follows:
  (F) "TIMELY" SHALL MEAN TEN DAYS PRIOR TO THE DATE ON WHICH REAL PROP-
ERTY INSURANCE PREMIUMS ARE DUE AND PAYABLE.
  S  2.  This  act shall take effect on the ninetieth day after it shall
have become a law.







 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD04667-01-1

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