S T A T E   O F   N E W   Y O R K
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                                  2918

                       2009-2010 Regular Sessions

                          I N  A S S E M B L Y

                            January 21, 2009
                               ___________

Introduced by M. of A. V. LOPEZ -- read once and referred to the Commit-
  tee on Banks

AN ACT to amend the banking law, in relation to the power of the banking
  board to regulate mortgage escrow accounts

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

  Section 1. Section 14-b of the banking law, as amended by chapter  342
of  the laws of 1986,  subdivisions 1 and 5 as amended by chapter 267 of
the laws of 1987 and subdivision 6 as amended by chapter 440 of the laws
of 1989, is amended to read as follows:
  S 14-b. Power of the banking  board  to  [prescribe  minimum  rate  of
interest  on]  REGULATE  mortgage  escrow accounts. 1. The banking board
shall [have the power to prescribe, from time to time but not more often
than once in every three month period] PRESCRIBE ANNUALLY PRIOR TO OCTO-
BER FIRST FOR EACH SUCCEEDING YEAR, by a three-fifths vote  of  all  its
members, by regulation a minimum rate of, and method or basis of comput-
ing, interest that a mortgage investing institution shall be required to
pay  on  each  escrow account maintained with respect to a mortgage on a
one to six family residence occupied by the owner  or  on  any  property
owned  by a cooperative apartment corporation, as defined in subdivision
twelve of section three hundred sixty of the tax law, (as such  subdivi-
sion  was  in effect on December thirtieth, nineteen hundred sixty), and
located in this state, which rate shall be  greater  than  the  rate  of
interest required to be paid under section 5-601 or 5-602 of the general
obligations law.
  2.  THE  BANKING BOARD SHALL PRESCRIBE BY REGULATION BY A THREE-FIFTHS
VOTE OF ALL ITS MEMBERS THE METHOD BY WHICH A MORTGAGE INVESTING  INSTI-
TUTION SHALL BE REQUIRED TO CALCULATE THE MINIMUM AMOUNTS REQUIRED TO BE
MAINTAINED  IN EACH ESCROW ACCOUNT MAINTAINED WITH RESPECT TO A MORTGAGE
ON A ONE TO SIX FAMILY RESIDENCE OCCUPIED BY THE OWNER OR  ANY  PROPERTY
OWNED  BY  A COOPERATIVE APARTMENT CORPORATION AS DEFINED IN SUBDIVISION

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD05732-01-9
              

A. 2918                             2

TWELVE OF SECTION THREE HUNDRED SIXTY OF THE TAX LAW, (AS SUCH  SUBDIVI-
SION  WAS  IN EFFECT ON DECEMBER THIRTIETH, NINETEEN HUNDRED SIXTY), AND
LOCATED IN THIS STATE.
  3.  In  making  [such  determination]  THE  DETERMINATIONS REQUIRED IN
SUBDIVISIONS ONE AND TWO  OF  THIS  SECTION,  the  banking  board  shall
consider  pertinent economic and cost factors including, but not limited
to: (i) current yields on short term investments, (ii) current  dividend
rates  paid  on  regular  savings  accounts throughout this state, (iii)
currently prevailing interest rates on conventional and insured or guar-
anteed mortgage loans in this state, (iv) cost  factors  in  maintaining
escrow  accounts  and  (v) such other pertinent economic or cost factors
that the banking board shall deem to be appropriate.  Prior to the bank-
ing board's prescription of any such minimum rate of interest, OR METHOD
OF CALCULATING ESCROW BALANCES, the superintendent shall make a  written
recommendation to the banking board as to such minimum rate of interest,
OR  METHOD OF CALCULATING MINIMUM ESCROW BALANCES, reciting the economic
and cost data and criteria upon which such recommendation is  based.  IN
PRESCRIBING  THE  METHOD FOR CALCULATING THE MINIMUM AMOUNTS REQUIRED TO
BE MAINTAINED IN SUCH ESCROW ACCOUNTS THE BANKING BOARD SHALL  PRESCRIBE
A METHOD WHICH RESULTS IN SUCH BALANCES BEING REDUCED TO AS NEAR AS ZERO
AS  PRUDENTLY  POSSIBLE  AFTER  REQUIRED  PAYMENTS  ARE MADE OUT OF SUCH
ACCOUNTS. Prior to making such recommendation,  the  superintendent  may
invite  presentation,  by  interested  persons,  of information and data
relating to economic and cost factors relevant to such minimum  rate  of
interest.
  [3.]  4. The banking board may promulgate such regulations as it deems
necessary and proper to implement and  define  the  provisions  of  this
section.  The  banking  board may prescribe the minimum rate of interest
from time to time, but not more often than once in any three-month peri-
od, and shall provide reasonable notice to the public of any  change  in
the  rate of interest, of the effective date of such change, which shall
be not less than seven days following the adoption of such change by the
banking board, and of any rule or regulation adopted  pursuant  to  this
subdivision.
  [4.]  5.  In  no event shall interest be required to be paid on escrow
accounts OR  THE  METHOD  OF  CALCULATING  MINIMUM  ESCROW  BALANCES  BE
PRESCRIBED  where  (i) there is a contract between the mortgagor and the
mortgage investing institution, entered into before the date this subdi-
vision shall have become a law which contains an express  disclaimer  of
an  obligation  on the part of the mortgage investing institution to pay
interest on such accounts OR WHICH CONTAINS AN EXPRESS PROVISION SETTING
FORTH THE METHOD FOR CALCULATING MINIMUM ESCROW BALANCES,  or  (ii)  the
payment of such interest would violate any federal law or regulation, or
(iii)  such  accounts  are maintained with a mortgage servicing company,
neither affiliated with nor owned in whole or in part  by  the  mortgage
investing institution, under a written contract, entered into before the
date  this  subdivision shall have become a law, which contract does not
permit the mortgage investing institution to earn or  receive  a  return
from  the  investment  of  such  accounts  OR  WHICH CONTAINS AN EXPRESS
PROVISION SETTING  FORTH  THE  METHOD  FOR  CALCULATING  MINIMUM  ESCROW
BALANCES.
  [5.]  6.  "Mortgage investing institution" as used in this section and
in section 5-601 or 5-602 of the general obligations law shall mean  and
include  any  bank,  trust company, national bank, savings bank, savings
and loan association, federal  savings  and  loan  association,  private
banker,  credit  union,  investment  company, insurance company, pension

A. 2918                             3

fund, mortgage company or other entity which makes, extends or  holds  a
mortgage on any one to six family residence occupied by the owner or any
property  owned  by  a  cooperative apartment corporation, as defined in
subdivision  twelve  of  section three hundred sixty of the tax law, (as
such subdivision was in effect on December thirtieth,  nineteen  hundred
sixty), and located in this state.
  [6.]  7. "Escrow account" as used in this section and in section 5-601
or 5-602 of the general obligations law shall mean  any  account  estab-
lished  pursuant  to  an  agreement  between  a mortgagor and a mortgage
investing institution whereby the mortgagor pays to the mortgage invest-
ing institution or his designee amounts to be used for  the  payment  of
insurance  premiums,  water rents or any similar charges, and shall also
include real property tax escrow accounts as defined in title three-A of
article nine of the real property tax law.
  [7.] 8. "One to six family residence" as used in this section  and  in
section 5-601 or 5-602 of the general obligations law shall mean proper-
ty  used  primarily  for  residential  purposes for one to six families,
including property held in condominium form, and which  is  occupied  in
whole or in part by the owner.
  [8.]  9.  If any provision of this section, or the application of such
provision to any individual, company, corporation or circumstance, shall
be held invalid, the remainder of this section, and the  application  of
such  section  to individuals, companies, corporations, or circumstances
other than those to which it is held  invalid,  shall  not  be  affected
thereby.
  S 2. This act shall take effect on the one hundred twentieth day after
it  shall have become a law. Effective immediately, the addition, amend-
ment and/or repeal of any rule or regulation necessary for the implemen-
tation of the foregoing section of this act on its  effective  date  are
authorized to be made on or before such effective date.