S T A T E O F N E W Y O R K
________________________________________________________________________
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.