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This entry was published on 2014-09-22
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SECTION 6-K
Real property insurance escrow accounts
Banking (BNK) CHAPTER 2, ARTICLE 1
§ 6-k. Real property insurance escrow accounts. 1. Definitions. When
used in this section: (a) "Mortgage investing institution" means any
bank, trust company, national bank, savings bank, savings and loan
association, federal savings bank, federal savings and loan association,
private banker, credit union, federal credit union, investment company,
pension fund, licensed mortgage banker or any other entity which
maintains a real property insurance escrow account for real property
located in this state.

(b) "Mortgagor" means a person having title to and occupying a one to
four family residence which is located in this state and is subject to a
mortgage.

(c) "Real property insurance" means a policy of insurance issued, or
issued for delivery in this state, on a risk located or resident in this
state insuring the following contingency: loss or damage (including but
not limited to loss or damage on account of fire) to real property used
predominantly for residential purposes and consists of not more than
four dwelling units, other than motels or hotels.

(d) "Real property insurance escrow account" means an account
established by contract between a mortgagor of real property improved by
a one to four family residence and the mortgage investing institution
having a mortgage thereon, into which the mortgage investing institution
shall deposit money collected from the mortgagor for the purpose of
paying real property insurance premiums.

(e) "One to four family residence" means property used primarily for
residential purposes for one to four families, including property held
in condominium form of ownership, and which is occupied in whole or in
part by the owner.

2. Duties and responsibilities of mortgage investing institutions. (a)
Every mortgage investing institution shall make all payments for
insurance for which they hold real property insurance escrow accounts in
a timely manner.

(b) Every mortgage investing institution shall pay at least the
minimum rate of interest on each real property insurance escrow account
as prescribed therein.

(c) Every mortgage investing institution shall deposit funds from a
real property insurance escrow account of a mortgagor in a banking
institution whose deposits are insured by a federal agency or a licensed
branch of a foreign banking corporation whose deposits are insured by a
federal agency. Notwithstanding the foregoing provisions of this
subdivision, the superintendent shall have the power to exempt from the
requirements of this subdivision any banking organization which does not
receive deposits or share accounts from the general public.

(d) A mortgage investing institution may debit a mortgagor's real
property insurance escrow account for payments of insurance premiums
only if actual payment for such premiums is made within twenty-one days
after such debit.

(e) Every mortgage investing institution shall, at least annually,
provide to the mortgagor an analysis of the real property insurance
escrow account of the mortgagor. Such analysis shall contain, for the
twelve month period covered by the analysis, at least: (1) interest
earned; (2) the amount of insurance premiums paid from the real property
insurance escrow account; and (3) the account balance as of the
beginning of the period covered by the analysis and the ending account
balance as of a specified date within forty-five days preceding the date
of the analysis. In addition, the mortgage investing institution shall,
upon request by the mortgagor, provide to the mortgagor the date or
dates of the payment of insurance premiums from such real property
insurance escrow account. The information required by this paragraph may
be provided in notices otherwise required by federal or state law,
regulation or rule to be sent on at least an annual basis to the
mortgagor, including but not limited to notices under title three-A of
the real property tax law.

(f) The mortgage investing institution shall provide a written
disclosure, in at least eight point bold face type, to the mortgagor
with respect to the real property insurance escrow account. Such
disclosure shall be provided at the time of the establishment of the
real property insurance escrow account. In the case of accounts already
in existence on the effective date of this act, such disclosure shall be
provided to the mortgagor with the next annual analysis required by
paragraph (e) of this subdivision. The disclosure shall contain
substantially the following language:

(i) The mortgage investing institution is obligated to make all
payments for real property insurance for which the real property
insurance escrow account is maintained. If any such payments are not
timely, the mortgage investing institution is responsible for making
such payments including any penalties and interest and shall be liable
for all damages to the mortgagor resulting from its failure to make
timely payment.

(ii) In the event that a real property insurance premium notice is
sent directly to the mortgagor by the insurer, the mortgagor shall have
the obligation to promptly transmit such premium notice to the mortgage
investing institution, or such other institution or agent as may be
designated in writing by the mortgage investing institution, for
payment. Failure to do so may jeopardize the mortgagor's insurance
coverage and may excuse the mortgage investing institution from
liability for failure to timely make such real property insurance
payments.

(iii) The mortgagor is obligated to pay one-twelfth of the real
property insurance premiums each month to the mortgage investing
institution for deposit into the real property insurance escrow account,
unless there is a deficiency or surplus in the account, in which case a
greater or lesser amount may be required.

(iv) If the mortgage investing institution is subject to the
provisions of paragraph (c) of this subdivision, the mortgage investing
institution must deposit the escrow payments made by the mortgagor in a
banking institution or a licensed branch of a foreign banking
corporation whose deposits are insured by a federal agency.

(g) Every mortgage investing institution shall provide written notice
to a mortgagor no later than ten business days after the transfer to
another mortgage investing institution of the right to receive all
payments from the mortgagor, including payments made into the real
property insurance escrow account, which notice shall include the name,
address and telephone number of the mortgage investing institution to
which such rights have been transferred. Upon request by the mortgagor,
the mortgage investing institution shall advise the mortgagor of the
amount of money in such account as of the date of such transfer. Every
mortgage investing institution shall remain fully liable to pay any real
property insurance premiums which are due and payable prior to the date
of such transfer, and the mortgage investing institution to which such
rights have been transferred shall be liable to pay any real property
insurance premiums which are due and payable after the date of such
transfer, unless otherwise agreed among the parties to the transfer.

(h) Every mortgage investing institution shall, no later than thirty
days after the final payment of the mortgage loan, where the mortgagor
retains ownership of the property, send to the mortgagor a written
statement that shall include, but not be limited to the following
information: (i) that the real property insurance escrow account has
been or will be terminated (whichever is applicable); and (ii) that
unless the mortgagor establishes a new real property insurance escrow
account with a mortgage investing institution, the mortgagor will be
obliged to pay to the appropriate insurer real property insurance
premiums becoming due thereafter. The written notice shall also set
forth the effective date of the termination and shall provide the name
and address of each insurer and shall advise the mortgagor to contact
such insurer for billing information.

3. Mailing or delivery of bills to mortgage investing institutions. A
mortgagor who has entered into a real property insurance escrow account
may designate, in writing, a mortgage investing institution, and its
successors, agents or assigns to receive premium notices for real
property insurance. The mortgage investing institution shall advise the
insurer in writing within fifteen days after the termination of such
escrow account and shall inform the insurer that all future premium
notices should be sent directly to the insured. The mortgage investing
institution shall, upon the request of the insurer, provide any document
that clearly evidences its authorization to receive insurance premium
notices or obligation to pay real property insurance premiums.

4. Payments by mortgage investing institutions. A mortgage investing
institution may pay the real property insurance premiums due on more
than one parcel by a single instrument, provided that the mortgage
investing institution also provides to the insurer a detailed list of
the specific parcels to which the instrument is to be applied, each
parcel identification number (if any) and the amount of the real
property insurance premium to be paid with respect to each parcel.

5. Liabilities of mortgage investing institutions. (a) A mortgage
investing institution which receives moneys from a mortgagor for deposit
into a real property insurance escrow account shall be liable to such
mortgagor, upon failure to pay such real property insurance premiums,
for the amount of the real property insurance premiums plus penalties
and interest imposed thereon.

(b) In addition to any other remedies permitted by law, a mortgagor
whose real property insurance premiums are to be paid by means of a real
property insurance escrow account pursuant to this section may bring an
action against the mortgage investing institution maintaining such
account for the mortgagor under the provisions of this subdivision if
payments for real property insurance premiums have not been made for
thirty days after the date such insurance premiums have become due and
payable. If a court shall find, after considering the circumstances of
the failure of a mortgage investing institution to pay the real property
insurance premium of a mortgagor pursuant to an escrow agreement, that
such failure was due to the negligence or intentional acts of the
mortgage investing institution, its agent, or both, the court may award
the mortgagor injunctive relief and liquidated damages in an amount
equal to three times the real property insurance premium not paid, but
in no event greater than six thousand dollars.

(c) A mortgage investing institution shall be liable to the mortgagor
for all damages and shall bear all responsibility for failure to make
timely payment of insurance premiums.

(d) The mortgage investing institution shall have liability to the
mortgagor under this subdivision only if:

(i) the mortgage investing institution, or such other institution or
agent as designated in writing by the mortgage investing institution,
has received the real property insurance premium notice; and

(ii) the mortgagor has made required payments for deposit into the
real property insurance escrow account.

6. Separability. If any provision of this section or the application
of such provision in certain circumstances shall be held invalid, the
validity of the remainder of this section and its applicability to other
circumstances shall not be affected.