N.Y. Banking Law § 14-b: Power of the superintendent of financial services to prescribe minimum rate of interest on mortgage escrow accounts

§ 14-b. Power of the superintendent of financial services to prescribe

minimum rate of interest on mortgage escrow accounts. 1. The

superintendent shall have the power to prescribe, from time to time but

not more often than once in every three month period, by regulation a

minimum rate of, and method or basis of computing, 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 subdivision 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. In making such determination the superintendent 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 guaranteed

mortgage loans in this state, (iv) cost factors in maintaining escrow

accounts and (v) such other pertinent economic or cost factors that the

superintendent shall deem to be appropriate. Prior to the

superintendent's prescription of any such minimum rate of interest, the

superintendent shall issue a statement in writing setting forth the

economic and cost data and criteria upon which such determination is

based. Prior to making such determination, 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. The superintendent may promulgate such regulations as the

superintendent deems necessary and proper to implement and define the

provisions of this section. The superintendent may prescribe the minimum

rate of interest from time to time, but not more often than once in any

three-month period, 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 superintendent, and of any rule or regulation

adopted pursuant to this subdivision.

4. In no event shall interest be required to be paid on escrow

accounts where (i) there is a contract between the mortgagor and the

mortgage investing institution, entered into before the date this

subdivision 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 (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.

5. "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

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. "Escrow account" as used in this section and in section 5-601 or

5-602 of the general obligations law shall mean any account established

pursuant to an agreement between a mortgagor and a mortgage investing

institution whereby the mortgagor pays to the mortgage investing

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. "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

property 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. 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.