N.Y. Banking Law § 6-k: Real property insurance escrow accounts

§ 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.