Escrow Account Reform Act of 1993

Summary: Escrow Account Reform Act of 1993 - Amends the Real Estate Settlement Procedures Act of 1974 to modify the limitation placed on advance deposits in escrow accounts. 
Requires any mortgage lender or servicer that establishes or maintains an escrow account in connection with a federally related mortgage loan to pay interest on the balance in such account at a specified minimum annual rate.  Cites conditions under which a borrower in connection with a federally related mortgage may terminate an escrow account by submitting a statement certifying that the borrower agrees to make timely payments of all charges paid from the escrow account. 
Defines the liability incurred for noncompliance with this Act. Sets forth Federal court jurisdiction over escrow account violations, and identifies the parties with standing to sue (including the borrower). 
Requires the Secretary of Housing and Urban Development to:  (1) report to the Congress the results of a study of standard escrow account management procedures; and (2) promulgate regulations implementing this Act.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Escrow Account Reform Act of 1993''.

SEC. 2. LIMITATION OF PAYMENTS INTO ESCROW ACCOUNTS.

    (a) Payments at Settlement.--
            (1) In general.--Section 10(a)(1) of the Real Estate 
        Settlement Procedures Act of 1974 (12 U.S.C. 2609(a)(1)) is 
        amended by striking ``, plus one-sixth'' and all that follows 
        through ``twelve-month period''.
            (2) Effective date.--The amendment under paragraph (1) 
        shall be made and shall take effect upon the expiration of the 
        1-year period beginning on the date of the enactment of this 
        Act.
    (b) Regular Monthly Payments.--
            (1) In general.--Section 10(a) of the Real Estate 
        Settlement Procedures Act of 1974 (12 U.S.C. 2609(a)) is 
        amended by adding at the end the following new undesignated 
        paragraphs:
    ``Notwithstanding paragraphs (1) and (2) and any mortgage 
agreement, each lender or servicer maintaining any such escrow account 
shall provide that, not less than once during each annual escrow 
period, the balance in each such escrow account shall equal an amount 
not greater than the amount equal to one-sixth of the sum of the total 
amount of taxes, insurance premiums, and other charges anticipated to 
be paid during such annual escrow period (or such lesser amount as 
provided in the mortgage agreement or other mortgage instrument).
    ``For 12 consecutive calendar months (the first such month being 
the month in which the first installment payment under the mortgage is 
due), an amount in each such month not exceeding \1/72\ of the 
estimated total amount of taxes, insurance premiums, and other charges 
which are reasonably anticipated to be paid on dates during the annual 
escrow period may be collected by the lender as a sum in excess of the 
amount sufficient to pay such taxes, insurance premiums, and other 
charges during the annual period.''.
            (2) Applicability.--The amendment made by paragraph (1) 
        shall apply to any annual escrow period (as such term is 
        defined in section 10(h) of the Real Estate Settlement 
        Procedures Act of 1974, as amended by this Act) for a federally 
        related mortgage loan that begins after the expiration of the 
        1-year period beginning on date of the enactment of this Act.
    (c) Coverage of Servicers.--Section 10(a) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2609(a)) is amended--
            (1) in the matter preceding paragraph (1), by inserting 
        ``or servicer (as the term is defined in section 6(i))'' after 
        ``lender''; and
            (2) by inserting ``or servicer'' after ``lender'' each 
        place it appears in paragraphs (1) and (2).

SEC. 3. INTEREST ON AMOUNTS IN ESCROW ACCOUNTS.

    (a) In General.--Section 10 of the Real Estate Settlement 
Procedures Act of 1974 (12 U.S.C. 2609) is amended by adding at the end 
the following new subsection:
    ``(e) Interest on Amounts in Escrow Accounts.--Any lender or 
servicer that establishes or maintains an escrow account in connection 
with a federally related mortgage loan shall pay interest on the 
balance in the escrow account at an annual rate of not less than the 
current passbook savings rate, as determined by the Secretary (in the 
same manner determined for purposes of determining family annual income 
under title I of the United States Housing Act of 1937). Interest 
accrued under this subsection shall be payable annually, except that 
any amounts accrued upon termination of an escrow account shall be 
payable upon the termination of the account. The Secretary shall, by 
regulation, provide for the manner and timing of payment of interest 
accrued under this section to the borrower or the account of the 
borrower.''.
    (b) Applicability.--The amendment made by subsection (a) shall 
apply to any escrow account (in connection with a federally related 
mortgage loan) that is established after the expiration of the 1-year 
period beginning on the date of the enactment of this Act.

SEC. 4. OPTION OF BORROWER TO TERMINATE ESCROW ACCOUNT.

    (a) In General.--Section 10 of the Real Estate Settlement 
Procedures Act of 1974 (12 U.S.C. 2609), as amended by section 3 of 
this Act, is further amended by adding at the end the following new 
subsection:
    ``(f) Borrower Assumption of Escrow Account Responsibility.--Any 
borrower in connection with a federally related mortgage loan for which 
less than 80 percent of the original principal obligation under the 
loan remains outstanding may terminate any escrow account for the loan 
by submitting to the lender or servicer of the loan a statement 
certifying that the borrower agrees to make timely payments of all 
taxes, insurance premiums, and other charges paid from the escrow 
account. Notwithstanding subsection (a) or any mortgage agreement, a 
lender or servicer may not require the establishment or maintenance of 
any escrow account for any federally related mortgage loan for which 
the escrow account is terminated under this subsection.''.
    (b) Effective Date.--The amendment under subsection (a) shall be 
made and shall take effect upon the expiration of the 180-day period 
beginning on the date of the enactment of this Act.

SEC. 5. ENFORCEMENT OF BORROWER RIGHTS.

    (a) Civil Money Penalties.--Section 10(d) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2609(d)) is amended--
            (1) in paragraph (1)--
                    (A) by striking ``failure to submit a statement to 
                a borrower as required under subsection (c)'' and 
                inserting ``failure by a lender or servicer to comply 
                with the provisions of this section''; and
                    (B) by striking ``failing to submit the statement'' 
                and inserting ``failing to comply''; and
            (2) in paragraph (2), by striking ``the requirement to 
        submit the statement'' and inserting ``a provision of this 
        section''.
    (b) Actions.--Section 10 of the Real Estate Settlement Procedures 
Act of 1974 (12 U.S.C. 2609), as amended by sections 3 and 4 of this 
Act, is further amended by adding at the end the following new 
subsection:
    ``(g) Actions to Enforce Borrower Rights.--
            ``(1) Damages and costs.--Whoever fails to comply with any 
        provision of this section shall be liable to the borrower for 
        each such failure in the following amounts:
                    ``(A) Individuals.--In the case of any action by an 
                individual, an amount equal to the sum of--
                            ``(i) any actual or incidental damages to 
                        the borrower as a result of the failure; and
                            ``(ii) in the case of a pattern or practice 
                        of noncompliance with the provisions of this 
                        section, any punitive damages as the court may 
                        allow, in an amount not to exceed $10,000.
                    ``(B) Class actions.--In the case of a class 
                action, an amount equal to the sum of--
                            ``(i) any actual or incidental damages to 
                        each of the borrowers in the class as a result 
                        of the failure; and
                            ``(ii) in the case of a pattern or practice 
                        of noncompliance with the provisions of this 
                        section, any punitive damages as the court may 
                        allow.
            ``(2) Attorneys fees.--In any action pursuant to this 
        section, the court shall award to the prevailing party the 
        court costs of the action together with reasonable attorneys 
        fees.''.

SEC. 6. DEFINITIONS.

    Section 10 of the Real Estate Settlement Procedures Act of 1974 (12 
U.S.C. 2609), as amended by sections 3, 4, and 5 of this Act, is 
further amended by adding at the end the following new subsection:
    ``(h) Definitions.--For purposes of this section:
            ``(1) The term `annual escrow period' means a period of 12 
        consecutive calendar months occurring during the term of a 
        federally related mortgage loan. The annual escrow period 
        beginning in each calendar year shall begin with the calendar 
        month during which the first installment payment under the 
        mortgage was due.
            ``(2) The term `balance', with respect to any escrow 
        account, means the total of any amounts remaining in the escrow 
        account, irrespective of the purpose or manner in which such 
        amounts were deposited or are to be used.''.

SEC. 7. JURISDICTION OF COURTS.

    Section 16 of the Real Estate Settlement Procedures Act of 1974 (12 
U.S.C. 2614) is amended--
            (1) by inserting ``(a) Kickback and Title Company 
        Violations.--'' after ``Sec. 16.''; and
            (2) by adding at the end the following new subsection:
    ``(b) Escrow Account Violations.--Any action brought pursuant to 
the provisions of section 10 may be brought in the United States 
district court or in any other court of competent jurisdiction, for the 
district in which the property involved is located or where the 
violation is alleged to have occurred, within 3 years from the date 
that the borrower under the federally related mortgage loan first had 
actual knowledge of the violation. Actions pursuant to section 10 may 
be brought by the borrower, the Secretary, the Attorney General of any 
State, or the insurance commissioner of any State.''.

SEC. 8. STUDY OF STANDARD ESCROW ACCOUNT MANAGEMENT PROCEDURES.

    (a) In General.--The Secretary of Housing and Urban Development 
shall conduct a study of the accrual and disbursement dates for taxes, 
insurance premiums, and other charges under escrow accounts maintained 
by lenders and servicers in connection with federally related mortgage 
loans, procedures regarding shortages and surplus amounts in such 
escrow accounts, and the impact and treatment of inflation with respect 
to such accounts, to determine the feasibility of requiring standard 
procedures for managing such escrow accounts.
    (b) Definitions.--For purposes of this section--
            (1) the term ``accrual date'' means, with respect to taxes, 
        insurance premiums, and other charges to escrow accounts, the 
        date on which the amount for a charge is required to be 
        deposited in an escrow account maintained for payment of such 
        charges; and
            (2) the term ``disbursement date'' means, with respect to 
        taxes, insurance premiums, and other charges to escrow 
        accounts, the date on which the amount of a charge is withdrawn 
        from an escrow account maintained for payment of such charges.
    (c) Report.--The Secretary of Housing and Urban Development shall 
submit to the Congress a report regarding the results of the study 
under subsection (a), not later than June 30, 1993. The report shall 
include the following information:
            (1) A determination of the overall cost to lenders and 
        servicers of converting accounting procedures used for escrow 
        accounts from single item analysis to an aggregate analysis 
        procedure.
            (2) A determination of the feasibility of establishing an 
        accrual date for each charge to an escrow account that occurs 
        30 days before the disbursement date for the charge.
            (3) A determination of (A) the feasibility of identifying 
        the disbursement dates for various State and local tax 
        collection agencies throughout the United States and (B) any 
        cost to the Secretary of Housing and Urban Development of 
        issuing a list of such disbursement dates on an annual basis.
            (4) A description and comparison of various accounting 
        methods for estimating the annual percentage increase in 
        property taxes for a property securing a federally related 
        mortgage loan.
            (5) An examination of mortgage agreements and a 
        determination of the extent to which such agreements permit any 
        increase in the amounts required to be deposited by a borrower 
        upon transfer of the servicing rights for the mortgage loan.
            (6) A determination of the extent and frequency of 
        deficiencies of amounts in escrow accounts and a description 
        and comparison of the various procedures used to remedy such 
        deficiencies.
            (7) A description of the various procedures used by State 
        and local tax authorities and lenders and servicers in 
        increasing tax charges and collecting related amounts for 
        escrow accounts.
            (8) A recommendation regarding the feasibility of requiring 
        standard procedures for management of escrow accounts.
            (9) Any other information relating to the study conducted 
        under subsection (a) that the Secretary considers appropriate.

SEC. 9. REGULATIONS.

    (a) Requirement.--Not later than the expiration of the 180-day 
period beginning on the date of the enactment of this Act, the 
Secretary of Housing and Urban Development shall issue any proposed 
regulations necessary to carry out this Act and the amendments made by 
this Act. Not later than the expiration of the 90-day period beginning 
on the expiration of such 180-day period, the Secretary of Housing and 
Urban Development shall issue final regulations to carry out this Act 
and the amendments made by this Act. The regulations issued pursuant to 
this section shall be subject to section 553 of title 5, United States 
Code.
    (b) Rule of Construction.--Any failure by the Secretary to issue 
any regulations required under subsection (a) shall not affect the 
effectiveness of the provisions of this Act or of the amendments made 
by this Act.