I
103D CONGRESS
1ST SESSION
H. R. 27
To amend the Real Estate Settlement Procedures Act of 1974 to reflect
changes in the mortgage servicing industry and the availability of im-
proved technology to escrow agents, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 5, 1993
Mr. GONZALEZ (for himself, Mr. SCHUMER, Mr. FRANK of Massachusetts, Mr.
KENNEDY, Mr. MFUME, and Mr. RUSH) introduced the following bill;
which was referred to the Committee on Banking, Finance and Urban
Affairs
APRIL 22, 1993
Additional sponsors: Mr. GUTIERREZ, Mr. TOWNS, Mr. DE LUGO, Mr. WATT,
Mr. BARRETT of Wisconsin, Mr. BLACKWELL, Mrs. MEEK, Mr. FROST,
and Mr. GENE GREEN of Texas.
A BILL
To amend the Real Estate Settlement Procedures Act of
1974 to reflect changes in the mortgage servicing indus-
try and the availability of improved technology to escrow
agents, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Escrow Account Re-
form Act of 1993’’.
(1) in the matter preceding paragraph (1), by
inserting ‘‘or servicer (as the term is defined in sec-
tion 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 Set-
tlement Procedures Act of 1974 (12 U.S.C. 2609) is
amended by adding at the end the following new sub-
section:
‘‘(e) INTEREST
ON
AMOUNTS
IN
ESCROW
AC-
COUNTS.—Any lender or servicer that establishes or main-
tains an escrow account in connection with a federally re-
lated 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 Sec-
retary (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 ac-
count. 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 bor-
rower.’’.
(b) APPLICABILITY.—The amendment made by sub-
section (a) shall apply to any escrow account (in connec-
tion with a federally related mortgage loan) that is estab-
lished 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 Set-
tlement 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 per-
cent of the original principal obligation under the loan re-
mains 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. Notwith-
standing subsection (a) or any mortgage agreement, a
lender or servicer may not require the establishment or
maintenance of any escrow account for any federally relat-
ed mortgage loan for which the escrow account is termi-
nated under this subsection.’’.
(b) EFFECTIVE DATE.—The amendment under sub-
section (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 state-
ment to a borrower as required under sub-
section (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 require-
ment to submit the statement’’ and inserting ‘‘a pro-
vision of this section’’.
(b) ACTIONS.—Section 10 of the Real Estate Settle-
ment Procedures Act of 1974 (12 U.S.C. 2609), as
amended by sections 3 and 4 of this Act, is further amend-
ed 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 lia-
ble to the borrower for each such failure in the fol-
lowing amounts:
‘‘(A) INDIVIDUALS.—In the case of any ac-
tion 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 prac-
tice 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 prac-
tice of noncompliance with the provisions
of this section, any punitive damages as
the court may allow.
‘‘(2) ATTORNEYS FEES.—In any action pursu-
ant to this section, the court shall award to the pre-
vailing 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 cal-
endar year shall begin with the calendar month dur-
ing which the first installment payment under the
mortgage was due.
‘‘(2) The term ‘balance’, with respect to any es-
crow account, means the total of any amounts re-
maining in the escrow account, irrespective of the
purpose or manner in which such amounts were de-
posited 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 sub-
section:
‘‘(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 pursu-
ant to section 10 may be brought by the borrower, the
Secretary, the Attorney General of any State, or the insur-
ance commissioner of any State.’’.
SEC. 8. STUDY OF STANDARD ESCROW ACCOUNT MANAGE-
MENT 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 sur-