2023 New York Laws › BNK - Banking › Article 1 - Short Title; Definitions; Miscellaneous Provisions. › 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.