DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part of the
legislative instrument. The keyword, one-liner, abstract, and digest do not constitute part of the law
or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 1064 Engrossed 2022 Regular Session Farnum
Abstract: Provides for regulations regarding the deposit and disbursement of insurance proceeds
following damage to residential property when a mortgagee or mortgage servicer has a
security interest in all or part of the damaged property.
Present law requires that when payment of an insurance settlement is by check or draft in settlement
of a property damage claim involving residential property in which another holds a mortgage on the
property is paid jointly to the claimant and the holder of the mortgage, then such settlement proceeds
are to be placed in an interest-bearing escrow account with the interest accruing to the benefit of the
claimant.
Proposed law repeals present law.
Proposed law provides for the following requirements regarding mortgagees or mortgage servicers
servicing residential mortgage loans:
(1)That the mortgagee or mortgage servicer is required to promptly endorse the check, draft, or
other negotiable instrument made payable jointly to the mortgagee or mortgage servicer and
borrower-payee. Proposed law does not require a mortgagee or mortgage servicer to endorse
such instrument if the borrower-payee refuses to endorse the instrument.
(2)That such proceeds that relate to damage of property in which the mortgagee or mortgage
servicer has a security interest are required to be deposited in a segregated account except
when the mortgagee or mortgage servicer returns such proceeds to the borrower-payee or the
borrower-payee has not endorsed the check, draft, or other negotiable instrument.
(3)That any portion of proceeds which relate to contents insurance coverage and in which the
mortgagee or mortgage servicer does not have a security interest is required to be promptly
distributed to the borrower-payee by traceable deliver or electronic transfer.
Proposed law does not require a mortgagee or mortgage servicer to remit the portion of the insurance
proceeds relative to additional living expenses and contents insurance to the borrower-payee if the
mortgagee cannot determine which portion of the proceeds relates to such coverage.
Proposed law does not prevent an insurer from paying the borrower-payee directly for additional
living expenses or contents insurance coverage if the mortgagee or mortgage servicer does not have
a mortgage or security interest in the contents. Proposed law requires a mortgagee or mortgage servicer to notify the borrower-payee when holding
all or part of the settlement proceeds pending completion of all or part of the repairs to the damaged
property. Notice shall include each requirement in which the borrower-payee is required to comply
for release of funds. Such notice is required to be provided not later than 10 business days after the
mortgagee receives payment of the proceeds.
Proposed law requires a mortgagee or mortgage servicer to do either of the following not later than
the 10th business day following a borrower-payee's request for release of proceeds being held:
(1)Release the proceeds to the borrower-payee as requested upon receipt of sufficient evidence
of the borrower-payee's compliance with the requirements provided by the mortgagee or
mortgage servicer. A site inspection within 10 business days of request for release of funds
or submission via email of photo(s) or video evidence showing repair of progress or
completion of repairs shall constitute sufficient evidence which shall be accepted at the
mortgagee or mortgage servicer's discretion.
(2)Provide notice to the borrower-payee which sets for, with specificity, the reasons for the
mortgagee or mortgage servicer's refusal to release the insurance settlement proceeds or each
requirement with which the borrower-payee shall comply for the release of funds.
Proposed law authorizes the commissioner to impose civil penalties of up to $500 per day for each
day the mortgagee or mortgage servicer fails to comply with the requirements of proposed law. Such
penalties shall be due and payable upon notice of their assessment unless the penalties are set aside
after an administrative hearing pursuant to present law. Such penalties shall be final and subject to
enforcement by the commissioner through judicial proceedings.
Proposed law retains the present law provision that the claimant be paid after satisfactory completion
of the replacement or repair of the damaged property.
Present law defines "settlement proceeds".
Proposed law repeals present law.
Present law requires interest to accrue on proceeds held in escrow for more than 30 days and allows
for federal servicing guidelines to constitute compliance with present law.
Proposed law changes present law by only requiring interest to accrue on proceeds which are greater
than or equal to $25,000 which has been held in a segregated account for more than 30 days.
Present law provides that present law shall apply to state chartered federally insured financial
institutions and their affiliates to the same extent such provisions apply to federally chartered
institutions.
Proposed law provides that the provisions of present law and proposed law regarding the
disbursement of settlement proceeds shall apply only to residential mortgage loans and shall not apply to a mortgagee or mortgage servicer when the borrower-payee is in default, behind in payment,
or in foreclosure.
Present law provides that a mortgage holder who is presented with a jointly payable insurance
proceeds by check or draft for residential immovable property damage resulting from Hurricanes
Katrina or Rita, or both, is required to endorse and release excess funds from the insurance proceeds
to the borrower within 30 days of written request for release of the excess funds by the borrower.
Proposed law changes present law, by repealing the requirement that the proceeds be from damage
resulting from Hurricanes Katrina or Rita and that the proceeds be paid within 30 days of written
request for release. Proposed law adds the requirement that the funds be returned within 10 business
days after receipt of such request for release.
Proposed law makes present law and proposed law applicable to proceeds paid by other negotiable
instruments in addition to checks or drafts already accounted for in present law.
Present law defines "excess funds".
Proposed law retains present law.
Present law authorizes the commissioner to impose civil penalties of up to $150 per day for each day
the mortgage holder fails to comply with the requirements of present law.
Proposed law changes the penalty limit that can be imposed on a mortgagee or mortgage servicer
from up to $150 per day to up to $500 per day.
Proposed law provides that the provisions of present law and proposed law shall apply only to
residential mortgage loans and shall not apply to a mortgagee or mortgage servicer when the
borrower-payee is in default, behind in payment, or in foreclosure.
(Amends R.S. 6:337 and 338)