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 Reengrossed 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 secured by property containing one to four residential dwelling
units:
(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)If the mortgagee or mortgage servicer does not require a property inspection, to 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.
(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 provides that property inspections related to mortgage loans covered by proposed law
shall be done at least 15 business days after receipt by the mortgagee or mortgage servicer of both
a request for inspection and a receipt by the mortgagee of sufficient evidence of the borrower-payee's
compliance with the mortgagee's requirements pursuant to proposed law, if the borrower-payee is
cooperative and the property is accessible.
Proposed law authorizes a mortgagee or mortgage servicer, at their discretion, to allow property
inspections be conducted in person, by photo or video evidence submitted by the borrower-payee,
through a video call with the borrower-payee, or by other means documenting the progress or
completion of repairs.
Proposed law requires photo or video evidence to clearly identify the repairs being documented and
confirm the repairs were completed in accordance with the repair plan. Further, a mortgagee or
mortgage servicer does not have to accept such evidence if it does not allow them to ascertain that
the repairs are from the location of the property subject to the mortgage, authenticate when the
evidence was captured, or if the mortgagee or mortgage servicer believes the evidence is altered.
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, not
to exceed a total penalty of $5,000 per violation. 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 secured by a
property containing one to four residential dwelling units 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 15 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.
Proposed law provides that the 15-business day timeline for the release of excess funds in
accordance with proposed law shall not apply to proceeds paid by check, draft, or other negotiable
instrument requiring endorsement by multiple mortgagees or lien holders.
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, not to exceed a total penalty of $5,000 per violation.
Proposed law provides that the provisions of present law and proposed law shall apply only to
residential mortgage loans secured by property containing one to four residential dwelling units 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)
Summary of Amendments Adopted by House
The House Floor Amendments to the engrossed bill:
1. Limit the scope of present and proposed law to certain residential mortgage loans.
2. Make one requirement provided by proposed law regarding release of excess funds
applicable only when the mortgagee or mortgage servicer does not require inspection.
`3. Remove the criteria of what constitutes sufficient evidence and the requirement that such
evidence be accepted at the mortgagee's discretion.
4. Add provisions which set certain requirements regarding property inspections conducted
pursuant to proposed law.
5. Limit the total penalty amount that can be assessed per violation pursuant to proposed
law.
6. Increase the time requirement with which the mortgagee or mortgage servicer must
comply with a request to release excess funds.
7. Specify that the time requirement for the release of excess funds shall not be applicable
in certain circumstances.