SSHB1064 506 5136
HOUSE SUMMARY OF SENATE AMENDMENTS
HB 1064 2022 Regular Session Farnum
FINANCIAL INSTITUTIONS: Provides relative to the deposit and disbursement of
insurance proceeds
Synopsis of Senate Amendments
1.Authorizes the mortgagee or mortgage servicer to deposit funds into an
individual deposit account or a master account containing subaccounts for each
borrower-payee.
2.Deletes proposed law that allows an insurance company to pay the borrower-
payee directly for additional living expenses or contents insurance coverage if
the mortgagee or mortgage servicer does not have mortgage or security interest
in the contents.
3.Makes provisions of present and proposed law applicable to state chartered
federally insured financial institutions.
4. Deletes the present law requirement that mortgage holders holding funds in
escrow must return to the mortgagor all funds considered to be excess funds.
5.Deletes the present law authority of the commissioner to promulgate rules.
Instead provides that the provisions of present and proposed law do not impair
the contractual rights of a mortgagee or mortgage servicer related to loan
balances and accrued interest as provided for in present law.
6.Makes technical changes.
Digest of Bill as Finally Passed by Senate
Present law provides that if proceeds of an insurance check or draft in settlement of a
property damage claim are paid jointly to the claimant and the holder of the mortgage, when
such payment involves residential property, the settlement proceeds are to be placed in an
interest-bearing account with interest accruing to the benefit of the claimant.
Proposed law retains present law, redesignates the citation, and changes the following terms
throughout present and proposed law: Changes "claimant" to "borrower-payee". Changes
"person holding the mortgage on the property" to "mortgagee or mortgage servicer".
Changes "interest-bearing account" to "segregated account".
Proposed law specifies that present and proposed law provisions regarding settlement
proceeds apply to properties in this state containing 1 to 4 residential dwellings.
Proposed law requires a mortgagee or mortgage servicer to promptly endorse a settlement
proceeds check, draft, or other negotiable instrument made jointly payable to the mortgagee
or mortgage servicer and the borrower-payee. Further provides that a mortgagee or mortgage
servicer is not required to endorse a check, draft, or negotiable instrument for jointly payable
proceeds if the borrower-payee refuses to endorse the instrument.
Proposed law requires settlement proceeds, related to contents insurance coverage and
received by a mortgagee or mortgage servicer, in which the mortgagee or mortgage servicer
has a security interest, to be promptly deposited into a segregated account of a federally
insured financial institution unless the proceeds are returned to the borrower-payee or the
instrument is missing the borrower-payee's endorsement.
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Proposed law provides that the segregated account may, at the discretion of the mortgagee
or mortgage servicer, be an individual deposit account or a master account containing
subaccounts for each borrower-payee.
Proposed law requires settlement proceeds related to contents insurance coverage and
received by a mortgagee or mortgage servicer to be promptly distributed to the borrower-
payee if the mortgagee or servicer has no interest in the proceeds.
Proposed law requires settlement proceeds related to additional living expenses and received
by a mortgagee or mortgage servicer to be promptly distributed to the borrower-payee.
Proposed law requires settlement proceeds to be delivered to the borrower-payee via
traceable delivery or electronic transfer.
Proposed law provides that a mortgagee or mortgage servicer is not required to remit the
portion of the settlement proceeds related to additional living expenses and contents
insurance coverage unless it is determined which part of the settlement is related to
additional living expenses and contents insurance.
Present law provides that once the property is replaced or repaired to the satisfaction of the
claimant and the person holding the mortgage, any funds remaining in escrow are required
to be paid to the claimant with any interest accrued while in escrow. Proposed law changes
applicable terminology, redesignates the citation, and otherwise retains present law.
Present law further provides that the person holding the mortgage on the property is required
to fully cooperate with the claimant and his insurer in releasing funds in a timely manner for
the replacement or repair of the damaged property. Proposed law deletes present law.
Proposed law requires the mortgagee or mortgage servicer, within 10 business days of its
receipt of the settlement proceeds, to give notice to the borrower-payee of the requirements
for release of the proceeds. Further requires the mortgagee or mortgage servicer to release
all or part of the settlement proceeds to the borrower-payee if it has received sufficient
evidence of the borrower-payee's compliance with the requirements.
Proposed law provides that if a mortgagee or mortgage servicer does not release settlement
proceeds as requested, it is required to explain the reason for the refusal and each
requirement for which the borrower-payee must comply to receive the funds.
Proposed law requires property inspections related to residential mortgage loans to be
conducted within the 15th business day after the mortgagee's or mortgage servicer's receipt
of both a request by the borrower-payee for a property inspection and sufficient evidence of
the borrower-payee's compliance with requirements.
Proposed law authorizes property inspections to be conducted in person, through
photographic or video evidence submitted by the borrower-payee, through servicer-directed
video calls, or by other means to document the progress or completion of repairs. Further
provides that photographic or video evidence may not be accepted if its does not allow
determination of the repairs or authenticity of the time taken, or is believed to have been
altered.
Proposed law authorizes the commissioner to impose monetary penalties, not in excess of
$500 per day nor $5,000 per violation, on a mortgagee or servicer that fails to comply with
the process for distributing proceeds. Provides that penalties are due and payable upon
notice, unless the penalties are set aside after an administrative hearing. Further provides
that penalties are final, definitive, and subject to enforcement by the commissioner.
Proposed law requires for interest to accrue on settlement proceeds greater than $25,000 after
being held in a segregated account by the mortgagee or mortgage servicer for more than 30
days.
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Present law defines "settlement proceeds" as funds greater than $25,000 paid on insurance
claims for damage to residential immovable property as a result of Hurricanes Katrina or Rita
and held in escrow by the lender or loan servicer. Proposed law deletes present law.
Present law provides that compliance with Fannie Mae or Freddie Mac servicing guidelines
for payment of interest on property damage claim funds held in escrow by the lender or loan
servicer constitutes compliance. Proposed law replaces terminology, redesignates the
citation, and retains present law.
Present law provides that if a mortgage holder is presented with a jointly payable insurance
proceeds check or draft, endorsed by the mortgagor and related to residential damage to
immovable property resulting from Hurricane Katrina or Hurricane Rita, or both, and the
mortgage holder receives a written request from the borrower to release excess funds, the
mortgage holder has 30 days to return the excess funds.
Proposed law removes references to Hurricanes Katrina and Rita and changes the payment
timeframe from 30 days to 15 business days. Further provides that the 15th-business day
timeframe does not apply when the proceeds instrument requires the endorsement of multiple
mortgagees or lien holders.
Present law defines "excess funds" and requires the mortgage holder holding funds in escrow
to return all funds to the mortgagor considered to be excess funds. Proposed law deletes the
present law requirement and otherwise retains the definition.
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 from $150 to $500 per day, not to exceed a total penalty of
$5,000 per violation. Otherwise retains present law.
Present and proposed law do not apply to a mortgagee or mortgage servicer when the
borrower-payee is in default, past due, or in foreclosure on his mortgage loan.
Present law authorizes the commissioner to promulgate rules. Proposed law deletes present
law.
Proposed law provides that the provisions of present and proposed law do not impair the
contractual rights of a mortgagee or mortgage servicer related to loan balances and accrued
interest as provided for in present law.
(Amends R.S. 6:337 and 338)
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