SLS 22RS-1148 REENGROSSED
2022 Regular Session
SENATE BILL NO. 446
BY SENATOR FRED MILLS
BANKS/BANKING. Provides relative to banking provisions regarding damage to
mortgaged residential property. (8/1/22)
1 AN ACT
2 To amend and reenact R.S. 6:337 and 338(A), (B), and (C), relative to insurance settlement
3 monies paid for damages to property or contents; to require placement of certain
4 insurance settlement monies in segregated accounts; to provide for disbursement of
5 certain insurance settlement monies to the borrower-payee; and to provide for related
6 matters.
7 Be it enacted by the Legislature of Louisiana:
8 Section 1. R.S. 6:337 and 338(A), (B), and (C) are hereby amended and reenacted
9 to read as follows:
10 §337. Duty of secured party upon payment of insurance claim for damage to
11 mortgaged residential property
12 A. If payment in settlement of a damage claim on residential property in
13 which another person holds a mortgage is by check or draft, of an insurer, made
14 payable jointly to the claimant and the person holding the mortgage, then such
15 "settlement proceeds," as defined in Subsection C of this Section, shall be placed in
16 escrow and shall earn interest payable to the claimant in accordance with the
17 provisions of Subsection C of this Section.
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1 The following provisions shall apply to a mortgagee or mortgage
2 servicer, servicing residential mortgage loans in this state:
3 (1) The mortgagee or mortgage servicer shall promptly endorse a check,
4 draft, or other negotiable instrument for insurance settlement proceeds payable
5 jointly to the mortgagee or mortgage servicer and the borrower-payee by the
6 insurance company. However, the mortgagee or mortgage servicer is not
7 required to endorse such instrument if the borrower-payee refuses to endorse
8 the instrument.
9 (2) Insurance settlement proceeds received by a mortgagee or mortgage
10 servicer that relate to compensation for damage to property or contents
11 insurance coverage in which the mortgagee or mortgage servicer has mortgage
12 or security interest shall be promptly deposited into a segregated account of a
13 federally insured financial institution, unless the mortgagee or mortgage
14 servicer returns such insurance settlement proceeds to the borrower-payee or
15 the check, draft, or negotiable instrument is missing the borrower-payee's
16 endorsement.
17 (3) Insurance settlement proceeds received by a mortgagee or mortgage
18 servicer that relate to contents insurance coverage in which the mortgagee or
19 mortgage servicer does not have a security interest in the contents shall be
20 promptly distributed to the borrower-payee.
21 (4) Insurance settlement proceeds received by a mortgagee or mortgage
22 servicer that relate to additional living expenses shall be promptly distributed
23 to the borrower-payee.
24 B. Notwithstanding the provisions of Subsection A of this Section, the
25 mortgagee or mortgage servicer is not required to remit the portion of the
26 insurance settlement proceeds relating to additional living expenses and
27 contents insurance if the mortgagee or mortgage servicer is not able to
28 determine which part of the proceeds relates to additional living expenses and
29 contents insurance.
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SLS 22RS-1148 REENGROSSED
1 C. This Section shall not prevent an insurance company from paying the
2 borrower-payee directly for additional living expenses or paying the borrower-
3 payee directly for contents insurance coverage if the mortgagee or mortgage
4 servicer does not have a mortgage or security interest in the contents.
5 D.(1) If a mortgagee or mortgage servicer holds all or part of the
6 insurance settlement proceeds pending completion of all or part of the repairs
7 to the damaged property, the mortgagee or mortgage servicer shall notify the
8 borrower-payee of each requirement with which the borrower-payee shall
9 comply for the mortgagee or mortgage servicer to release the insurance
10 settlement proceeds. The notice required by this Paragraph shall be provided
11 not later than the twentieth day after the date the mortgagee or mortgage
12 servicer receives payment of the insurance settlement proceeds.
13 (2) Not later than the twentieth day after the date a mortgagee or
14 mortgage servicer receives from the borrower-payee a request for release of all
15 or part of the insurance settlement proceeds held by the mortgagee or mortgage
16 servicer, the mortgagee or mortgage servicer shall do either of the following:
17 (a) If the mortgagee or mortgage servicer has received sufficient
18 evidence of the borrower-payee's compliance with the requirements specified
19 by the mortgagee or mortgage servicer pursuant to Paragraph (1) of this
20 Subsection for release of the insurance settlement proceeds, release to the
21 borrower-payee, as requested, all or part of the proceeds.
22 (b) Provide notice to the borrower-payee that explains specifically both
23 of the following:
24 (i) The reason for the mortgagee or mortgage servicer's refusal to
25 release the insurance settlement proceeds to the borrower-payee.
26 (ii) Each requirement with which the borrower-payee shall comply for
27 the mortgagee or mortgage servicer to release the insurance settlement
28 proceeds.
29 E.(1) When the damaged property is replaced or otherwise repaired to the
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1 satisfaction of the claimant borrower-payee and the person holding the mortgage
2 on the property mortgagee or mortgage servicer, then any remaining balance in the
3 escrow segregated account shall be paid to the claimant borrower-payee together
4 with all interest that accrued while the funds were in escrow the segregated account
5 as provided in Paragraph (2) of this Subsection. The person holding the security
6 interest in the property shall cooperate fully with the claimant and the claimant's
7 insurer in releasing funds in a timely manner to replace or repair the damaged
8 property.
9 C. As used in this Section, "settlement proceeds" means funds paid on an
10 insurance claim for damage to residential immovable property as a result of
11 Hurricane Katrina or Hurricane Rita, and where the funds equal twenty-five thousand
12 dollars or more. These funds shall be held in escrow by the lender or loan servicer.
13 (2) Interest shall accrue on insurance settlement proceeds where the funds
14 equal twenty-five thousand dollars or more after being held in escrow by the
15 mortgagee or mortgage servicer in a segregated account for more than thirty
16 days. For purposes of this Subsection, compliance with Fannie Mae or Freddie Mac
17 servicing guidelines for payment of interest on property damage claim funds held in
18 escrow by the lender or loan servicer mortgagee or mortgage servicer constitutes
19 compliance with this Section.
20 DF. The provisions of this Section shall be applicable to state chartered
21 federally insured financial institutions and their affiliates to the same extent that such
22 provisions are applicable to federally chartered financial institutions.
23 §338. Insurance settlement proceeds; return of excess funds; enforcement
24 A. If a mortgage holder mortgagee or mortgage servicer is presented with
25 a jointly payable insurance proceeds check or draft, draft, or other negotiable
26 instrument for residential immovable property damage resulting from either
27 Hurricane Katrina or Hurricane Rita, or both, which contains the mortgagor's
28 borrower-payee's endorsement, and the mortgage holder mortgagee or mortgage
29 servicer receives a written request from the borrower-payee to release excess funds,
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1 then all mortgage holders the mortgagee or mortgage servicer shall have thirty
2 days after receiving such request and such check or draft, draft, or other negotiable
3 instrument to provide their endorsements and return all excess funds provided for
4 in Subsection B of this Section.
5 B. The mortgage holder mortgagee or mortgage servicer holding funds in
6 escrow a segregated account shall return to the mortgagor borrower-payee all
7 funds considered to be excess funds. For purposes of this Section, the term "excess
8 funds" shall mean insurance funds in excess of both of the following:
9 (1) All loan balances of any mortgage holder mortgagee or mortgage
10 servicer named as payee on the insurance claim check or draft, draft, or other
11 negotiable instrument calculated as of the thirtieth day following receipt of the
12 request and check or draft as outlined in Subsection A of this Section; and.
13 (2) Six months of future accrued interest as calculated pursuant to the terms
14 of the mortgage loans and calculated from the date of the payoff explained in
15 Paragraph (B)(1) of this Section. Paragraph (1) of this Subsection.
16 C.(1) The commissioner may impose civil money penalties of up to one
17 hundred fifty dollars per day of each day a mortgage holder subject to his jurisdiction
18 mortgagee or mortgage servicer fails to comply with the requirements of
19 Subsection B of this Section.
20 (2) Penalties shall be due and payable upon notice of their assessment to the
21 mortgage holder mortgagee or mortgage servicer, unless set aside after
22 administrative hearing pursuant to the provisions of the Administrative Procedure
23 Act. The assessment of civil money penalties shall be final and definitive and subject
24 to enforcement by the commissioner through judicial proceedings.
25 * * *
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SLS 22RS-1148 REENGROSSED
The original instrument was prepared by Xavier Alexander. The following
digest, which does not constitute a part of the legislative instrument, was
prepared by Tyler McCloud.
DIGEST
SB 446 Reengrossed 2022 Regular Session Fred Mills
Present law provides that if payment of an insurance 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 account and the interest accruing
to the benefit of the claimant.
Proposed law replaces the term "claimant" with "borrower-payee".
Proposed law replaces the phrase "person holding the mortgage on the property" with
"mortgagee or mortgage servicer".
Proposed law provides that a mortgagee or mortgage servicer shall promptly endorse a
check, draft, or other negotiable instrument for insurance settlement proceeds payable jointly
to the mortgagee or mortgage servicer and the borrower-payee.
Proposed law provides that a mortgagee or mortgage servicer is not required to endorse a
check, draft, or other negotiable instrument for insurance settlement proceeds payable jointly
to the mortgagee or mortgage servicer and borrower-payee if the borrower-payee refuses to
endorse the instrument.
Proposed law provides that insurance settlement proceeds, related to damage of property or
contents insurance coverage, received by a mortgagee or mortgage servicer, which the
mortgagee or mortgage servicer has a security interest, shall be promptly deposited into a
segregated account of a federally insured financial institution, unless the insurance
settlement proceeds are returned to the borrower-payee or the instrument is missing the
borrower-payee's endorsement.
Proposed law provides that insurance settlement proceeds, related to contents insurance
coverage, received by a mortgagee or mortgage servicer, which the mortgagee or mortgage
servicer has no security interest, shall be promptly distributed to the borrower-payee.
Proposed law provides that insurance settlement proceeds received by a mortgagee or
mortgage servicer that is related to additional living expenses shall be promptly distributed
to the borrower-payee.
Proposed law provides that a mortgagee or mortgage servicer is not required to remit the
portion of the insurance 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 content insurance.
Proposed law provides that an insurance company can pay the borrower-payee directly for
additional living expenses or contents insurance coverage if the mortgagee or mortgage
servicer has no security interest in the contents.
Proposed law requires the mortgagee or mortgage servicer to give notice, within 20 days of
receiving the insurance settlement proceeds, to the borrower-payee of the requirements for
the release the proceeds.
Proposed law requires the mortgagee or mortgage servicer to release all or part of the
insurance settlement proceeds within 20 days of receiving a request by the borrower-payee
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SLS 22RS-1148 REENGROSSED
if sufficient evidence of complying with requirements has been received by the mortgagee
or mortgage servicer.
Proposed law requires if the insurance settlements proceeds are not released as requested,
the mortgagee or mortgage servicer must explain the reason for the refusal to release the
funds and each requirement the borrower-payee must comply with to receive the funds.
Present law provides that once the property is replaced or repaired to the satisfaction of the
claimant and the person holding the mortgage, then any funds remaining in escrow shall be
paid to the claimant with any interest accrued while in escrow. Present law further provides
that the holder of the mortgage on the property is required to cooperate fully with the
claimant and his insurer in releasing funds in a timely manner for such replacement or repair
of the damaged property.
Proposed law provides that once the property is replaced or repaired to the satisfaction of the
borrower-payee and mortgagee or mortgage servicer, then any funds remaining in a
segregated account shall be paid to the borrower-payee with any interest that accrued while
the funds were in the segregated account. Proposed law removes the requirement that the
holder of the mortgage on the property is required to cooperate fully with the claimant and
his insurer in releasing funds in a timely manner for such replacement or repair of the
damaged property.
Present law defines "settlement proceeds" to be funds of $25,000 or more paid on insurance
claims for damage to residential immovable property as a result of Hurricane Katrina or
Hurricane Rita which are held in interest-bearing accounts for 60 days or more by the lender
or loan servicer. Present law further provides that interest shall accrue on settlement
proceeds after being held in escrow for more than 30 days.
Proposed law provides that interest shall accrue on insurance settlement proceeds that are
$25,000 or more, after being held by the mortgagee or mortgage servicer segregated account
for more than 30 days. Proposed law deletes the definition of "settlement proceeds" under
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 retains this provision.
Present law provides that if a mortgage holder is presented with a jointly payable insurance
proceed check or draft, that is endorsed by 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 then
the mortgage holder shall have 30 days to return excess funds.
Proposed law retains present law but removes the provision that the damage must be a result
of Hurricane Katrina or Hurricane Rita.
Present law defines "excess funds" and provides that the mortgage holder holding funds in
escrow shall return all funds considered to be excess funds. Proposed law retains present law
and replaces the term "mortgage holder" with "mortgagee or mortgage servicer".
Effective August 1, 2022.
(Amends R.S. 6:337 and 338(A), (B), and (C))
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Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Commerce, Consumer
Protection, and International Affairs to the original bill
1. Makes technical change.
Senate Floor Amendments to engrossed bill
1. Requires the mortgagee or mortgage servicer to give notice, within 20 days
of receiving the insurance settlement proceeds, to the borrower-payee of the
requirements for the release the proceeds.
2. Requires the mortgagee or mortgage servicer to release all or part of the
insurance settlement proceeds within 20 days of receiving a request by the
borrower-payee if sufficient evidence of complying with requirements has
been received by the mortgagee or mortgage servicer.
3. Requires if the insurance settlements proceeds are not released as requested,
the mortgagee or mortgage servicer must explain the reason for the refusal
to release the funds and each requirement the borrower-payee must comply
with to receive the funds.
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