North Dakota 2025-2026 Regular Session

North Dakota House Bill HB1378 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	25.1015.~~03000~~
	1	+	25.1015.01000
2	2		Sixty-ninth
3	3		Legislative Assembly
4	4		of North Dakota
5	5		Introduced by
6	6		Representative J. Johnson
7		-	A BILL for an Act to create and enact three new sections to chapter 47-10.2 of the North Dakota
8		-	Century Code, relating to the payment of interest on escrow accounts for residential mortgages;
9		-	to amend and reenact section 47-10.2-01 of the North Dakota Century Code, relating to
10		-	definitions for escrow accounts; to provide a penalty; and to provide for application.
	7	+	A BILL for an Act to create and enact a new chapter to title 6 of the North Dakota Century Code,
	8	+	relating to mandating the payment of interest on escrow accounts for residential mortgages; to
	9	+	provide a penalty; and to provide for application.
11	10		BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
12		-	SECTION 1. ~~AMENDMENT. Section 47-10.2-01~~ of the North Dakota Century Code is
13		-	~~amended and reenacted~~ as follows:
14		-	~~47-10.2-01.~~ Definitions.
15		-	~~In sections 47-10.2-01 through 47-10.2-03, unless the context or subject matter otherwise~~
16		-	~~requires:~~
17		-	1.~~"Borrower" means the obligor under a residential mortgage held by a mortgagee.~~
	11	+	SECTION 1. A new chapter to title 6 of the North Dakota Century Code is created and
	12	+	enacted as follows:
	13	+	Definitions.
	14	+	1."Borrower" means a person that holds a residential mortgage loan and has an escrow
	15	+	account with a lender for the purpose of paying property taxes, insurance, or other
	16	+	related expenses.
18	17		2."Escrow account" means an account held by a lender or servicer used to collect and
19	18		hold funds for the payment of property taxes, homeowner's insurance, and other
20	19		related expenses associated with a residential mortgage.
21	20		3."Escrow funds" means money placed into an escrow account by a borrower for the
22	21		payment of obligations such as property taxes, homeowner's insurance, and other
23	22		expenses associated with home ownership.
24	23		4."Interest rate" means the percentage rate paid by the lender on funds held in escrow
25	24		accounts.
26		-	5."Lender" means a bank, mortgage company, credit union, or other financial institution
27		-	that services residential mortgage loans and holds escrow accounts. The term does
28		-	not include the North Dakota housing finance agency.
29		-	Page No. 1 25.1015.03000
30		-	ENGROSSED HOUSE BILL NO. 1378
31		-	FIRST ENGROSSMENT
	25	+	5."Lender" means a bank, mortgage company, or other financial institution that services
	26	+	residential mortgage loans and holds escrow accounts. A lender shall pay interest on
	27	+	funds held in an escrow account that maintains a minimum average balance of five
	28	+	hundred dollars. The escrow account must have been in existence for a minimum of
	29	+	three months before the interest may be credited. Only active accounts are eligible for
	30	+	accumulation of interest.
	31	+	Page No. 1 25.1015.01000
	32	+	HOUSE BILL NO. 1378
	33	+
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55		-	6."Servicer" means a person or entity maintaining an escrow account for a residential
56		-	mortgagee.
57		-	3.7."Surplus amount" means from the annual escrow account analysis, any amount
58		-	greater than or equal to fifty dollars, excluding any escrow cushion required by the
59		-	servicer.
60		-	SECTION 2. A new section to chapter 47-10.2 of the North Dakota Century Code is created
61		-	and enacted as follows:
62		-	Lender's obligation to pay interest on escrow accounts.
63		-	A lender shall pay interest on funds held in an escrow account that maintains a minimum
64		-	average balance of five hundred dollars. The escrow account must have been in existence for a
65		-	minimum of three months before the interest may be credited. Only active accounts are eligible
66		-	for accumulation of interest.
67		-	SECTION 3. A new section to chapter 47-10.2 of the North Dakota Century Code is created
68		-	and enacted as follows:
69	59		Determining the acceptable interest rate.
70	60		1.The interest rate paid on escrow funds must be based on prevailing market rates for a
71	61		saving or similar deposit account. At minimum, all interest paid under this chapter must
72	62		be set at one - half percent annually. If the lender adjusts the interest rate, the change
73	63		must be consistent with changes in market rates for comparable deposit products. A
74		-	rate change may not disproportionately favor the lender.
	64	+	rate change may not disproportionately favor the lender. An adjustment to the interest
	65	+	rate must be communicated to the borrower at least thirty days before the new rate is
	66	+	applied.
75	67		2.A lender holding an escrow account shall use a transparent and clear formula for
76	68		determining the escrow account interest rate and clearly disclose the interest rate
77	69		applied to escrow accounts in a loan agreement. If a lender offers multiple types of
78	70		deposit accounts with different interest rates, the borrower must be informed of the
79	71		type of deposit product tied to the borrower's escrow account.
80		-	SECTION 4. A new section to chapter 47-10.2 of the North Dakota Century Code is created
81		-	and enacted as follows:
	72	+	Compliance and enforcement - Penalty.
	73	+	1.The department of financial institutions shall enforce this chapter.
	74	+	2.A lender holding an escrow account shall submit an annual report to the department
	75	+	detailing the amount of interest credited to escrow accounts, including information on
	76	+	the rates applied and the number of borrowers affected.
	77	+	3.A lender that fails to pay interest on eligible escrow accounts is subject to a civil
	78	+	penalty determined by the department and suspension of business operations within
	79	+	the state until compliance is achieved.
	80	+	4.If a lender fails to credit interest to an escrow account, the borrower is entitled to
	81	+	receive the unpaid interest, plus an additional penalty interest rate, not to exceed ten
	82	+	percent of the unpaid interest, for each year of nonpayment.
82	83		Disclosure - Opt - out.
83	84		1.A lender shall state in the mortgage agreement and in periodic statements how escrow
84	85		funds are managed, including details on the interest rate and how interest is credited.
85		-	Page No. 2 25.1015.03000
	86	+	2.A borrower may opt - out of the interest payment provision only if the borrower's
	87	+	mortgage agreement explicitly allows the borrower to opt - out and the borrower agrees
	88	+	to forfeit the interest in exchange for a reduced mortgage rate or other benefit.
	89	+	Page No. 2 25.1015.01000
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117		-	2.A borrower may opt - out of the interest payment provision only if the borrower's
118		-	mortgage agreement explicitly allows the borrower to opt - out and the borrower agrees
119		-	to forfeit the interest in exchange for a reduced mortgage rate or other benefit.
120		-	SECTION 5. APPLICATION. This Act applies to an escrow account created after the
	121	+	SECTION 2. APPLICATION. This Act applies to an escrow account created after the
121	122		effective date of this Act. For an existing escrow account, interest payments required by this Act
122	123		must begin on January 1, 2026.
123		-	Page No. 3 25.1015.~~03000~~
	124	+	Page No. 3 25.1015.01000
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