§ 10404. Home loan escrow accounts

(a) As used in this section:

(1) "Borrower" means one or more natural persons who are obligated to make escrow account payments under the terms of a loan agreement secured by residential real estate occupied by the borrower.

(2) "Escrow account" means an account into which a borrower is required under the terms of a residential real estate loan agreement to make periodic payments of property taxes, insurance premiums, or other similar charges.

(3) "Lender" means a person who services or holds the beneficial interest in a loan secured by residential real estate located in this State and who requires periodic payments by a borrower into an escrow account in accordance with the provisions of a residential real estate loan agreement.

(b) A lender shall pay into an escrow account for the benefit of the borrower interest on funds deposited into the account under the same conditions as the lender's regular savings account, if offered, and otherwise at a rate not less than the prevailing market rate of interest for regular savings accounts offered by local financial institutions, calculated on the basis of the average monthly balance in the account and credited on the first day of each quarter. This subsection shall not apply when a lender requires payment into an escrow account because a borrower has failed, within the past year, to make timely payments for property taxes and insurance in accordance with the provisions of the loan agreement.

(c) A lender shall not require a borrower to deposit into an escrow account any greater sum than is sufficient to pay taxes, insurance premiums, and other charges with respect to the residential real estate, subject to the following additional charges:

(1) a lender may require aggregate annual deposits no greater than the reasonably estimated total annual charges plus one-sixth of such total; and

(2) a lender may require monthly deposits no greater than one-twelfth of the reasonably estimated total annual charges plus an amount needed to maintain an additional account balance no greater than one-sixth of such total.

(d) A lender shall make timely payments of all charges with respect to the residential real estate payable from the escrow account.

(e) The lender shall maintain escrow account funds in a federally insured depository institution.

(f) With respect to borrowers who have maintained escrow accounts in accordance with the provisions of the loan agreement, the lender shall be primarily obligated for the payment of any municipal or county taxes, insurance premiums, or other similar charges with respect to the residential real estate, and any penalties attributable to the lender's late payment of such charges.

(g)(1) At least annually, at the completion of the escrow account computation year, a lender shall conduct an escrow account analysis to determine the borrower's monthly escrow account payments for the next computation year based on the borrower's current tax liability, if made available to the lender either by the borrower or the municipality, after any applicable adjustment for a State credit on property taxes.

(2) Upon receipt of a revised property tax bill, the lender shall review the property tax bill and, upon verifying that it has been reduced since the date of the last escrow account analysis, the lender shall, within 30 days of receiving the bill, conduct a new escrow account analysis, recalculate the borrower's monthly escrow payment, and notify the borrower of any change.

(3) At least annually, and whenever an escrow account analysis is conducted or upon request of the borrower, the lender shall provide to the borrower financial statements relating to the borrower's escrow account in a manner and on a form consistent with the federal Real Estate Settlement Procedures Act. The lender shall not charge the borrower for the preparation and transmittal of such statements.

(h) A borrower aggrieved by a violation of the provisions of this section, or a rule adopted by the Commissioner in connection with this section, may bring an action for injunctive relief, three times the amount of any interest unpaid in violation of this section, other damages, costs, and reasonable attorneys' fees. The Commissioner may bring an action in the Superior Court of Washington County for injunctive relief, restitution, and any administrative costs and attorneys' fees incurred as a result of a violation of this section. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001; amended 2017, No. 70, § 2.)