PRINTER'S NO. 3180
No. 2452 Session of 1992
INTRODUCED BY KREBS, PESCI, M. N. WRIGHT, HARPER, GANNON, SALOOM, HAYDEN, TIGUE, HARLEY, PISTELLA, FAJT, D. W. SNYDER, VEON, BELARDI, JOHNSON, RICHARDSON AND JAMES, MARCH 10, 1992
REFERRED TO COMMITTEE ON BUSINESS AND COMMERCE, MARCH 10, 1992
AN ACT 1 Amending the act of January 30, 1974 (P.L.13, No.6), entitled 2 "An act regulating agreements for the loan or use of money; 3 establishing a maximum lawful interest rate in the 4 Commonwealth; providing for a legal rate of interest; 5 detailing exceptions to the maximum lawful interest rate for 6 residential mortgages and for any loans in the principal 7 amount of more than fifty thousand dollars and Federally 8 insured or guaranteed loans and unsecured, noncollateralized 9 loans in excess of thirty-five thousand dollars and business 10 loans in excess of ten thousand dollars; providing 11 protections to debtors to whom loans are made including the 12 provision for disclosure of facts relevant to the making of 13 residential mortgages, providing for notice of intention to 14 foreclose and establishment of a right to cure defaults on 15 residential mortgage obligations, provision for the payment 16 of attorney's fees with regard to residential mortgage 17 obligations and providing for certain interest rates by banks 18 and bank and trust companies; clarifying the substantive law 19 on the filing of and execution on a confessed judgment; 20 prohibiting waiver of provisions of this act, specifying 21 powers and duties of the Secretary of Banking, and 22 establishing remedies and providing penalties for violations 23 of this act," providing for the payment of interest by 24 residential mortgage lenders on certain amounts held in 25 escrow. 26 The General Assembly of the Commonwealth of Pennsylvania 27 hereby enacts as follows: 28 Section 1. The act of January 30, 1974 (P.L.13, No.6), 29 referred to as the Loan Interest and Protection Law, is amended
1 by adding a section to read: 2 Section 409. Residential Mortgage Interest on Escrow.--(a) 3 In the event any residential mortgage lender requires that a 4 sum, in addition to that necessary for the payment of interest 5 and the amortization of loan principal, be paid to him by a 6 residential mortgage debtor for the purpose of paying or 7 guaranteeing payment of real estate taxes and property insurance 8 premiums, interest shall be paid on the sum while held by the 9 lender pursuant to one of the following two options. The lender 10 may: 11 (1) Deposit the sum in an escrow account in a bank or 12 savings association regulated by the Department of Banking, the 13 Federal Reserve Board, the Federal Home Loan Bank Board or the 14 Comptroller of the Currency in an interest-bearing account. The 15 residential mortgage lender shall be entitled to receive, as 16 administrative expenses, a sum equivalent to two per cent per 17 annum upon the interest earned on the funds so deposited which 18 shall be in lieu of all other administrative and custodial 19 expenses. The balance of the interest shall be the property of 20 the residential mortgage debtor to be used as he directs. 21 (2) Pay interest on the additional sum being held at a rate 22 not less than three and one-half per cent per annum or the 23 discount rate established by the Federal Reserve Bank, whichever 24 is less, to the residential mortgage debtor payable annually on 25 the anniversary of the mortgage. 26 (b) For the purpose of this section, residential mortgages 27 to which these provisions apply shall not be subject to any 28 limitation otherwise applicable to this act. 29 (c) The requirements of this section shall not be applicable 30 to any residential mortgage lender who, on the effective date of 19920H2452B3180 - 2 -
1 this act, already pays interest to all of his residential 2 mortgage debtors in one of the forms herein delineated. In the 3 event any residential mortgage lender, excluded from coverage 4 under subsection (a) by this subsection, discontinues the 5 payment of interest to any residential mortgage debtor, the 6 provisions of subsection (a) shall automatically take effect 7 against him on the date that action takes place. 8 Section 2. This act shall take effect in 60 days. A15L12JRW/19920H2452B3180 - 3 -