PRINTER'S NO. 2423
No. 1738 Session of 1996
INTRODUCED BY SCHWARTZ, BELAN, LAVALLE, MUSTO, AFFLERBACH, O'PAKE, STOUT AND TARTAGLIONE, NOVEMBER 19, 1996
REFERRED TO BANKING AND INSURANCE, NOVEMBER 19, 1996
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 it by a 6 residential mortgage debtor for the purpose of paying or 7 guaranteeing payment of real estate taxes and/or property 8 insurance premiums, the lender must pay compound interest on the 9 sum so held to the borrower. The interest on such amounts shall 10 be on the average yearly balance of the account at a rate not 11 less than the discount rate established by the Federal Reserve 12 Bank of Chicago on January 1 of each year. Such interest shall 13 annually be issued to the borrower or credited to the borrower's 14 account, except that upon termination of the account such 15 interest shall be issued to the borrower. In cases where 16 escrowed funds are insufficient to pay the insurance and taxes 17 owed by the debtor, interest payments may be applied by the 18 lender to payment of taxes and insurance. 19 (b) The lender shall annually issue to the debtor a written 20 statement containing the following: 21 (1) The amount the debtor paid into escrow that year. 22 (2) The rate of interest paid. 23 (3) The amount paid on behalf of the debtor for taxes and 24 insurance. 25 (4) The balance due to the debtor or being credited to the 26 borrower's account. 27 Section 2. This act shall take effect in 60 days. H23L12SFL/19960S1738B2423 - 2 -