PRINTER'S NO. 666
No. 604 Session of 1989
INTRODUCED BY HAGARTY, FEBRUARY 15, 1989
REFERRED TO COMMITTEE ON BUSINESS AND COMMERCE,
FEBRUARY 15, 1989
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 such sums while held by the
9 lender pursuant to one of the following three options. The
10 lender may:
11 (1) Deposit such 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 such additional sums being held at a
22 rate not less than two per cent per annum to the residential
23 mortgage debtor payable annually on the anniversary of the
24 mortgage.
25 (3) Capitalize the additional sums when received against the
26 mortgage principal, and increase the principal indebtedness of
27 the mortgage when payments for taxes and insurance premiums are
28 made.
29 (b) For the purpose of this section, residential mortgages
30 to which these provisions apply shall not be subject to any
19890H0604B0666 - 2 -
1 limitation otherwise applicable to this act.
2 (c) The requirements of this section shall not be applicable
3 to any residential mortgage lender who, on the effective date of
4 this act, already pays interest to all of his residential
5 mortgage debtors in one of the forms herein delineated. In the
6 event any residential mortgage lender, excluded from coverage
7 under subsection (a) by this subsection, discontinues the
8 payment of interest to any residential mortgage debtor, the
9 provisions of subsection (a) shall automatically take effect
10 against him on the date such action takes place.
11 Section 2. This act shall take effect in 60 days.
B6L12JRW/19890H0604B0666 - 3 -