PRINTER'S NO. 557
No. 537 Session of 2001
INTRODUCED BY SCHWARTZ, COSTA, LAVALLE, STOUT, BODACK, MUSTO, GERLACH, EARLL, KASUNIC, TOMLINSON, M. WHITE, TARTAGLIONE, HUGHES, O'PAKE AND STACK, FEBRUARY 16, 2001
REFERRED TO BANKING AND INSURANCE, FEBRUARY 16, 2001
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 or property insurance 8 premiums, the lender shall pay compound interest on the sum so 9 held to the debtor. The interest on such amounts shall be on the 10 average yearly balance of the account at a rate not less than 11 the discount rate established by the Federal Reserve Bank of 12 Chicago on January 1 of each year. Such interest shall annually 13 be issued to the debtor or credited to the debtor's account, 14 except that upon termination of the account such interest shall 15 be issued to the debtor. In cases where escrowed funds are 16 insufficient to pay the insurance and taxes owed by the debtor, 17 interest payments may be applied by the lender to payment of 18 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 debtor's account. 27 Section 2. This act shall take effect in 60 days. A22L12BIL/20010S0537B0557 - 2 -