SENATE, No. 803
STATE OF NEW JERSEY
INTRODUCED FEBRUARY 22, 1996
By Senator EWING
An Act concerning mortgage escrow accounts and amending and supplementing P.L.1990, c.69.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 1 of P.L.1990, c.69 (C. 17:16F-15) is amended to read as follows:
1. As used in this act:
"Commissioner" means the Commissioner of Community Affairs.
"Duplicate copy" means a duplicate of the original property tax bill which duplicate is generated by the collector of a taxing district.
"Effective date of transfer" means the date on which the mortgage payment of a mortgagor is first due to the purchasing servicing organization pursuant to the sale, assignment or transfer of the servicing of a mortgage loan.
"Mortgagee" means the maker or holder, or both, of a mortgage loan, as applicable.
"Mortgage escrow account" or "escrow account" means an account which is part of a mortgage loan agreement, whether incorporated into the agreement or as part of a separately executed document, whereby: the mortgagor is obligated to make periodic payment to the mortgagee or his agent for taxes, insurance premiums, or other charges with respect to the real property which secures the mortgage loan; and the mortgagee or his agent is obligated to make payments for taxes, insurance premiums or other charges with respect to the real property which secures the mortgage loan. For the purposes of P.L.1990, c.69 (C.17:16F-15 et seq.), there shall be only one escrow account per mortgage loan and an account shall refer to the sum of all payments made by a mortgagor into an escrow account regardless of how a mortgagee or its agent may subdivide the account for accounting purposes.
"Mortgage loan" means a loan made to a natural person or persons to whom credit is offered or extended primarily for personal, family or household purposes which is secured [by a mortgage constituting] in whole or in part by a lien upon any interest in residential real property located in this State [on which there is erected or to be erected a structure containing one, two, three, four, five or six dwelling units, a portion of which structure may be used for nonresidential purposes], including shares of stock in a cooperative corporation created pursuant to "The Cooperative Recording Act of New Jersey," P.L.1987, c.381 (C.46:8D-1 et seq.), which lien is created by a security agreement, including a mortgage, indenture, or any other similar instrument or document, in the making of which lien the mortgagee relies primarily upon the value of the mortgaged property or the shares of stock in the cooperative corporation.
"Mortgagor" includes any person liable for the payment of a mortgage loan, and the owner of real property which secures the payment of a mortgage loan.
"Original tax bill" means the property tax bill as originally prepared and mailed by the collector of a taxing district pursuant to subsection a. of R.S.54:4-64.
"Property tax processing organization" means an organization which, under contract with a mortgagee or a servicing organization, collects and processes property tax information with respect to properties securing mortgage loans.
"Purchasing servicing organization" means a person or entity to whom or which a mortgagee or a selling servicing organization sells, assigns or transfers the servicing of a mortgage loan.
"Replacement bill" means a property tax bill made or generated by a mortgagee, servicing organization or tax processing organization subject to the restrictions provided pursuant to subsection a. of section 5 of [this act] P.L.1990, c.69 (C.17:16F-19) and regulations promulgated by the Commissioner of the Department of Community Affairs pursuant to that subsection a. [of section 5 of this act.]
"Selling servicing organization" means a person or entity [who] that sells, assigns or transfers the servicing of a mortgage loan.
"Servicing organization" means a mortgagee or an agent of the mortgagee, pursuant to a written agreement between the agent and the mortgagee, which is responsible for one or more mortgage escrow accounts.
"Tax authorization form" means a form approved by the Commissioner of Community Affairs whereby the mortgagor authorizes the municipal tax collector to send the original municipal tax bill to the mortgagee or the mortgagee's servicing organization pursuant to R.S.54:4-64.
(cf: P.L.1990, c.69, s.1)
2. Section 7 of P.L.1990, c.69 (C.17:16F-21) is amended to read as follows:
7. a. A mortgagee or servicing organization which requires a mortgagor to pay into a mortgage escrow account shall furnish to the mortgagor, within 45 days after the end of each calendar year, a written statement providing: the balance of the account at the beginning of the calendar year; total payments credited to the account during the calendar year, including interest credited to the account, if any; an itemized statement of all expenditures from the account during the calendar year; the average daily balance in the account for each calendar quarter of a calendar year; and the balance in the account at the end of the calendar year. The mortgagor shall be entitled to receive one written statement for each calendar year without charge.
b. [The] Except for providing the average daily balance in the account for each calendar quarter of the calendar year, the annual statement provided for in subsection a. of this section is not required if the mortgagor is provided with at least a monthly statement or mortgagor passbook which provides the balance in the escrow account and an itemized record of disbursements from the account.
(cf: P.L.1990, c.69, s.7)
3. (New section) Each mortgagee or its servicing organization which requires a mortgagor to make payments into a mortgage escrow account shall pay interest to the mortgagor on the amount in the mortgagor's escrow account. Interest shall be calculated quarterly on the average daily balance in the mortgage escrow account for the calendar quarter and shall be credited to the escrow account within 30 days of the end of a calendar quarter. The rate of interest to be paid on mortgage escrow account balances shall be determined annually by the Commissioner of Banking and shall reflect the average rate of interest paid during the preceding year by financial institutions in this State on passbook savings or statement savings account, whichever is higher.
4. (New section) The Commissioner of Banking shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this 1995 amendatory and supplementary act and may promulgate regulations as deemed appropriate by the Commissioner of Banking, after consultation with the Commissioner of Community Affairs, necessary to effectuate the provisions of P.L.1990, c.69 (C.17:16F-15 et seq.).
5. This act shall take effect on the 90th day after enactment.
STATEMENT
This bill prohibits a mortgagee or its servicing agent from establishing more than one escrow account with respect to a mortgagor's payments for taxes, insurance and other costs associated with a particular property which is the subject of a mortgage.
In addition, a mortgagee or its servicing agent is required to pay interest on the average daily balance in a mortgage escrow account on a quarterly basis at a rate set on an annual basis by the Commissioner of Banking and provide the mortgagor with information regarding the average daily balance in the mortgagor's escrow account for each quarter in a calendar year at the same time the mortgagee or it servicing agent provides an annual statement of the account to the mortgagor.
Requires payment of interest on mortgage escrow accounts.