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Lawmakers Hear Bill to Require Interest on Mortgage Escrows; Banks Warn of Cost
Summary
Representative Joran Johnson introduced House Bill 1378 to require lenders to pay interest credited to borrowers on residential mortgage escrow accounts, proposing at least a 0.5% minimum; bankers and the Department of Financial Institutions warned of administrative costs and enforcement problems.
Representative Joran Johnson introduced House Bill 1378 to the Industry, Business and Labor Committee, saying the bill would “correct the inequity of homeowners providing interest free money to financial institutions via escrow accounts by requiring the interest earned to be credited to the borrower.”
The bill would apply to escrow accounts — funds held by a lender or servicer to pay property taxes, homeowners insurance and related expenses — and Johnson proposed placing the language in the existing escrow code chapter (47-10.1). He told the committee he would ask Legislative Council to draft the move and offered three preliminary amendments: move the language to the existing escrow chapter, require at least 30 days’ notice for rate adjustments, and cap penalties where the current code already provides a $500 fine.
Why it matters: Supporters said the measure would stop lenders from earning short-term use of customers’ escrow funds…
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