H-2856.2 _______________________________________________
HOUSE BILL 2144
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State of Washington 53rd Legislature 1994 1st Special Session
By Representatives Carlson, Long and Dyer
Read first time 01/10/94. Referred to Committee on Financial Institutions & Insurance.
AN ACT Relating to payment of interest on mortgage escrow accounts; and adding a new chapter to Title 19 RCW.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1. The legislature finds that financial institutions earn significant interest from funds of mortgage customers held in escrow accounts for the purpose of paying property taxes, hazard insurance, and other obligations of the residential real estate loan customer in relation to residential real estate loans. It is the intent of the legislature to require financial institutions to pay interest on mortgage escrow accounts in fairness to consumers, who generally are at a disadvantage when bargaining with the lender regarding mortgage escrow accounts.
NEW SECTION. Sec. 2. (1) Beginning January 1, 1995, each lender shall place all funds received from the residential real estate loan customer and designated for the payment of property taxes and hazard insurance on the residential real estate loan into an interest-bearing mortgage escrow account. The interest accruing on this account, minus reasonable and appropriate service charges or fees, shall be paid to the residential real estate mortgage customer. Interest shall be computed on the average monthly balance in the account and shall be paid by crediting the escrow account the amount due at least annually. The rate of interest accruing shall not be less than the typical rate paid on passbook savings accounts in the state.
(2) For purposes of this section:
(a) "Residential real estate loan" means a loan secured by a first mortgage, deed of trust, real estate contract, or other first lien on the borrower's interest in a one-to-four family dwelling, including an individual cooperative unit, or a loan for the construction of the dwelling.
(b) "Lender" means any individual, corporation, association, partnership, or trust doing business under the laws of this state or the United States relating to banks, bank holding companies, mutual savings banks, trust companies, savings and loan associations, credit unions, consumer finance companies, investment companies, insurance companies, mortgage companies, pension funds, or real estate investment trusts, and affiliates, subsidiaries, and service corporations thereof.
(c) "Mortgage escrow account" means an account created in conjunction with a residential real estate loan that is intended for the placement of funds, on an incremental basis, for the purpose of paying property taxes, hazard insurance, and other obligations of the residential real estate loan customer in relation to the residential real estate loan.
NEW SECTION. Sec. 3. This chapter applies to all mortgage escrow accounts existing on January 1, 1995, and all accounts created on or after January 1, 1995, except for mortgage escrow accounts where payment of interest on these accounts specifically violates federal law or regulation.
NEW SECTION. Sec. 4. The director of financial institutions may enact rules necessary to carry out this chapter. These rules may include periodically defining the minimum interest rate or maximum service charge provided for under section 2(1) of this act.
NEW SECTION. Sec. 5. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.
NEW SECTION. Sec. 6. Sections 1 through 4 of this act shall constitute a new chapter in Title 19 RCW.
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