A. All of the following provisions shall apply to a mortgagee or mortgage servicer servicing residential mortgage loans secured by a property that contains one to four residential dwelling units in this state:

            (1) The mortgagee or mortgage servicer shall promptly endorse a check, draft, or other negotiable instrument for insurance settlement proceeds payable jointly to the mortgagee or mortgage servicer and the borrower-payee by the insurance company. However, the mortgagee or mortgage servicer is not required to endorse such instrument if the borrower-payee refuses to endorse the instrument.

            (2) Insurance settlement proceeds received by a mortgagee or mortgage servicer that relate to compensation for damage to property or contents insurance coverage in which the mortgagee or mortgage servicer has a mortgage or security interest shall be promptly deposited into a segregated account of a federally insured financial institution, unless the mortgagee or mortgage servicer returns such insurance settlement proceeds to the borrower-payee or the check, draft, or negotiable instrument is missing the borrower-payee’s endorsement. The segregated account may at the discretion of the mortgagee or mortgage servicer be an individual deposit account for each borrower-payee or a master account containing subaccounts for each borrower-payee.

            (3) Insurance settlement proceeds received by a mortgagee or mortgage servicer that relate to contents insurance coverage in which the mortgagee or mortgage servicer does not have a security interest in the contents shall be promptly distributed to the borrower-payee via traceable delivery or electronic transfer.

            (4) Insurance settlement proceeds received by a mortgagee or mortgage servicer that relate to additional living expenses shall be promptly distributed to the borrower-payee via traceable delivery or electronic transfer.

            B. Notwithstanding the provisions of Subsection A of this Section, the mortgagee or mortgage servicer is not required to remit the portion of the insurance settlement proceeds relating to additional living expenses and contents insurance if the mortgagee or mortgage servicer is not able to determine which part of the proceeds relate to additional living expenses and contents insurance.

            C.(1) If a mortgagee or mortgage servicer holds all or part of the insurance settlement proceeds pending completion of all or part of the repairs to the damaged property, the mortgagee or mortgage servicer shall notify the borrower-payee of each requirement with which the borrower-payee shall comply for the mortgagee or mortgage servicer to release the insurance settlement proceeds. The notice required by this Paragraph shall be provided not later than the tenth business day after the date the mortgagee or mortgage servicer receives payment of the insurance settlement proceeds.

            (2) Not later than the tenth business day after the date a mortgagee or mortgage servicer receives from the borrower-payee a request for release of all or part of the insurance settlement proceeds held by the mortgagee or mortgage servicer, the mortgagee or mortgage servicer shall do either of the following:

            (a) If the mortgagee or mortgage servicer does not require a property inspection to be conducted and has received sufficient evidence of the borrower-payee’s compliance with the requirements specified by the mortgagee or mortgage servicer pursuant to Paragraph (1) of this Subsection for release of the insurance settlement proceeds, release to the borrower-payee, as requested, all or part of the proceeds.

            (b) Provide notice to the borrower-payee that explains with specificity both of the following:

            (i) The reason for the mortgagee or mortgage servicer’s refusal to release the insurance settlement proceeds to the borrower-payee.

            (ii) Each requirement with which the borrower-payee shall comply for the mortgagee or mortgage servicer to release the insurance settlement proceeds.

            (3)(a) Property inspections related to residential mortgage loans covered by this Section shall be conducted not later than the fifteenth business day after receipt by the mortgagee or mortgage servicer of both a request by the borrower-payee for a property inspection and receipt of sufficient evidence of the borrower-payee’s compliance with the requirements specified by the mortgagee or mortgage servicer pursuant to Paragraph (1) of this Subsection, provided that the borrower-payee is cooperative and that the premises are accessible.

            (b) A mortgagee or mortgage servicer may, at their discretion, allow property inspections to be conducted in person, through photographic or video evidence submitted by the borrower-payee, through a servicer-directed video call with the borrower-payee, or by any other means to document the progress or completion of repairs of the property.

            (c) Photographic or video evidence shall also clearly identify the repairs that are being documented and confirm the repairs were completed in accordance with the repair plan. Any photographic or video evidence provided to a mortgagee or mortgage servicer may not be accepted if it does not allow the mortgagee or mortgage servicer to determine the repairs are from the location of the property subject to the mortgage loan, does not authenticate when it was taken, or if it is believed by the mortgagee or mortgage servicer to have been altered in any way.

            (4)(a) The commissioner may impose civil money penalties of up to five hundred dollars per day for each day that a mortgagee or mortgage servicer fails to comply with the requirements of Paragraph (1) or (2) of this Subsection. The penalties provided by this Paragraph shall not exceed five thousand dollars per violation.

            (b) Penalties shall be due and payable upon notice of their assessment to the mortgagee or mortgage servicer, unless such penalties are set aside after an administrative hearing pursuant to the provisions of the Administrative Procedure Act. The assessment of civil money penalties shall be final and definitive and subject to enforcement by the commissioner through judicial proceedings.

            D.(1) When the damaged property is replaced or otherwise repaired to the satisfaction of the borrower-payee and the mortgagee or mortgage servicer, then any remaining balance in the segregated account shall be paid to the borrower-payee together with all interest that accrued while the funds were in the segregated account in accordance with Paragraph (2) of this Subsection.

            (2) Interest shall accrue on insurance settlement proceeds where the funds equal twenty-five thousand dollars or more after being held by the mortgagee or mortgage servicer in a segregated account for more than thirty days. For the purposes of this Subsection, compliance with Fannie Mae or Freddie Mac servicing guidelines for payment of interest on property damage claim funds held by the mortgagee or mortgage servicer constitutes compliance with this Section.

            E. The provisions of this Section and La. Rev. Stat. 6:338 shall be applicable to state chartered federally insured financial institutions and their affiliates to the same extent that such provisions are applicable to federally chartered financial institutions.

            F. The provisions of this Section shall apply only to residential mortgage loans secured by a property that contains one to four residential dwelling units. However, the provisions of this Section shall not apply to a mortgagee or mortgage servicer when the borrower-payee is in default on his mortgage loan, past due with payments on his mortgage loan, or in foreclosure related to his mortgage loan.

            Acts 2006, 1st Ex. Sess., No. 14, §1, eff. Feb. 23, 2006; Acts 2022, No. 744, §1.