N.Y. Banking Law 14-B – Power of the superintendent of financial services to prescribe minimum rate of interest on mortgage escrow accounts
§ 14-b. Power of the superintendent of financial services to prescribe minimum rate of interest on mortgage escrow accounts. 1. The superintendent shall have the power to prescribe, from time to time but not more often than once in every three month period, by regulation a minimum rate of, and method or basis of computing, interest that a mortgage investing institution shall be required to pay on each escrow account maintained with respect to a mortgage on a one to six family residence occupied by the owner or on any property owned by a cooperative apartment corporation, as defined in subdivision twelve of § 360 of the tax law, (as such subdivision was in effect on December thirtieth, nineteen hundred sixty), and located in this state, which rate shall be greater than the rate of interest required to be paid under section 5-601 or 5-602 of the general obligations law.
Terms Used In N.Y. Banking Law 14-B
- Contract: A legal written agreement that becomes binding when signed.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgagor: The person who pledges property to a creditor as collateral for a loan and who receives the money.
- National Bank: A bank that is subject to the supervision of the Comptroller of the Currency. The Office of the Comptroller of the Currency is a bureau of the U.S. Treasury Department. A national bank can be recognized because it must have "national" or "national association" in its name. Source: OCC
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
2. In making such determination the superintendent shall consider pertinent economic and cost factors including, but not limited to: (i) current yields on short term investments, (ii) current dividend rates paid on regular savings accounts throughout this state, (iii) currently prevailing interest rates on conventional and insured or guaranteed mortgage loans in this state, (iv) cost factors in maintaining escrow accounts and (v) such other pertinent economic or cost factors that the superintendent shall deem to be appropriate. Prior to the superintendent's prescription of any such minimum rate of interest, the superintendent shall issue a statement in writing setting forth the economic and cost data and criteria upon which such determination is based. Prior to making such determination, the superintendent may invite presentation, by interested persons, of information and data relating to economic and cost factors relevant to such minimum rate of interest.
3. The superintendent may promulgate such regulations as the superintendent deems necessary and proper to implement and define the provisions of this section. The superintendent may prescribe the minimum rate of interest from time to time, but not more often than once in any three-month period, and shall provide reasonable notice to the public of any change in the rate of interest, of the effective date of such change, which shall be not less than seven days following the adoption of such change by the superintendent, and of any rule or regulation adopted pursuant to this subdivision.
4. In no event shall interest be required to be paid on escrow accounts where (i) there is a contract between the mortgagor and the mortgage investing institution, entered into before the date this subdivision shall have become a law which contains an express disclaimer of an obligation on the part of the mortgage investing institution to pay interest on such accounts, or (ii) the payment of such interest would violate any federal law or regulation, or (iii) such accounts are maintained with a mortgage servicing company, neither affiliated with nor owned in whole or in part by the mortgage investing institution, under a written contract, entered into before the date this subdivision shall have become a law, which contract does not permit the mortgage investing institution to earn or receive a return from the investment of such accounts.
5. "Mortgage investing institution" as used in this section and in section 5-601 or 5-602 of the general obligations law shall mean and include any bank, trust company, national bank, savings bank, savings and loan association, federal savings and loan association, private banker, credit union, investment company, insurance company, pension fund, mortgage company or other entity which makes, extends or holds a mortgage on any one to six family residence occupied by the owner or any property owned by a cooperative apartment corporation, as defined in subdivision twelve of § 360 of the tax law, (as such subdivision was in effect on December thirtieth, nineteen hundred sixty), and located in this state.
6. "Escrow account" as used in this section and in section 5-601 or 5-602 of the general obligations law shall mean any account established pursuant to an agreement between a mortgagor and a mortgage investing institution whereby the mortgagor pays to the mortgage investing institution or his designee amounts to be used for the payment of insurance premiums, water rents or any similar charges, and shall also include real property tax escrow accounts as defined in title three-A of Article 9 of the real property tax law.
7. "One to six family residence" as used in this section and in section 5-601 or 5-602 of the general obligations law shall mean property used primarily for residential purposes for one to six families, including property held in condominium form, and which is occupied in whole or in part by the owner.
8. If any provision of this section, or the application of such provision to any individual, company, corporation or circumstance, shall be held invalid, the remainder of this section, and the application of such section to individuals, companies, corporations, or circumstances other than those to which it is held invalid, shall not be affected thereby.