| (1) |
A lender not requiring the establishment and maintenance of a reserve account shall offer the borrower the following options:
Terms Used In Utah Code 7-17-4- Borrower: means any person who becomes obligated on a real estate loan at the time of origination of such loan and includes mortgagors, trustors under trust deeds and vendees under conditional land sales contracts. See Utah Code 7-17-2
- Lender: means any person who regularly makes, extends or holds real estate loans and includes, but is not limited to, mortgagees, beneficiaries under trust deeds and vendors under conditional land sales contracts and who regularly require or maintain reserve accounts. See Utah Code 7-17-2
- Property: includes both real and personal property. See Utah Code 68-3-12.5
- Reserve account: means any account, whether denominated escrow, impound, trust, pledge, reserve or otherwise, which is established in connection with a loan secured by an interest in real estate located in this state, whether or not a real estate loan as defined in this chapter, and whether incorporated into the loan agreement or a separate document, whereby the borrower agrees to make periodic prepayment to the lender or its designee of taxes, insurance premiums or other charges pertaining to the property securing the loan and the lender or its designee agrees to pay the taxes, insurance premiums or other charges out of the account on or before their due date. See Utah Code 7-17-2
| (a) |
the borrower may elect to maintain a noninterest-bearing reserve account to be serviced by the lender at no charge to the borrower; or |
| (b) |
the borrower may manage the payment of insurance premiums, taxes and other charges for the borrower’s own account. |
|
| (2) |
| (a) |
The lender shall give written notice of the options to the borrower:
| (i) |
with respect to real estate loans existing on July 1, 1979, by notice mailed not more than 30 days after July 1, 1979; or |
| (ii) |
with respect to real estate loans made on or after July 1, 1979, by notice given at or prior to the closing of the loan. |
|
| (b) |
The notice required by this Subsection (2) shall:
| (i) |
clearly describe the options; and |
| (ii) |
state that:
| (A) |
a reserve account is not required by the lender; |
| (B) |
the borrower is legally responsible for the payment of taxes, insurance premiums, and other charges; and |
| (C) |
the notice is being given pursuant to this chapter. |
|
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| (c) |
For real estate loans in existence on July 1, 1979, the borrower shall select one of the options prior to 60 days after July 1, 1979. |
| (d) |
If no option is selected prior to 60 days after July 1, 1979, the borrower will be considered to have selected the option described in Subsection (1)(a), provided, however, that the borrower at a later time may select the option described in Subsection (1)(b). |
| (e) |
For loans made on or after July 1, 1979, the borrower shall select one of the options at the closing. |
| (f) |
If the borrower selects the option described in Subsection (1)(a), the lender may not be required to account for earnings, if any, on the account. |
|
| (3) |
| (a) |
Subject to Subsection (3)(b), if the borrower who selects the option described in Subsection (1)(b), or the borrower’s successors or assigns, fails to pay the taxes, insurance premiums, or other charges pertaining to the property securing the loan prior to the delinquency date for such payments, the lender may require a reserve account without interest or other compensation for the use of the funds. |
| (b) |
Notwithstanding Subsection (3)(a), the lender may not require a reserve account without interest or other compensation if:
| (i) |
the borrower pays any delinquency within 30 days; and |
| (ii) |
the borrower has not previously been delinquent in payment of taxes, insurance premiums, or other charges. |
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| (4) |
This section does not apply to a loan made, renewed, or modified on or after May 6, 2002. |
Amended by Chapter 378, 2010 General Session
