S2868-2013 Actions

• Jan 24, 2013: REFERRED TO BANKS

S2868-2013 Memo

BILL NUMBER:S2868

TITLE OF BILL:  An act to amend the banking law, in relation to the
definition of the word "timely" for real property insurance escrow
accounts

PURPOSE:  This bill defines timely payment for the purpose of the
requirements applicable to real property insurance escrow accounts main-
tained by mortgage investing institutions.

SUMMARY OF PROVISIONS:  This bill adds a new paragraph (f) to subdivi-
sion (1) (Definitions) of

Section 6-k of the banking law. The new paragraph defines the term
"timely" for the purposes of this section, to mean 10 days prior to the
date on which real property insurance premiums are due and payable.

JUSTIFICATION:

Section 6-k sets forth various provisions applicable to real property
insurance escrow accounts maintained by mortgage investing institutions.
Such institutions are required by paragraph (a) of subdivision (2) of
section 6-k to "make all payments for insurance for which they hold real
property insurance escrow accounts in a timely manner." However, the
standard for timely payments is not defined. Despite the existence of
this section, late payments by these institutions continue to be a prob-
lem. When the payment is not received by the insurer by the due date, a
cancellation notice is issued by the insurer on the policy, with a copy
to the mortgagor and the mortgagor's insurance agent or broker. Some
mortgage investing institutions appear to time their payments not by the
premium due date but according to the terms of New York's statutory
"grace period" which provides an additional 15 days after issuance of a
nonpayment cancellation notice by the insurance company before an actual
cancellation can be affected. But waiting until the policy has gone into
cancellation mode causes untold problems for the other parties involved
in the insurance transaction. A cancellation notice, in the insurance
world, creates an emergency.

Much anxiety and many costly activities ensue when such a notice is
received. Insurance agents and their clients must take immediate action
to determine the cause of the cancellation notice and prevent its taking
effect. Yet this remains a common occurrence despite the requirements of
Section 6-k. Since escrow accounts are required primarily to protect the
mortgage companies' interests, they should be run in a way that does not
inconvenience the mortgagor and others with whom the mortgagor chooses
to do business. It is unfair to insurance consumers, insurance producers
and insurers for mortgage investing institutions to remit escrow
payments so late that the insurer must issue a cancellation notice. This
process entails extra costs in terms of time spent, mailings, phone
calls and processing. It is poor public policy to tolerate business
practices which routinely cause insurers to issue cancellation notices.

This bill will further specify the standard for timely payment to clear-
ly rule out payments that are received after the due date specified on
the premium billing notice.  Requiring payments to be remitted from
escrow accounts at least 10 days prior to the due date will prevent
cancellation notices from being necessary.

LEGISLATIVE HISTORY:  S.3491 of 2010- Referred to Banks S.3671 of 2012-
Referred to Banks

FISCAL IMPLICATIONS:  None.

LOCAL FISCAL IMPLICATIONS:  None.

EFFECTIVE DATE:  This act shall take effect on the ninetieth day after
it shall have become a law.

S2868-2013 Text

 S T A T E   O F   N E W   Y O R K
 
 
                                         2868
 2013-2014 Regular Sessions
 I N  SENATE
 January 24, 2013
 
 Introduced  by  Sen.  SMITH  -- read twice and ordered printed, and when
 printed to be committed to the Committee on Banks
 

AN ACT to amend the banking law, in relation to the  definition  of  the
 word "timely" for real property insurance escrow accounts
 

THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM
 BLY, DO ENACT AS FOLLOWS:

 

Section 1. Subdivision 1 of section 6-k of the banking law is  amended
 by adding a new paragraph (f) to read as follows:

 (F) "TIMELY" SHALL MEAN TEN DAYS PRIOR TO THE DATE ON WHICH REAL PROP
 ERTY INSURANCE PREMIUMS ARE DUE AND PAYABLE.
 

S  2.  This  act shall take effect on the ninetieth day after it shall
 have become a law.
 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD07215-01-3

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