Provides a definition of the word "timely" for purposes of real property insurance escrow accounts.
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 maintained by mortgage investing institutions.
SUMMARY OF PROVISIONS: This bill adds a new paragraph (f) to subdivision (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 problem. 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 clearly 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
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.
STATE OF NEW YORK ________________________________________________________________________ 3671 2011-2012 Regular Sessions IN SENATE March 1, 2011 ___________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. LBD04667-01-1