By Maxey                                         H.B. No. 313

      75R1382 DWS-D                           

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to payment of interest on certain escrow accounts;

 1-3     providing a civil penalty.

 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-5           SECTION 1.  Title 16, Revised Statutes, is amended by adding

 1-6     Article 375 to read as follows:

 1-7           Art. 375.  INTEREST ON ESCROW ACCOUNT

 1-8           Sec. 1.  DEFINITIONS.  In this article:

 1-9                 (1)  "Commissioner" means the banking commissioner of

1-10     Texas.

1-11                 (2)  "Mortgage lender" means a bank, savings and loan

1-12     association, savings bank, trust company, mortgage banking

1-13     institution, credit union, or other corporation or association

1-14     organized under state or federal law that makes a loan secured by a

1-15     security interest in residential property.

1-16           Sec. 2.  APPLICATION OF ARTICLE.  This article applies only

1-17     to residential property:

1-18                 (1)  having not more than four dwelling units and at

1-19     which an owner of the property resides; or

1-20                 (2)  that is owned by a cooperative association

1-21     incorporated under the Cooperative Association Act (Article

1-22     1396-50.01, Vernon's Texas Civil Statutes) and at which the members

1-23     or shareholders of the association are entitled to reside.

1-24           Sec. 3.  PAYMENT OF INTEREST REQUIRED.  If a mortgage lender

 2-1     that holds a security interest in property to which this article

 2-2     applies requires a person to maintain an escrow account with the

 2-3     mortgage lender for the payment of property taxes or casualty

 2-4     insurance premiums on the property, the mortgage lender shall pay

 2-5     the person interest on the money in the escrow account quarterly

 2-6     and on the date the escrow account terminates at the rate of

 2-7     interest the commissioner determines.

 2-8           Sec. 4.  RULES.  On recommendation of the commissioner, the

 2-9     Finance Commission of Texas shall adopt rules necessary to carry

2-10     out this section, including rules providing for interest payment

2-11     dates, compounding of interest, and the manner in which payments

2-12     are made.

2-13           Sec. 5.  RATE OF INTEREST.  (a)  Quarterly the commissioner

2-14     shall determine the interest rate applicable to payments made on

2-15     escrow accounts during the quarter for which the rate applies.

2-16           (b)  In determining the interest rate, the commissioner shall

2-17     consider relevant economic and cost factors, including:

2-18                 (1)  current yields on short-term investments;

2-19                 (2)  current dividend rates paid on regular savings

2-20     accounts in this state;

2-21                 (3)  prevailing interest rates on conventional and

2-22     insured or guaranteed mortgage loans in this state; and

2-23                 (4)  cost factors in maintaining escrow accounts.

2-24           Sec. 6.  CIVIL PENALTY.  (a)  A mortgage lender who does not

2-25     pay interest as required under this article  is liable for a civil

2-26     penalty not to exceed $1,000 for each violation.

2-27           (b)  The attorney general may sue to collect a civil penalty

 3-1     under this section.

 3-2           SECTION 2.  This Act takes effect September 1, 1997, and

 3-3     applies only to an escrow account established on or after the

 3-4     effective date of this Act.

 3-5           SECTION 3.  The importance of this legislation and the

 3-6     crowded condition of the calendars in both houses create an

 3-7     emergency and an imperative public necessity that the

 3-8     constitutional rule requiring bills to be read on three several

 3-9     days in each house be suspended, and this rule is hereby suspended.