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.