§ 6:338 — Insurance settlement proceeds; return of excess funds; enforcement

§338. Insurance settlement proceeds; return of excess funds; enforcement
A. If a mortgagee or mortgage servicer is presented with a jointly payable insurance
proceeds check, draft, or other negotiable instrument for residential immovable property
damage, which contains the borrower-payee's endorsement, and the mortgagee or mortgage
servicer receives a written request from the borrower-payee to release excess funds, then the
mortgagee or mortgage servicer shall have fifteen business days after receiving such request
and such check, draft, or other negotiable instrument to provide its endorsements and return
all excess funds provided for in Subsection B of this Section. The fifteen-business-day
timeline for releasing excess funds provided by this Section shall not apply when the
insurance proceeds check, draft, or other negotiable instrument requires the endorsement of
multiple mortgagees or lien holders.
B. For purposes of this Section, the term "excess funds" shall mean insurance funds
in excess of both of the following:
(1) All loan balances of any mortgagee or mortgage servicer named as payee on the
insurance claim check, draft, or other negotiable instrument calculated as of the thirtieth day
following receipt of the request and check or draft as outlined in Subsection A of this
Section.
(2) Six months of future accrued interest as calculated pursuant to the terms of the
mortgage loans and calculated from the date of the payoff explained in Paragraph (1) of this
Subsection.
C.(1) The commissioner may impose civil money penalties of up to five hundred
dollars per day of each day a mortgagee or mortgage servicer fails to comply with the
requirements of Subsection B of this Section. The penalties provided in this Paragraph shall
not exceed five thousand dollars per violation.
(2) Penalties shall be due and payable upon notice of their assessment to the
mortgagee or mortgage servicer, unless set aside after an administrative hearing pursuant to
the provisions of the Administrative Procedure Act. The assessment of civil money penalties
shall be final and definitive and subject to enforcement by the commissioner through judicial
proceedings.
D. The provisions of this Section shall apply only to residential mortgage loans
secured by a property that contains one to four residential dwelling units. However, the
provisions of this Section shall not apply to a mortgagee or mortgage servicer when the
borrower-payee is in default on his mortgage loan, past due with payments on his mortgage
loan, or in foreclosure related to his mortgage loan.
E. The provisions of this Section shall not impair the contractual rights of a
mortgagee or mortgage servicer related to all loan balances and accrued interest as described
in Paragraphs (B)(1) and (2) of this Section.

Legislative History

Acts 2006, 1st Ex. Sess., No. 21, §1, eff. April 1, 2006; Acts 2022, No. 744, §1.