Mortgage Servicers Disburse Insurance Proceeds

The act requires a mortgage servicer, upon the request of a borrower, to disclose certain information to the borrower concerning the disbursement of insurance proceeds to the borrower in the event that a residential property that is subject to a mortgage is damaged or destroyed and an insurance company pays a claim associated with such damage or destruction. In the event that a residential property is damaged or destroyed, a borrower, after consulting with the borrower's contractor, must create a written repair plan or a written rebuild plan and submit the plan to the mortgage servicer for approval. The mortgage servicer must indicate approval or disapproval within 30 days after receiving the submitted plan. The plan must include specific milestones that require the mortgage servicer to disburse insurance proceeds. However, a mortgage servicer must also disburse insurance proceeds to a borrower in specified amounts, depending on the amount of the insurance proceeds and whether the borrower is delinquent in making payments on the mortgage. For the purpose of such disbursements: A mortgage servicer must make the first disbursement within 14 days after the mortgage servicer receives the insurance proceeds if the mortgage is insured by the federal government or securitized by the federal national mortgage association or the federal home loan mortgage corporation and as soon as reasonably possible and no later than 30 days after the mortgage servicer receives the insurance proceeds if the mortgage is not insured by the federal government or securitized by the federal national mortgage association or the federal home loan mortgage corporation; and A mortgage servicer may disburse funds directly to a designee of a borrower so long as the designee is agreed to by both the borrower and the mortgage servicer and the designation is permitted by federal and state law and any associated rules. With certain exceptions, a mortgage servicer must promptly disburse to a borrower any amount of insurance proceeds in excess of the remaining amount that the borrower owes on the mortgage. A mortgage servicer must hold in an interest-bearing account any insurance proceeds that the mortgage servicer does not immediately disburse to a borrower. A mortgage servicer must ensure that any interest that is credited to the account is credited and disbursed to the borrower. A mortgage servicer must retain for at least 4 years all written and electronic communications between the mortgage servicer and a borrower. The act repeals certain provisions of existing law concerning the disbursement of insurance proceeds following a claim of property damages. APPROVED by Governor May 17, 2024 EFFECTIVE May 17, 2024(Note: This summary applies to this bill as enacted.)