Notice of Intent to Adopt Regulations
In accordance with Section 4-168(a) of the 2006 Supplement to the General Statutes, and by the authority granted in Section 49-2b of the 2006 Supplement to the General Statutes, notice is hereby given that the Banking Commissioner intends to adopt regulations concerning the payment of interest on funds held in escrow by mortgagees.
Text of Proposed Regulations:
Section 1. The Regulations of Connecticut State Agencies are amended by adding Sections 49-2b-1 to 49-2b-4, inclusive, as follows:
(NEW) Sec. 49-2b-1. Definitions
As used in sections 49-2b-1 to 49-2b-4, inclusive, of the Regulations of Connecticut State Agencies:
(1) “Annual rate” means the rate of interest used by a mortgagee to determine the amount owed to a mortgagor pursuant to subsection (a) of section 49-2a of the Connecticut General Statutes;
(2) “Insurance premiums” means premiums on a policy of fire, casualty, property liability, flood or other hazard insurance or homeowner’s insurance applicable with respect to mortgaged property located in this state;
(3) “Mortgaged property” means real property that is used as security for repayment of a loan or extension of credit;
(4) “Mortgagee” means any mortgagee or mortgage servicing company required pursuant to section 49-2a of the Connecticut General Statutes to pay interest on funds of a mortgagor held in escrow for the payment of taxes and insurance premiums;
(5) “Mortgagor” means any individual who is a mortgagor of mortgaged property located within this state that is owner-occupied residential property consisting of not more than four living units and housing cooperatives occupied solely by the housing cooperative shareholders; and
(6) “Taxes” means property taxes on mortgaged property located in this state.
As used in sections 49-2b-1 to 49-2b-4, inclusive, of the Regulations of Connecticut State Agencies:
(1) “Annual rate” means the rate of interest used by a mortgagee to determine the amount owed to a mortgagor pursuant to subsection (a) of section 49-2a of the Connecticut General Statutes;
(2) “Insurance premiums” means premiums on a policy of fire, casualty, property liability, flood or other hazard insurance or homeowner’s insurance applicable with respect to mortgaged property located in this state;
(3) “Mortgaged property” means real property that is used as security for repayment of a loan or extension of credit;
(4) “Mortgagee” means any mortgagee or mortgage servicing company required pursuant to section 49-2a of the Connecticut General Statutes to pay interest on funds of a mortgagor held in escrow for the payment of taxes and insurance premiums;
(5) “Mortgagor” means any individual who is a mortgagor of mortgaged property located within this state that is owner-occupied residential property consisting of not more than four living units and housing cooperatives occupied solely by the housing cooperative shareholders; and
(6) “Taxes” means property taxes on mortgaged property located in this state.
(NEW) Sec. 49-2b-2. Minimum interest calculation
The minimum monthly amount of interest credited to funds of a mortgagor held in escrow by a mortgagee for payment of taxes and insurance premiums may be determined by multiplying either the actual average daily balance as of the day of the month corresponding to the date set by the mortgagee for the payment by the mortgagor of funds to be held in escrow by the mortgagee or the actual average daily balance for the month by the quotient obtained by dividing the annual rate by twelve. The annual rate shall not be less than the minimum required by section 49-2a of the Connecticut General Statutes. Any other method of computation may be employed as long as it does not result in less than the minimum monthly amount of interest determined in accordance with this section.
The minimum monthly amount of interest credited to funds of a mortgagor held in escrow by a mortgagee for payment of taxes and insurance premiums may be determined by multiplying either the actual average daily balance as of the day of the month corresponding to the date set by the mortgagee for the payment by the mortgagor of funds to be held in escrow by the mortgagee or the actual average daily balance for the month by the quotient obtained by dividing the annual rate by twelve. The annual rate shall not be less than the minimum required by section 49-2a of the Connecticut General Statutes. Any other method of computation may be employed as long as it does not result in less than the minimum monthly amount of interest determined in accordance with this section.
(NEW) Sec. 49-2b-3. Payment of interest upon final repayment of mortgage
If the mortgage debt is paid prior to December thirty-first, the mortgagee shall promptly pay to the mortgagor any interest remaining as a credit to the escrow account of the mortgagor, computed to the date of final repayment of the mortgage debt.
If the mortgage debt is paid prior to December thirty-first, the mortgagee shall promptly pay to the mortgagor any interest remaining as a credit to the escrow account of the mortgagor, computed to the date of final repayment of the mortgage debt.
(NEW) Sec. 49-2b-4. Annual report of interest credited by mortgagee
Not more than thirty days after each December thirty-first, the mortgagee shall report to the mortgagor the amount of interest credited to the escrow account of the mortgagor during the year ending and including each December thirty-first. The mortgagee may use for this purpose the Department of Treasury Internal Revenue Service Form 1099-INT, which may be obtained by calling 1-800-TAX-FORM (1-800-829-3676) or by accessing the Internal Revenue Service’s web site at http://www.irs.ustreas.gov/. In the alternative, the mortgagee may use any acceptable substitute form that complies with the requirements of 26 CFR 1.6049-6 and Internal Revenue Service Publication Form 1179.
Sec. 2. Sections 49-2a-1, 49-2a-2, 49-2a-4 and 49-2a-5 of the Regulations of Connecticut State Agencies are repealed.
Statement of Purpose: To clarify the statutory authority for adopting regulations concerning the payment of interest on funds held in escrow by mortgagees; update the definition of “mortgagee”; add a definition for the term “annual rate”; provide the forms to be used for reporting to mortgagors the interest due; and make technical changes.
All interested persons who wish to submit data, views or arguments and to inspect and copy the fiscal note prepared in connection with the proposed regulations may do so in writing within thirty (30) days of the publication of this notice in the Connecticut Law Journal. Comments may be submitted to the Banking Commissioner, Attention: Legal Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800.