RÉSUMÉ DIGEST
ACT 744 (HB 1064) 2022 Regular Session Farnum
Prior law provided that if proceeds of an insurance check or draft in settlement of a property
damage claim are jointly paid to the claimant and the holder of the mortgage, when such
payment involves residential property, the settlement proceeds are to be placed in an interest-
bearing account with interest accruing to the benefit of the claimant.
New law revises prior law by redesignating the citation and changing the following terms
throughout prior law: Changes "claimant" to "borrower-payee". Changes "person holding
the mortgage on the property" to "mortgagee or mortgage servicer". Changes "interest-
bearing account" to "segregated account".
New law specifies that new and existing law provisions regarding settlement proceeds apply
to properties in this state containing one to four residential dwellings. Requires a mortgagee
or mortgage servicer to promptly endorse a settlement proceeds check, draft, or other
negotiable instrument made jointly payable to the mortgagee or mortgage servicer and the
borrower-payee. Further provides that a mortgagee or mortgage servicer is not required to
endorse a check, draft, or negotiable instrument for jointly payable proceeds if the borrower-
payee refuses to endorse the instrument.
New law requires settlement proceeds, related to contents insurance coverage and received
by a mortgagee or mortgage servicer, in which the mortgagee or mortgage servicer has a
security interest, to be promptly deposited into a segregated account of a federally insured
financial institution unless the proceeds are returned to the borrower-payee or the instrument
is missing the borrower-payee's endorsement. Further provides that the segregated account
may, at the discretion of the mortgagee or mortgage servicer, be an individual deposit
account or a master account containing subaccounts for each borrower-payee.
New law requires settlement proceeds related to contents insurance coverage and received
by a mortgagee or mortgage servicer to be promptly distributed to the borrower-payee if the
mortgagee or servicer has no interest in the proceeds. Further requires settlement proceeds
related to additional living expenses to be promptly distributed to the borrower-payee.
New law provides that a mortgagee or mortgage servicer is not required to remit the portion
of the settlement proceeds related to additional living expenses and contents insurance
coverage unless it is determined which part of the settlement is related to additional living
expenses and contents insurance.
New law requires settlement proceeds to be delivered to the borrower-payee via traceable
delivery or electronic transfer.
Prior law provided that once the property is replaced or repaired to the satisfaction of the
claimant and the person holding the mortgage, any funds remaining in escrow are required
to be paid to the claimant with any interest accrued while in escrow. New law changes
applicable terminology and redesignates the citation.
Prior law further provided that the person holding the mortgage on the property was required
to fully cooperate with the claimant and his insurer in releasing funds in a timely manner for
the replacement or repair of the damaged property. New law deletes prior law.
New law requires the mortgagee or mortgage servicer, within 10 business days of its receipt
of the settlement proceeds, to give notice to the borrower-payee of the requirements for
release of the proceeds. Further requires the mortgagee or mortgage servicer to release all
or part of the settlement proceeds to the borrower-payee if it has received sufficient evidence
of the borrower-payee's compliance with the requirements.
New law provides that if a mortgagee or mortgage servicer does not release settlement
proceeds as requested, it is required to explain the reason for the refusal and each
requirement for which the borrower-payee must comply to receive the funds.
New law requires property inspections related to residential mortgage loans to be conducted
within the 15th business day after the mortgagee's or mortgage servicer's receipt of both a
request by the borrower-payee for a property inspection and sufficient evidence of the
borrower-payee's compliance with requirements.
New law authorizes property inspections to be conducted in person, through photographic
or video evidence submitted by the borrower-payee, through servicer-directed video calls,
or by other means to document the progress or completion of repairs. Further provides that
photographic or video evidence may not be accepted if its does not allow determination of
the repairs or authenticity of the time taken, or is believed to have been altered.
New law authorizes the commissioner of insurance (commissioner) to impose monetary
penalties, not in excess of $500 per day nor $5,000 per violation, on a mortgagee or mortgage
servicer that fails to comply with the process for distributing proceeds. Provides that
penalties are due and payable upon notice unless the penalties are set aside after an
administrative hearing. Further provides that penalties are final, definitive, and subject to
enforcement by the commissioner.
New law requires interest to accrue on settlement proceeds greater than $25,000 when held
in a segregated account by the mortgagee or mortgage servicer for more than 30 days.
Prior law defined "settlement proceeds" as funds greater than $25,000 paid on insurance
claims for damage to residential immovable property as a result of Hurricanes Katrina or Rita
and held in escrow by the lender or loan servicer. New law deletes prior law.
Prior law provided that compliance with Fannie Mae or Freddie Mac servicing guidelines for
payment of interest on property damage claim funds held in escrow by the lender or loan
servicer constitutes compliance. New law replaces terminology, redesignates the citation,
and otherwise retains prior law.
Prior law provided that if a mortgage holder was presented with a jointly payable insurance
proceeds check or draft, endorsed by the mortgagor and related to residential damage to
immovable property resulting from Hurricanes Katrina or Rita, and the mortgage holder
received a written request from the borrower to release excess funds, the mortgage holder
had 30 days to return the excess funds.
New law deletes prior law and instead provides that if the mortgagee or mortgage servicer
is presented with a jointly payable insurance proceeds check or draft related to residential
damage to immovable property, and the mortgagee or mortgage servicer endorses the
instrument but receives a written request from the borrower-payee to release the excess
funds, the mortgagee or mortgage servicer has 15 business days to return the excess funds.
Further provides that the timeframe of 15 business days does not apply when the proceeds
instrument requires the endorsement of multiple mortgagees or lien holders.
Prior law required the mortgage holder holding funds in escrow to return all funds to the
mortgagor considered to be excess funds. Further authorized the commissioner to promulgate
rules. New law deletes prior law.
Existing law defines "excess funds" and authorizes the commissioner to impose civil
penalties each day the mortgage holder fails to return excess funds. New law retains the
definition of "excess funds" and the commissioner's authority in existing law, but increases
the penalty limit from $150 per day for violations to $500 per day, not to exceed a total
penalty of $5,000 per violation.
New law provides that the provisions of new law and existing law do not impair the
contractual rights of a mortgagee or mortgage servicer related to loan balances and accrued
interest as provided for in existing law. Further provides that new law and existing law do
not apply to a mortgagee or mortgage servicer when the borrower-payee is in default, past
due, or in foreclosure on his mortgage loan.
Effective August 1, 2022.
(Amends R.S. 6:337 and 338)


Statutes affected:
HB1064 Original:
HB1064 Engrossed:
HB1064 Reengrossed:
HB1064 Enrolled:
HB1064 Act :