N.Y. Comp. Codes R. & Regs. Tit. 3 § 10.2 - Payment of interest upon sale of a mortgage; qualification for exemptions

(a) Definitions. The term maintains, for purposes of section 14-b of the Banking Law and section 5-601 of the General Obligations Law, shall mean maintains itself or through an agent. The term mortgage investing institution, for purposes of section 14-b of the Banking Law and section 5-601 of the General Obligations Law, shall mean and include any bank, trust company, national bank, savings bank, savings and loan association, Federal savings and loan association, private banker, credit union, investment company, insurance company, pension fund, mortgage company or other entity which makes, extends or holds a mortgage on any one- to six-family residence occupied by the owner and located in this State, or which makes, extends or holds a mortgage on any property owned by a cooperative apartment corporation as defined in subdivision 12 of section 360 of the Tax Law (as such subdivision was in effect on December 30, 1960), and located in this State, including a governmental or quasi- governmental agency and any institution which has sold or assigned such mortgage if it otherwise continues to service and maintain the escrow account maintained with respect to such mortgage.

(b) In the instance of a mortgage on any property owned by a cooperative apartment corporation, no interest shall be required to be paid on escrow accounts where there is a contract between the mortgagor and the mortgage investing institution, entered into before March 30, 1979, which contains an express disclaimer of an obligation on the part of the mortgage investing institution to pay interest on such accounts.

(c) If a mortgage investing institution sells either a mortgage on a one- to six-family residence occupied by the owner and located in this State, or a mortgage on any property owned by a cooperative apartment corporation as defined in subdivision 12 of section 360 of the Tax Law (as such subdivision was in effect on December 30, 1960), and located in this State to another mortgage investing institution (which may include a governmental or quasi- governmental agency as well as any subsequent purchaser therefrom), the following principles shall apply to the payment of interest on escrow accounts: The mortgage investing institution which owns the mortgage shall be obligated to pay interest on such account, unless such institution is exempt from the requirement to pay interest on such account under proviso (i), (ii) or (iii) of section 14-b(4) of the Banking Law or the provisions of subdivision (b) of this section. In cases where the mortgage investing institution owning the mortgage is exempt from payment of interest on the escrow account by reason of section 14-b(4)(iii), then interest shall be paid by that mortgage investing institution which does in fact have possession of such escrow account, unless such latter institution is expressly prohibited by the applicable servicing contract from earning or receiving a return from the investment of funds of such escrow account. Notwithstanding the foregoing, with respect to any mortgage or class of mortgages, the mortgage investing institution owning a mortgage and the mortgage investing institution having possession of the escrow account may by mutual agreement establish which institution shall pay interest on such account.

(d) The exemption under section 14-b(4)(iii) of the Banking Law shall apply only if:

(1) the date of the servicing contract as well as the mortgage in question predate April 1, 1974; and

(2) the servicing contract expressly precludes the mortgage investing institution owning such mortgage from earning or receiving a return from the investment of funds of such escrow accounts, or if the contract, though silent on the question, effectively does not permit such institution from earning or receiving such return.

(e) No party acquiring a mortgage from or through a party which was not liable to pay interest on escrow accounts may take advantage of a statutory exception available only to such predecessor in interest.

Notes

N.Y. Comp. Codes R. & Regs. Tit. 3 § 10.2