(a)  Every mortgagee holding funds of a mortgagor in escrow for the payment of taxes and insurance premiums with respect to mortgaged property located in this state shall pay or credit interest on those funds at a rate equal to the rate paid to the mortgagee on its regular savings account, if offered, and otherwise at a rate not less than the prevailing market rate of interest for regular savings accounts offered by local financial institutions as determined by the director, said determination to be made within thirty (30) days of the effective date of this provision and thereafter annually on the first business day of the year. Said credit of interest shall accrue on the daily balance and be made annually on December 31. If the mortgage debt is paid prior to December 31 in any year, the interest to the date of payment shall be paid to the mortgagor. The provision of this section shall apply only with respect to mortgages on owner-occupied residential property consisting of not more than four (4) living units. The provisions of this section shall not be waived. No mortgagee holding the mortgagor’s funds in escrow for the payment of taxes shall also charge an annual “tax service fee” or other annual fee for ascertaining whether or not the real estate taxes have in fact been paid. Any mortgagee violating the provisions of this section shall be fined not more than one hundred dollars ($100) for each offense.

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Terms Used In Rhode Island General Laws 19-9-2

  • Escrow: Money given to a third party to be held for payment until certain conditions are met.
  • Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
  • Mortgagee: The person to whom property is mortgaged and who has loaned the money.
  • Mortgagor: The person who pledges property to a creditor as collateral for a loan and who receives the money.
  • real estate: may be construed to include lands, tenements, and hereditaments and rights thereto and interests therein. See Rhode Island General Laws 43-3-10

(b)  Mortgages insured or guaranteed by the Farmer’s Home Loan Administration, Federal Housing Administration, or the Veterans’ Administration, or a private mortgage insurer licensed to do business in the state of Rhode Island or made pursuant to the provisions of chapter 55 of Title 42 shall be exempt from the requirements of this section.

(c)  The director, or the director’s designee, shall adopt any regulations that are necessary to carry out the provisions of this section.

History of Section.
P.L. 1995, ch. 82, § 47; P.L. 2008, ch. 238, § 2; P.L. 2008, ch. 309, § 2.