In certain states, mortgage lenders may be required to pay borrowers interest on their escrow accounts, where payments for taxes and insurance are held until they’re paid once a year. The complaint for this class action alleges that Citizens Bank, NA violates laws in Rhode Island and other states by not paying its mortgage borrowers this interest.
When mortgage borrowers make their monthly mortgage payment, they are often required to include an amount for taxes and insurance on their homes. The lender or servicer does not send the tax payment or the insurance payment to the appropriate party each month, however; it normally pays these costs only once a year.
During the rest of the year, the lender or servicer holds each monthly payment in an escrow account. State laws may require that a certain amount of interest be paid to the borrower on these accounts each year.
The requirements are different, depending on the state. Rhode Island General Laws, for example require that when the mortgage is secured by an owner-occupied residential property that has from one to four units, and that is located in Rhode Island, the mortgage lender must pay the borrower interest on this kind of escrow account.
The Rhode Island law does not specify an exact percentage. It says the interest should be “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…” This interest must be paid on December 31 each year.
In New York, by contrast, the law covers properties that have from one to six units, and the interest paid must be at least two percent per year.
Connecticut, Massachusetts, New Hampshire, and Vermont also have laws on this subject.
The complaint proposes a class and an alternative to it:
- The Multi-State Class is all customers of Citizens Bank (or its subsidiaries) in Connecticut, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont who (1) took a loan with Citizens Bank secured by a mortgage that is subject to the customer’s state escrow laws, (2) paid money into an escrow account held by Citizens Bank to cover taxes, insurance, or other matters concerning the property, and (3) did not receive from Citizens Bank the amount of interest owed according to the law of the state where the property is located.
- The Rhode Island Class is all customers of Citizens Bank (or its subsidiaries) who (1) took a loan with Citizens Bank secured by an owner-occupied residential property with nor more than four units, located in Rhode Island, (2) paid money into an escrow account held by Citizens Bank to cover taxes, insurance, or other matters concerning the property, and (3) received from Citizens Bank less than the amount of interest owed to them under Rhode Island General Laws § 19-9-2(a).
Topic: Loans
Most Recent Case Event
Citizens Bank Interest on Mortgage Escrow Accounts Multi-State Complaint
July 15, 2021
In certain states, mortgage lenders may be required to pay borrowers interest on their escrow accounts, where payments for taxes and insurance are held until they’re paid once a year. The complaint for this class action alleges that Citizens Bank, NA violates laws in Rhode Island and other states by not paying its mortgage borrowers this interest.
Citizens Bank Interest on Mortgage Escrow Accounts Multi-State ComplaintCase Event History
Citizens Bank Interest on Mortgage Escrow Accounts Multi-State Complaint
July 15, 2021
In certain states, mortgage lenders may be required to pay borrowers interest on their escrow accounts, where payments for taxes and insurance are held until they’re paid once a year. The complaint for this class action alleges that Citizens Bank, NA violates laws in Rhode Island and other states by not paying its mortgage borrowers this interest.
Citizens Bank Interest on Mortgage Escrow Accounts Multi-State Complaint