D:\dist\text\1011

HOUSE BILL 24-1011

BY REPRESENTATIVE(S) Brown and Amabile, Bacon, Bird,

Boesenecker, Clifford, Duran, English, Epps, Froelich, Hamrick,

Hernandez, Herod, Jodeh, Joseph, Kipp, Lieder, Lindsay, Lindstedt, Lynch,

Mabrey, Marshall, Mauro, McCormick, Parenti, Ricks, Rutinel, Sirota,

Snyder, Story, Titone, Velasco, Weissman, Woodrow, Young, McCluskie;

also SENATOR(S) Cutter and Marchman, Buckner, Danielson, Exum,

Gonzales, Hinrichsen, Jaquez Lewis, Michaelson Jenet, Fenberg.

ONCERNING MORTGAGE SERVICERS, AND, IN CONNECTION THEREWITH,

REQUIRING MORTGAGE SERVICERS TO TAKE CERTAIN ACTIONS

REGARDING THE DISBURSEMENT OF INSURANCE PROCEEDS TO

BORROWERS

Be it enacted by the General Assembly of the State of Colorado:

SECTION 1. In Colorado Revised Statutes, add 38-40-106 as

follows:

38-40-106. Mortgage servicers - requirements concerning

disbursement of insurance proceeds - disclosure of mortgage interest

rate - retention of communications - definitions. (1) A

S USED IN THIS

SECTION

, UNLESS THE CONTEXT OTHERWISE REQUIRES:

NOTE: This bill has been prepared for the signatures of the appropriate legislative

officers and the Governor. To determine whether the Governor has signed the bill

or taken other action on it, please consult the legislative status sheet, the legislative

history, or the Session Laws.

________

Capital letters or bold & italic numbers indicate new material added to existing law; dashes

through words or numbers indicate deletions from existing law and such material is not part of

the act.

(a) "BORROWER" HAS THE MEANING SET FORTH IN SECTION

38-38-100.3 (2.5).

(b) "M

ORTGAGE SERVICER" MEANS:

(I) A

MORTGAGE SERVICER, AS DEFINED IN SECTION 5-21-103 (4);

(II) A

MORTGAGE SERVICER, AS DEFINED IN SECTION 38-38-100.3

(23.3);

(III) AN AGENT OF A MORTGAGE SERVICER.

EBUILD PLAN" MEANS A WRITTEN PLAN TO REBUILD A

RESIDENTIAL PROPERTY THAT HAS BEEN DESTROYED

(d) "R

EPAIR PLAN" MEANS A WRITTEN PLAN TO REPAIR A

RESIDENTIAL PROPERTY THAT HAS BEEN DAMAGED

(e) "R

ESIDENTIAL PROPERTY" MEANS A RESIDENTIAL PROPERTY THAT

IS THE SUBJECT OF A MORTGAGE

(2) (a) U

PON THE REQUEST OF A BORROWER, A MORTGAGE SERVICER

SHALL PROMPTLY DISCLOSE TO THE BORROWER THE SPECIFIC CONDITIONS

UNDER WHICH THE MORTGAGE SERVICER WILL DISBURSE INSURANCE

PROCEEDS TO THE BORROWER IN THE EVENT THAT A RESIDENTIAL PROPERTY

THAT IS THE SUBJECT OF A MORTGAGE IS DAMAGED OR DESTROYED AND AN

INSURANCE COMPANY PAYS INSURANCE PROCEEDS TO SATISFY A CLAIM

ASSOCIATED WITH SUCH DAMAGE OR DESTRUCTION

. A MORTGAGE SERVICER

MAY PROVIDE THE INFORMATION ELECTRONICALLY

(b) I

N THE EVENT THAT A RESIDENTIAL PROPERTY IS DAMAGED OR

DESTROYED

, A BORROWER, AFTER CONSULTING WITH THE BORROWER'S

CONTRACTOR

, SHALL CREATE A REPAIR PLAN OR REBUILD PLAN FOR THE

RESIDENTIAL PROPERTY

. THE BORROWER SHALL SUBMIT THE REPAIR PLAN

OR REBUILD PLAN TO THE MORTGAGE SERVICER FOR APPROVAL

. THE

MORTGAGE SERVICER SHALL INDICATE APPROVAL OR DENIAL OF THE PLAN

WITHIN THIRTY DAYS OF RECEIPT

. THE REPAIR PLAN OR REBUILD PLAN MUST

INCLUDE SPECIFIC MILESTONES THAT REQUIRE THE MORTGAGE SERVICER TO

DISBURSE INSURANCE PROCEEDS IN CERTAIN AMOUNTS UPON REACHING THE

PAGE 2-HOUSE BILL 24-1011

SPECIFIED MILESTONES, AS DESCRIBED IN SUBSECTIONS (2)(c)(I)(B) AND

(2)(d)(II) OF THIS SECTION. IF A MORTGAGE SERVICER EMPLOYS INSPECTORS

FOR THE PURPOSE OF DETERMINING WHEN SUCH MILESTONES ARE ATTAINED

THE MORTGAGE SERVICER SHALL NOTIFY THE BORROWER OF THE SPECIFIC

CRITERIA THAT THE INSPECTORS USE TO MAKE SUCH DETERMINATIONS

F A BORROWER IS NOT DELINQUENT IN MAKING PAYMENTS ON

THE MORTGAGE OR THE BORROWER IS LESS THAN THIRTY

-ONE DAYS

DELINQUENT IN MAKING PAYMENTS ON THE MORTGAGE

, A MORTGAGE

SERVICER SHALL DISBURSE THE INSURANCE PROCEEDS TO THE BORROWER AS

FOLLOWS

(A) I

F THE AMOUNT OF THE INSURANCE PROCEEDS IS LESS THAN OR

EQUAL TO FORTY THOUSAND DOLLARS

, THE MORTGAGE SERVICER SHALL

DISBURSE THE ENTIRE AMOUNT TO THE BORROWER IN ONE PAYMENT

; AND

(B) IF THE AMOUNT OF THE INSURANCE PROCEEDS IS MORE THAN

FORTY THOUSAND DOLLARS

, THE MORTGAGE SERVICER SHALL INITIALLY

DISBURSE TO THE BORROWER AN AMOUNT THAT IS FORTY THOUSAND

DOLLARS OR THIRTY

-THREE PERCENT OF THE TOTAL PROCEEDS, WHICHEVER

AMOUNT IS GREATER

. THEREAFTER, THE MORTGAGE SERVICER SHALL

DISBURSE THE REMAINING PROCEEDS BASED ON PERIODIC INSPECTIONS AND

PROGRESS ON THE WORK IN ACCORDANCE WITH THE MILESTONES IN THE

REPAIR PLAN OR REBUILD PLAN DESCRIBED IN SUBSECTION

(2)(b) OF THIS

SECTION AND

, WHERE REQUIRED BY FEDERAL LAW OR REGULATION, AFTER

APPROVAL BY THE FEDERAL HOME LOAN BANKS OR APPLICABLE FEDERAL

AGENCY

(II) F

OR THE PURPOSES OF THIS SUBSECTION (2)(c), IF A BORROWER

HAS MADE ADVANCE PAYMENTS TO A CONTRACTOR OR TO PURCHASE

MATERIALS

, AS EVIDENCED BY PAID RECEIPTS, THE MORTGAGE SERVICER

MAY REIMBURSE THE BORROWER FOR SUCH PAYMENTS

(d) I

F A BORROWER IS MORE THAN THIRTY-ONE DAYS DELINQUENT

IN MAKING PAYMENTS ON THE MORTGAGE

, A MORTGAGE SERVICER SHALL

DISBURSE THE INSURANCE PROCEEDS TO THE BORROWER AS FOLLOWS

(I) I

F THE AMOUNT OF THE INSURANCE PROCEEDS IS LESS THAN OR

EQUAL TO FIVE THOUSAND DOLLARS

, THE MORTGAGE SERVICER SHALL

DISBURSE THE ENTIRE AMOUNT TO THE BORROWER IN ONE PAYMENT

; AND

PAGE 3-HOUSE BILL 24-1011

(II) IF THE AMOUNT OF THE INSURANCE PROCEEDS IS MORE THAN

FIVE THOUSAND DOLLARS

, THE MORTGAGE SERVICER SHALL INITIALLY

DISBURSE TO THE BORROWER AN AMOUNT THAT IS TWENTY

-FIVE PERCENT

OF THE TOTAL PROCEEDS

; EXCEPT THAT THE AMOUNT OF THIS INITIAL

DISBURSEMENT MAY NOT EXCEED TEN THOUSAND DOLLARS OR THE AMOUNT

BY WHICH THE TOTAL PROCEEDS EXCEED THE SUM OF THE UNPAID BALANCE

ON THE MORTGAGE

, ANY INTEREST ACCRUED ON THE MORTGAGE, AND ANY

ADVANCES MADE ON THE MORTGAGE

. THEREAFTER, THE MORTGAGE

SERVICER SHALL DISBURSE THE REMAINING PROCEEDS IN AMOUNTS NOT TO

EXCEED TWENTY

-FIVE PERCENT OF THE REMAINING PROCEEDS, IN

ACCORDANCE WITH THE MILESTONES ESTABLISHED IN THE REPAIR PLAN OR

THE REBUILD PLAN PURSUANT TO SUBSECTION

(2)(b) OF THIS SECTION;

EXCEPT THAT THE MORTGAGE SERVICER SHALL NOT DISBURSE ANY

REMAINING PROCEEDS UNTIL THE MORTGAGE SERVICER OR THE MORTGAGE

SERVICER

'S AGENT HAS INSPECTED THE REPAIRS, IF ANY, THAT HAVE BEEN

MADE PURSUANT TO A REPAIR PLAN ESTABLISHED PURSUANT TO SUBSECTION

(2)(b) OF THIS SECTION.

(e) F

OR THE PURPOSES OF DISBURSEMENT OF INSURANCE PROCEEDS

AS DESCRIBED IN SUBSECTIONS

(2)(c) AND (2)(d) OF THIS SECTION:

(I) A

MORTGAGE SERVICER SHALL MAKE THE FIRST DISBURSEMENT

OF INSURANCE PROCEEDS TO THE BORROWER

(A) W

ITHIN FOURTEEN DAYS AFTER THE MORTGAGE SERVICER

RECEIVES THE INSURANCE PROCEEDS IF THE MORTGAGE IS INSURED BY THE

FEDERAL GOVERNMENT OR SECURITIZED BY THE FEDERAL NATIONAL

MORTGAGE ASSOCIATION OR THE FEDERAL HOME LOAN MORTGAGE

CORPORATION

; AND

(B) AS SOON AS REASONABLY POSSIBLE AND NO LATER THAN THIRTY

DAYS AFTER THE MORTGAGE SERVICER RECEIVES THE INSURANCE PROCEEDS

IF THE MORTGAGE IS NOT INSURED BY THE FEDERAL GOVERNMENT OR

SECURITIZED BY THE FEDERAL NATIONAL MORTGAGE ASSOCIATION OR THE

FEDERAL HOME LOAN MORTGAGE CORPORATION

; AND

(II) A MORTGAGE SERVICER MAY DISBURSE FUNDS DIRECTLY TO A

DESIGNEE OF A BORROWER SO LONG AS

(A) T

HE DESIGNEE IS AGREED TO BY BOTH THE BORROWER AND THE

PAGE 4-HOUSE BILL 24-1011

MORTGAGE SERVICER; AND

(B) THE DESIGNATION IS PERMITTED BY FEDERAL AND STATE LAW

AND ANY ASSOCIATED RULES

(f) N

OTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, A

MORTGAGE SERVICER SHALL PROMPTLY DISBURSE TO A BORROWER ANY

AMOUNT OF INSURANCE PROCEEDS IN EXCESS OF THE REMAINING AMOUNT

THAT THE BORROWER OWES ON THE MORTGAGE UNLESS

(I) T

HE PROPERTY IS AN AFFORDABLE RESIDENTIAL RENTAL

PROPERTY THAT IS SUBJECT TO RENT OR INCOME RESTRICTIONS AS REQUIRED

BY FEDERAL

, STATE, LOCAL, OR POLITICAL SUBDIVISION PROGRAM

REQUIREMENTS

; AND

(II) THE INSURANCE PROCEEDS IN EXCESS OF THE REMAINING

AMOUNT THAT THE BORROWER OWES ON THE MORTGAGE ARE NECESSARY TO

RETURN THE PROPERTY TO THE SAME CONDITION IN WHICH THE PROPERTY

EXISTED PRIOR TO THE DAMAGE OR DESTRUCTION

(g) A

MORTGAGE SERVICER SHALL HOLD IN AN INTEREST-BEARING

ACCOUNT ANY INSURANCE PROCEEDS THAT THE MORTGAGE SERVICER DOES

NOT IMMEDIATELY DISBURSE TO A BORROWER AS REQUIRED BY THIS

SECTION

. SUCH AN ACCOUNT MUST GENERATE INTEREST AT A RATE THAT IS

NOT LESS THAN THE NATIONAL RATE FOR MONEY MARKET ACCOUNTS

, AS

DETERMINED ACCORDING TO

12 CFR 337.7. A MORTGAGE SERVICER SHALL

ENSURE THAT ANY INTEREST THAT IS CREDITED TO THE ACCOUNT IS

CREDITED AND DISBURSED TO THE BORROWER

(3) I

MMEDIATELY UPON COMMENCING THE SERVICING OF A

MORTGAGE

, AND AT ANY TIME THEREAFTER AT THE REQUEST OF THE

BORROWER

, A MORTGAGE SERVICER SHALL:

(a) D

ISCLOSE TO THE BORROWER THE INTEREST RATE ASSOCIATED

WITH THE MORTGAGE

; AND

(b) PROVIDE THE BORROWER, IN WRITING, WITH A PRIMARY POINT OF

CONTACT FOR THE PURPOSE OF COMMUNICATING WITH THE MORTGAGE

SERVICER

PAGE 5-HOUSE BILL 24-1011

(4) A MORTGAGE SERVICER SHALL RETAIN FOR AT LEAST FOUR

YEARS ALL WRITTEN AND ELECTRONIC COMMUNICATIONS BETWEEN THE

MORTGAGE SERVICER AND A BORROWER

(5) N

OTHING IN THIS SECTION:

(a) P

ROHIBITS A MORTGAGE SERVICER FROM RELEASING INSURANCE

PROCEEDS IN AMOUNTS GREATER THAN REQUIRED BY THIS SECTION

;

(b) P

ROHIBITS OR LIMITS A MORTGAGE SERVICER FROM DISTRIBUTING

ADDITIONAL MONEY THAT IS MADE AVAILABLE DURING A DECLARED STATE

OF EMERGENCY OR NATURAL DISASTER

; OR

FEDERAL RULES

, REGULATIONS, AND REQUIREMENTS.

SECTION 2. In Colorado Revised Statutes, 38-40-104, amend (1)

as follows:

38-40-104. Cause of action - attorney fees. (1) If any applicant or

debtor is aggrieved by a violation of section 38-40-102, 38-40-103, or

38-40-103.5, OR 38-40-106 and the violation is not remedied in a

reasonable, timely, and good faith manner by the party obligated to do so,

and after a good faith effort to resolve the dispute is made by the debtor or

borrower, the debtor or borrower may bring an action in a court of

competent jurisdiction for any such violation. If the court finds that actual

damages have occurred, the court shall award to the debtor or borrower, in

addition to actual damages, the amount of one thousand dollars, together

with costs and reasonable attorney fees.

SECTION 3. In Colorado Revised Statutes, add 5-21-107.5 as

follows:

5-21-107.5. Disbursement of insurance proceeds to borrowers

- disclosure of mortgage interest rate - retention of communications. A

MORTGAGE SERVICER SHALL COMPLY WITH THE REQUIREMENTS OF SECTION

38-40-106 REGARDING DISBURSEMENT OF INSURANCE PROCEEDS TO

BORROWERS

, DISCLOSURE OF MORTGAGE INTEREST RATES, AND RETENTION

OF COMMUNICATIONS

PAGE 6-HOUSE BILL 24-1011

SECTION 4. In Colorado Revised Statutes, repeal 10-4-112 as

follows:

10-4-112. Property damage - time of payment. (1) After an

insurer has issued a draft or check to a loss payee and the insured under the

terms of a property damage policy for the repair of property damage to a

one- to four-family dwelling unit or an owner-operated commercial property

when the mortgage or deed of trust secures a debt not in excess of two

hundred thousand dollars, such draft or check, if satisfactory in an amount

to the insured, shall be properly endorsed by the insured in favor of the loss

payee and delivered to the loss payee.

(2) If the draft or check is for the full amount of the loss and is in an

amount of one thousand dollars or less, the loss payee shall return the draft

or check, properly endorsed, to the insured within ten days after the date of

its receipt by the loss payee, unless the evidence of the debt or the

instrument given as security for the debt is in default.

(3) If the draft or check is in an amount in excess of one thousand

dollars, or is a partial payment on a loss in an amount in excess of one

thousand dollars, the loss payee shall either:

(a) Send the draft or check, properly endorsed, to the insured within

ten days after the date of its receipt by the loss payee;

(b) Process the draft or check for collection or deposit, except as

provided in paragraph (c) of this subsection (3). Any loss payee holding

funds under this paragraph (b), upon its approval of contracts or plans for

the completion of repairs, shall make reasonable advances or progress

payments as appropriate to be applied to the completion of repairs and shall

be entitled to require appropriate lien waivers and to inspect the repairs

during the progress of the repairs. The loss payee shall be entitled to retain

up to fifteen percent of the amount of the draft or check as retainage until

completion and inspection, satisfactory to the insured, of the work.

payee holding funds under this paragraph (c) shall hold such funds for the

payment of the cost of repairs unless any one of the following

circumstances is present:

PAGE 7-HOUSE BILL 24-1011

(I) The evidence of the debt or the instrument given as security for

the debt is in default. If the default is a result of failure to make payments

in a timely manner as required by the evidence of debt or the instrument

securing the debt, the loss payee may apply an amount of such proceeds

sufficient to cure the default, including taxes, penalties, and late charges,

and hold the balance for the cost of repairs, pursuant to paragraph (b) of this

subsection (3).

(II) The restoration of the property would violate local, state, or

federal laws or regulations;

(III) The property cannot reasonably be restored to its condition

prior to the loss at a cost of not to exceed the amount of the draft, reduced

by an amount applied to cure a default pursuant to subparagraph (I) of this

paragraph (c).

(d) Advise the insurer and insured that it is not satisfied with the

amount of the draft or check and pursue a claim for the loss under the terms

of the policy. Upon such notification the insured shall not be precluded

from pursuing, either singly or jointly with the loss payee, a claim for the

loss under the terms of the policy.

(4) Neither approval of contracts, plans for the completion of

repairs, nor inspection of the work shall make the loss payee liable to any

person for any improper, negligent, or unsatisfactory repairs.

SECTION 5. Safety clause. The general assembly finds,

determines, and declares that this act is necessary for the immediate

preservation of the public peace, health, or safety or for appropriations for

PAGE 8-HOUSE BILL 24-1011

the support and maintenance of the departments of the state and state

institutions.

____________________________ ____________________________

Julie McCluskie Steve Fenberg

SPEAKER OF THE HOUSE PRESIDENT OF

OF REPRESENTATIVES THE SENATE

____________________________ ____________________________

Robin Jones Cindi L. Markwell

CHIEF CLERK OF THE HOUSE SECRETARY OF

OF REPRESENTATIVES THE SENATE

APPROVED________________________________________

(Date and Time)

_________________________________________

Jared S. Polis

GOVERNOR OF THE STATE OF COLORADO

PAGE 9-HOUSE BILL 24-1011