Mortgages; authorize lenders to mortgagors to make additional mortgage payments

HB55 ENROLLED
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HB55
EJWTT2C-3
By Representative Hollis
RFD: Financial Services
First Read: 13-Jan-26
PFD: 05-Nov-25
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PFD: 05-Nov-25
Enrolled, An Act,
Relating to financial institutions; to authorize
mortgage servicers to allow mortgagors to make biweekly or
semi-monthly mortgage payments and additional payments to the
mortgage principal without penalty.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. (a) For purposes of this section, the
following terms have the following meanings:
(1) BIWEEKLY. Occurring every two weeks.
(2) CONTRACTUAL MORTGAGE PAYMENT. The total amount of
the monthly mortgage loan payment, comprised of the principal
payment, interest payment, and any additional amounts being
collected and held in an escrow account.
(3) ESCROW AMOUNT. The amount of any additional funds
that are collected by a mortgage servicer pursuant to a
mortgage loan and set aside in an escrow account to cover
future expenses, including property taxes and homeowners
insurance.
(4) ESCROW ANALYSIS. The accounting that a financial
institution conducts pursuant to 12 C.F.R. § 1024.17 to
determine the appropriate target balances, compute the
borrower's monthly payments or deposits needed for the next
year, and determine whether escrow shortages exist.
(5) MORTGAGE SERVICER. A servicer as defined in 12
U.S.C. § 2605(i)(2).
(6) MORTGAGOR. A person that borrows money by granting
a mortgage or a successor in ownership of the real property
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a mortgage or a successor in ownership of the real property
described in the mortgage.
(7) PRINCIPAL. The outstanding balance of the original
mortgage loan granted by the mortgage servicer, exclusive of
interest.
(8) SEMI-MONTHLY. Occurring twice each month.
(b) A mortgage servicer may allow a mortgagor, without
the imposition of any penalty, to:
(1) Make biweekly mortgage payments, in which any
amount paid in excess of the total annual contractual mortgage
payments due shall be applied to the mortgage loan principal;
or
(2) Make semi-monthly mortgage payments in the amount
of half of the total monthly contractual mortgage payment due.
(c) If allowed by the mortgage servicer, the mortgagor
may elect to submit a payment to the mortgage servicer to
reduce or eliminate any escrow shortage. A mortgagor that
elects to make additional mortgage payments pursuant to this
subsection shall notify the mortgage servicer of his or her
intent to make the payments in a manner prescribed by the
mortgage servicer. The payments shall be treated separately
and independent of payments applied to the mortgage loan
principal pursuant to subsection (b).
(d) A mortgage servicer shall not be precluded from
requiring mortgagors to opt-in to any payment structure
authorized by this section.
(e)(1) This section shall apply only to consumer
mortgages that are secured by real property located in this
state and that are originated after the effective date of this
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state and that are originated after the effective date of this
act.
(2) This section shall not apply to any open-end
mortgage or home equity products.
(3) This section shall not apply to any mortgage
servicer that allows mortgagors to make biweekly or
semi-monthly mortgage payments without penalty or that offer a
closed-end mortgage product that allows a mortgagor to make
biweekly or semi-monthly mortgage payments without penalty.
Section 2. This act shall become effective on October
1, 2026.
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1, 2026.
________________________________________________
Speaker of the House of Representatives
________________________________________________
President and Presiding Officer of the Senate
House of Representatives
I hereby certify that the within Act originated in and
was passed by the House 03-Mar-26.
John Treadwell
Clerk
Senate 08-Apr-26 Passed
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