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EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*hb1509*
HOUSE BILL 1509
I1 6lr2906
By: Delegate Roberts
Introduced and read first time: February 13, 2026
Assigned to: Economic Matters
A BILL ENTITLED
AN ACT concerning 1
Financial Institutions – Mortgage Servicers – Insurance Proceeds 2
FOR the purpose of requiring a mortgage servicer that receives certain insurance proceeds 3
to deposit the proceeds into a certain interest bearing account; requiring a borrower 4
to elect the use of the interest earnings on the insurance proceeds; requiring certain 5
interest earnings to begin accruing by a certain date; authorizing a mortgage servicer 6
to charge a fee for disbursement of interest earnings subject to certain limit ations; 7
requiring certain methods and procedures for disbursement of insurance proceeds 8
and interest earnings; and generally relating to mortgage servicers. 9
BY repealing and reenacting, without amendments, 10
Article – Financial Institutions 11
Section 11–501(a), (b), (c), (o), and (r) and 11–517(a)(4) 12
Annotated Code of Maryland 13
(2020 Replacement Volume and 2025 Supplement) 14
BY adding to 15
Article – Financial Institutions 16
Section 11–522.1 17
Annotated Code of Maryland 18
(2020 Replacement Volume and 2025 Supplement) 19
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 20
That the Laws of Maryland read as follows: 21
Article – Financial Institutions 22
11–501. 23
(a) In this subtitle the following words have the meanings indicated. 24
2 HOUSE BILL 1509
(b) “Borrower” means a person who makes a loan application for or receives a loan 1
or other extension of credit that is or is intended to be secured in whole or in part by any 2
interest in a dwelling or residential real estate located in Maryland. 3
(c) (1) “Dwelling” means a residential structure or mobile home that contains 4
one to four family housing units or individual units of condominiums or cooperatives. 5
(2) “Dwelling” does not include a residential structure or mobile home 6
unless the residential structure or mobile hom e, or at least one unit contained in the 7
residential structure or mobile home, is owner–occupied. 8
(o) “Mortgage servicer” means a person who: 9
(1) Engages in whole or in part in the business of servicing mortgage loans 10
for others; or 11
(2) Collects or otherwise receives payments on mortgage loans directly 12
from borrowers for distribution to any other person. 13
(r) “Residential real estate” means any owner –occupied real property located in 14
Maryland on which a dwelling is constructed or intended to be constructed. 15
11–517. 16
(a) Subject to the hearing provisions of § 11 –518 of this subtitle, the 17
Commissioner may suspend or revoke the license of any licensee if the licensee or any 18
owner, director, officer, member, partner, stockholder, employee, or agent of the licensee: 19
(4) Violates any provision of this subtitle or any rule or regulation adopted 20
under it or any other law regulating mortgage loan lending in the State; or 21
11–522.1. 22
(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 23
INDICATED. 24
(2) “INSURANCE PROCEEDS ” MEANS INSURANCE PAYM ENTS OR 25
INSURANCE CLAIM PROC EEDS ISSUED DUE TO D AMAGE TO A DWELLING OR 26
RESIDENTIAL REAL ESTATE. 27
(3) “LOSS DRAFT ACCOUNT ” MEANS AN ACCOUNT IN WHICH A 28
MORTGAGE SERVICER HO LDS INSURANCE PROCEE DS PENDING A REPAIR OR 29
REBUILDING OF A DWELLING OR RESIDE NTIAL REAL ESTATE THAT HAS BEEN 30
DAMAGED. 31
HOUSE BILL 1509 3
(B) THIS SECTION APPLIES TO A MORTGAGE SERVIC ER THAT RECEIVES 1
INSURANCE PROCEEDS. 2
(C) (1) THE MORTGAGE SERVICER SHALL DEPOSIT THE INSURANCE 3
PROCEEDS INTO A LOSS DRAFT ACCOUNT IN A FEDERALLY INSUR ED BANKING 4
INSTITUTION WITH A SIMPLE INTEREST RATE OF AT LEAST 2% PER ANNUM. 5
(2) THE BORROWER SHALL EL ECT TO HAVE THE INTE REST 6
EARNINGS: 7
(I) CREDITED TO THE LOSS DRAFT ACCOUNT; OR 8
(II) PAID DIRECTLY TO THE BORROWER. 9
(3) EXCEPT AS PROVIDED UN DER PARAGRAPH (4) OF THIS 10
SUBSECTION, INTEREST EARNINGS ON INSURANCE PROCEEDS I N A LOSS DRAFT 11
ACCOUNT SHALL ACCRUE ON DEPOSIT OF THE INSURANCE PROCEEDS. 12
(4) IF INSURANCE PROCEEDS HAVE BEEN DEPOSITED INTO A LOSS 13
DRAFT ACCOUNT ON OR BEFORE JULY 1, 2026, INTEREST EARNINGS SHALL ACCRUE 14
BEGINNING JULY 1, 2026. 15
(D) (1) SUBJECT TO PARAGRAPH (2) OF THIS SUBSECTION, A MORTGAGE 16
SERVICER MAY CHARGE THE BORROW ER A FEE FOR THE DISBURSEMENT OF THE 17
INTEREST EARNINGS PAID DIRECTLY TO THE BORROWER BY WIRE TRANSFER. 18
(2) A MORTGAGE SERVICER MAY NOT CHARGE THE BORROWER A FEE: 19
(I) THAT IS UNREASONABLE; 20
(II) THAT WOULD HAVE THE E FFECT OF LOWERING TH E 21
INTEREST EARNINGS TO AN AMOUNT THAT WOULD EQ UATE TO AN INTEREST RATE 22
THAT IS LESS THAN 2%; 23
(III) FOR THE DISBURSEMENT OF THE INTEREST EARN INGS BY 24
DIRECT DEPOSIT; OR 25
(IV) THAT EXCEEDS THE ACTU AL COSTS INCURRED BY THE 26
MORTGAGE SERVICER FOR THE DISBURSEMENT. 27
(E) (1) DISBURSEMENT METHODS OF THE INSURANCE PROCEEDS OR THE 28
INTEREST EARNINGS SHALL INCLUDE AT LEAST TWO OF THE FOLLOWING: 29
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(I) WIRE TRANSFER; 1
(II) DIRECT DEPOSIT; 2
(III) CASHIER’S CHECK DELIVERED BY MAIL; OR 3
(IV) CERTIFIED CHECK DELIVERED BY MAIL. 4
(2) THE DISBURSEMENT OF T HE INTEREST EARNINGS DIRECTLY TO 5
THE BORROWER SHALL OCCUR NO T LATER THAN 10 BUSINESS DAYS AFTER THE 6
MORTGAGE SERVICER RECEIVES NOTICE THAT THE BORROWER: 7
(I) ELECTS TO RECEIVE THE INTEREST EARNINGS DI RECTLY; 8
AND 9
(II) PROVIDES ANY INFORMATION NECE SSARY FOR THE 10
MORTGAGE SERVICER TO COMPLETE THE DISBURSEMENT. 11
(3) THE MORTGAGE SERVICER MAY NOT PLACE AN UNDUE BURDE N 12
ON A BORROWER TO PRO VIDE THE NECESSARY I NFORMATION UNDER PARAGRAPH 13
(2) OF THIS SUBSECTION. 14
(F) (1) WITHIN 5 BUSINESS DAYS AFTER RECEIVING INSURANCE 15
PROCEEDS, A MORTGAGE SERVICER SHALL DEPOSIT THE INSURANCE PROCEEDS IN 16
A FEDERALLY INSURED BANKING INSTITUTION. 17
(2) WITHIN 10 BUSINESS DAYS AFTER RECEIVING INSURANCE 18
PROCEEDS, A MORTGAGE SERVICER SHALL NOTIFY ELECTRONICALLY OR BY MAIL 19
THE BORROWER OF: 20
(I) THE AMOUNT OF INSURANCE PROCEEDS HELD IN THE LOSS 21
DRAFT ACCOUNT; 22
(II) THE INTEREST RATE ON THE ACCOUNT; 23
(III) THE BORROWER ’S RIGHT TO RECEIVE T HE INTEREST 24
EARNINGS; 25
(IV) THE DISBURSEMENT OPTIONS; 26
(V) ANY APPLICABLE FEES; AND 27
(VI) THE TIME FRAME FOR RECEIVING THE DISBURSEMENT. 28
HOUSE BILL 1509 5
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 1
1, 2026. 2