Colo. Rev. Stat. § 38-40-106

Current through Acts effective through 7/1/2024 of the 2024 Legislative Session
Section 38-40-106 - Mortgage servicers - requirements concerning disbursement of insurance proceeds - disclosure of mortgage interest rate - retention of communications - definitions
(1) As used in this section, unless the context otherwise requires:
(a) "Borrower" has the meaning set forth in section 38-38-100.3 (2.5).
(b) "Mortgage 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); or
(III) An agent of a mortgage servicer.
(c) "Rebuild plan" means a written plan to rebuild a residential property that has been destroyed.
(d) "Repair plan" means a written plan to repair a residential property that has been damaged.
(e) "Residential property" means a residential property that is the subject of a mortgage.
(2)
(a) Upon 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) In 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 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.
(c)
(I) If 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) If 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) For 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) If 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) If 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
(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) For 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) Within 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) The designee is agreed to by both the borrower and the mortgage servicer; and
(B) The designation is permitted by federal and state law and any associated rules.
(f) Notwithstanding 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) The 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) Immediately upon commencing the servicing of a mortgage, and at any time thereafter at the request of the borrower, a mortgage servicer shall:
(a) Disclose 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.
(4) A mortgage servicer shall retain for at least four years all written and electronic communications between the mortgage servicer and a borrower.
(5) Nothing in this section:
(a) Prohibits a mortgage servicer from releasing insurance proceeds in amounts greater than required by this section;
(b) Prohibits or limits a mortgage servicer from distributing additional money that is made available during a declared state of emergency or natural disaster; or
(c) Prohibits a mortgage servicer from complying with federal rules, regulations, and requirements.

C.R.S. § 38-40-106

Added by 2024 Ch. 189,§ 1, eff. 5/17/2024.