Representative Jay Ramras (R-Fairbanks) pre-filed legislation late Monday that would seek to give back interest on a residential homeowners’ mortgage reserve account, a move that state legislators say could save Alaskans millions of dollars a year in bank- or lender-held mortgage reserves. ”Banks and other institutions hold a portion of a mortgage payment every year in reserve to pay for homeowners’ property taxes, insurance, or other obligations for a loan, but more often than not, banks fail to pay any interest to their borrowers and consequently they hold hundreds of millions of dollars interest-free and lend that money back to homeowners,” Ramras said. ”So if you go into a bank for a loan on a car or snow machine you’re effectively borrowing back your own money, that they pay you no interest on, and you’re borrowing it back at market rates.”
The calculated interest rate is set at two percent a year on the average daily balance of money in the reserve account over the calendar year. HB 33 also protects homeowners by forbidding banks or lending institutions from levying a fee or service charge for administering the reserve account. The calculated interest would be paid on December 31 of each year. HB 33 would not cover federally chartered banks, credit unions or loan originators, since the state cannot regulate federally chartered institutions. Instead, Rep. Ramras’ bill covers state-chartered or state-regulated lenders and institutions. The bill would amend state statutes by requiring an institution covered in the bill to pay the borrower interest each year on the money held in the reserve account. The bill classifies a covered institution as a financial institution or mortgage originator as one under state jurisdiction, and will also apply to loans whose servicing is sold to a loan-servicing agent by the Alaska Housing Finance Corporation (AHFC).