HI SB2951

Mortgage servicers must disclose to borrowers the specific conditions for disbursing insurance proceeds when residential property is damaged or destroyed upon request.

Borrowers must create a repair or rebuild plan with a licensed contractor that includes specific milestones for insurance proceed disbursements, which servicers must approve or deny within 30 days.

For borrowers current on payments or less than 31 days delinquent, servicers must disburse the full amount if proceeds are $40,000 or less; for larger amounts, an initial disbursement of $40,000 or 33% (whichever is greater) is required.

For borrowers 31 or more days delinquent, the full amount is disbursed if proceeds are $5,000 or less; larger amounts are disbursed in increments of 25% tied to repair milestones after inspections.

Undisbursed insurance proceeds must be held in interest-bearing accounts at 2% annual interest or the servicer's money market rate, whichever is greater, with interest credited to the borrower.