SECTION   1. Chapter 183 of the General Laws as appearing in the 2022 Official Edition is hereby amended by adding at the end after the following three sections:-

Section 70. Timeliness of Loss Draft Payments

For the purpose of this section 70  and the following sections 71 and section 72, “loss draft” shall mean the insurance payout issued to a homeowner after property damage, such as from a fire, flood, or storm, which may be held and disbursed by the mortgage lender to the homeowner or contractors in stages as repairs are completed and “mortgage” shall refer mortgage to contractual agreement between a lender (mortgagee) and a homeowner borrower in which the homeowner pledges real property as security for a loan provided by the lender

(a) Upon a homeowner's notification to the mortgage lender ( or “lender”) initiating a loss draft, the lender shall not transfer the mortgage to another lender until all loss draft funds are disbursed to the homeowner.

(b) Upon a homeowner's notification to the mortgage lender initiating a loss draft, the homeowner shall have the option to choose their preferred method of receiving funds via direct deposit or paper check or a mutually agreed upon method. Upon receipt of loss draft funds, the  lender shall provide the homeowner with notice of the expected timeline for disbursement of funds.

(c) If the funds are retained by the lender for more than 30 days from the date the loss draft funds are received by the lender, the homeowner shall be entitled to interest on those funds. The interest shall be calculated at a fixed current annual percentage rate (APR) as of the 30th day. At the conclusion of all loss draft payments to the homeowner for the particular instance, the lender shall provide a summary report to the homeowners on the accrued interest. If not disbursed to the homeowner, the accrued interest shall be applied to the homeowner's loan at the conclusion of the current tax year.

Section 71: Disclosure of Loss Draft Processes

(a) All new mortgage documents shall include a dedicated section disclosing the lending institution's individual process for loss draft claims, as well as the provisions of this law.

(b) In the event that the homeowner's mortgage is sold to another lender for property located within the Commonwealth of Massachusetts, the homeowner must receive written notification of the pending sale. Following the completion of the sale, the new mortgage company shall also provide written disclosure of its loss draft processes and policies.

Section 72: Establishment of Zero-Interest Loan Fund and Penalties for Non-Compliance

(a) The Commonwealth of Massachusetts shall establish for homeowners whose claims are pending due to delays in loss draft payments, a zero-interest loan fund to provide zero-interest loans of up to fifteen thousand dollars ($15,000) per resident for necessary home repairs.

(b) In the event of non-compliance with any provisions of Sections 70, 71, 72, the mortgage lender shall be subject to penalties not to exceed five percent (5%) of the total value of the loan for each violation. Each instance of non-compliance shall be treated as a separate violation.

(c) The penalties collected under this section shall be deposited into the Commonwealth's zero-interest loan fund established in subsection (a) to support additional funding for homeowners requiring assistance with repairs.

SECTION 2. This act shall go into effect immediately upon its passage.