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Bill Summary · SB 1366

Legislative bill overview

SB 1366 modifies Hawaii law governing interest accrual on insurance proceeds held by lenders when mortgaged properties are damaged or destroyed. The bill addresses how and when interest earned on these proceeds should be credited to borrowers, potentially affecting the financial treatment of insurance claim settlements in mortgage situations.

Why is this important

When property damage occurs, insurance proceeds are typically held by the lender (mortgagee) as a condition of the mortgage agreement. The interest earned on these held funds can represent meaningful money—especially for significant claims or extended settlement periods. This bill clarifies borrower rights to that interest, which has direct financial consequences for homeowners and property owners recovering from losses.

Potential points of contention

  • Lender profitability impact: Financial institutions may oppose provisions requiring them to remit interest earnings to borrowers rather than retaining those funds as institutional revenue
  • Administrative burden: Lenders may argue that calculating and distributing interest on individual escrow accounts creates compliance complexity and costs
  • Scope ambiguity: Unclear whether the bill applies retroactively to existing mortgages and pending claims, potentially creating disputes over interpretation

Compiled from official sources — confirm details with the bill’s official record.

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