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HomeFinancial CodeDiv. 1.1Ch. 12Art. 1§ 1404 Broker Interest On Impound Accounts

§ 1404 Broker Interest On Impound Accounts

Financial Code·California
AI Summary·Official Text·Key Terms·Related Statutes·References
AI SummaryVerified

§ 1404 Broker Interest On Impound Accounts

This law says that when a real estate broker puts loan money into a bank account that doesn't earn interest, the broker gets any benefit from that money unless they sign a paper saying the lender gets it, and borrowers must earn at least 2% simple interest each year on certain escrow payments.

Key Takeaways

  • •Broker keeps benefits from non‑interest accounts unless a written agreement says otherwise.
  • •Borrowers must receive at least 2% simple interest per year on impound (escrow) payments.
  • •The rule applies to loans secured by a lien on real property under specific sections of the Business and Professions Code.

Example

A broker collects a home buyer's down payment and escrow funds for a mortgage, puts the money in a non‑interest‑bearing bank account, and keeps any fee or benefit from that placement because there is no written agreement giving it to the lender.

Because the broker didn't sign a written agreement with the lender, the law lets the broker keep the benefit. At the same time, the buyer must be paid at least 2% interest on the escrow money held for taxes and insurance.

AI-generated — May contain errors. Not legal advice. Always verify source.

Official Source
View on CA.gov

§ 1404 Broker Interest On Impound Accounts

Notwithstanding Section 10145 of the Business and Professions Code or any other provision of law, but subject to the limitations of Section 854, benefits accruing from the placement in a noninterest bearing account of a financial institution of funds received by a real estate broker who collects payments or provides services in connection with a loan secured by a lien on real property under subdivision (d) of Section 10131 or Section 10131.1 of the Business and Professions Code shall inure to the broker, unless otherwise agreed in writing by the broker and the lender or note owner on the loan. A borrower shall receive at least 2 percent simple interest per annum on impound account payments covered by Section 2954.8 of the Civil Code. For purposes of this section “financial institution” means any institution the business of which is engaging in financial activities as described in Section 1843(k) of Title 12 of the United States Code. (Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)

Last verified: January 11, 2026

Key Terms

noninterest bearing accountreal estate broker2 percent simple interestimpound account payments

Related Statutes

  • § 1405 Broker Interest On Commercial Loans
  • § 1400 Minor Bank Account Ownership
  • § 1401 Married Person Bank Accounts
  • § 1402 Multiple-Party Bank Accounts
  • § 1403 Bank Interest On Deposits

References

  • Official text at leginfo.legislature.ca.gov
  • California Legislature. Financial Code. Section 1404.
View Official Source