Compliance Alliance Q&A 4/23/2019
We escrow for taxes and insurance. This is not an HPML loan nor is flood insurance required in this situation. The taxes, with respect to this loan, are subject to a continual homestead credit that exceeds the tax charge. So, year after year, the amount via escrow that is owed is $0.00. The bank would like to collect a small amount as a cushion in case the taxes increase over the established credit. We don’t necessarily anticipate the taxes to increase, though. Can we do this?
12 CFR 1024.17(c)(ii): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1024/17/#c-1-ii - (1) A lender or servicer (hereafter servicer) shall not require a borrower to deposit into any escrow account, created in connection with a federally related mortgage loan, more than the following amounts:
(ii) Charges during the life of the escrow account. Throughout the life of an escrow account, the servicer may charge the borrower a monthly sum equal to one-twelfth (1/12) of the total annual escrow payments which the servicer reasonably anticipates paying from the account. In addition, the servicer may add an amount to maintain a cushion no greater than one-sixth (1/6) of the estimated total annual payments from the account.
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