Compliance Alliance Q&A 4/23/2019

Question:

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?

 

Answer:

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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