Our bank does not escrow for its customers. However, we give out the Illinois Mortgage Escrow Account Act Disclosure 765 ILCS §910, with mortgage secured loans. I have read the Act and the disclosure and do not see where this is necessary. In fact, in reading the disclosure, it appears we are disclosing that we will maintain an escrow account for them, when in fact we do not. Could someone please either explain this to me or point me to the correct part of the law on this issue. Thanks!

I don't believe that this is necessary unless you either require or will escrow. If you don't offer escrows at all, then no disclosure is needed.

That is what I am thinking, but since "it has always been done this way" I can't win my argument. Even the fact that the disclosure says "Your loan transaction will require an escrow account for the payment of certain property related expenses." and "The funds for the escrow account are accumulated as part of your regular payment" with neither statement being true! I think management is hung up on the statement "Failure of any mortgage lender operating within the State to comply with the provisions of this Act shall entitle the borrower to actual damages in a court action". Does your bank escrow? If not, do they give this disclosure?

Thanks again for your thoughts/comments.

We do escrow so we give the disclosure. You might want to check with the state regulators to get their interpretation. I'd be interested in their response.

I'm new at compliance so I don't have any contacts at the State. I guess I will just have to wing it.

SkiDoo,
In addition to coming to BOL, I also belong to the Illinois Bankers Association. They recently created a compliance forum. Your bank may have to be a member of the IBA to sign up, I don't remember. If you aren't a member, I can post your question out there if you'd like. Let me know.

We are not members (although I have been trying to encourage management to join!). Would you mind posting the question? I think it may be helpful to more people than just me!

I just got off the phone with Doug Slayton of the OBRE who confirmed, if you do not offer escrow services, despite the language in Section 4, you are not obligated to provide the disclosure. Yippee!!

Thanks for all your thoughts and comments!!

Oh, good. I still haven't had a response from anyone at the IBA forum.

I'm going to PM you - I heard from their Senior Compliance Counsel.

We posted a reply to a similar question on our Forum on July 7th (the question was posted on June 22nd). In all fairness, please understand that we provide the Forum as a free benefit to our members, we provide very in-depth responses based on legal research specific to each question, and like all of you, we wear many hats and have many other ongoing responsibilities.

Having said our mea culpa, we would like to add the following to Doug Slayton's answer (with which we agree, with the following caveat):

We believe that a notice should be provided to a borrower in the event that the bank reserves the right to require the payment of taxes into escrow at any time during the term of the loan, regardless of whether an escrow account is established at closing. We note that the Fannie Mae/Freddie Mac Illinois uniform mortgage documents contain such a reservation of the right to require escrow payments. If your bank uses these Illinois uniform mortgage documents, or other mortgage documents with similar contingent escrow provisions, you should provide a notice under the Act which states that while you are not currently requiring the payment of taxes into escrow, you may do so in the future, and in such case, the provisions of the Act (which you should describe in the notice) will apply.

Bruce Jay Baker, Executive Vice President & General Counsel, Illinois Bankers Association (www.ilbanker.com)