If you are doing a federally related mortgage loan does this require escrow to be done? If the bank does not require escrow accounts but the customer chooses to set up an escrow are the annual disclosures required?

A RESPA loan does not require escrow. If the escrow is truly voluntary, it is not subject to any disclosures (as it is exempt from RESPA requirements).

David, I have to disagree with how this is stated as I feel it is misleading as worded. A truly voluntary escrow meets the definition of an escrow account.

Escrow account means any account that a servicer establishes or controls on behalf of a borrower to pay taxes, insurance premiums (including flood insurance), or other charges with respect to a federally related mortgage loan, including charges that the borrower and servicer have voluntarily agreed that the servicer should collect and pay. The definition encompasses any account established for this purpose, including a "trust account," "reserve account," "impound account," or other term in different localities. An "escrow account" includes any arrangement where the servicer adds a portion of the borrower's payments to principal and subsequently deducts from principal the disbursements for escrow account items. For purposes of this section, the term "escrow account" excludes any account that is under the borrower's total control .

Whether the account is subject to the escrow rules is dependent on who controls the account that the funds are paid in and out of. In all escrow accounts I have dealt with the bank always controls the ins and outs because they are generally processed through GL accounts and not actual customer accounts.

For the borrower to have total control of the account then they must have the authority to do whatever they want with that account whenever they want without limitations.

I understand what you are saying and you have brought this up before. RESPA excludes voluntary escrows. As you quoted:
For purposes of this section, the term "escrow account" excludes any account that is under the borrower's total control .

That's all I'm trying to point out. I use the term "truly voluntary" to mean "under the borrower's total control". If that's true, it is not subject to RESPA and disclosures are not required on the account.

David, I understand what you are saying and what you meant because I know you know RESPA in just about any direction you can place it, but I'm afraid, as it is worded, that someone not as up to speed could/would misconstrue that any "voluntary" escrow account is exempt when it is not. The borrower must retain total control of the account for it to be exempt and very rarely have I seen where the borrower retains total control of the account because most escrows are processed through GL accounts instead of customer deposit accounts.

Appreciate your input Dan. Between the two of us, they should have "the rest of the story".