We have a mortgage loan where we are taking a primary and a secondary residence as collateral.

Do we just have to escrow on the primary residence and not the secondary?
Thanks

If an HPML and both are 1st liens, escrows on both properties will be required.

HPML only applies to the primary dwelling, therefore escrow would be required for the primary dwelling but I would opine it would not be for the secondary residence.

Oh - good catch Dan, however it might be a grey area as the taxes and insurance payments on both are required to support the loan. Not sure if there has been any actual guidance and the loan is secured by the primary residence.

There are a lot of "grey" areas lately. I think the regulators need to get some hair coloring and get their heads out......

I am basing my opinion on the fact that HPML requirements only apply to the primary residence.

3) Escrows--(i) Failure to escrow for property taxes and insurance. Except as provided in paragraph (b)(3)(ii) of this section, a creditor may not extend a loan secured by a first lien on a principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor,

and from the Commentary;

35(b)(3) Escrows.

Paragraph 35(b)(3)(i).

1. Section 226.35(b)(3) applies to principal dwellings, including structures that are classified as personal property under state law.


By establishing the escrow account on the primary dwelling does IMO meet the escrow requirement. But....... see my tag line.

I know, I know, but you could always break that sentenence down, i.e.,

"extend a loan secured by a first lien on a principal dwelling"

The answer to that question is "yes".

"an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor"

Taxes and insurance on both properties are required by the creditor.

Personally, I would establsih for both properties to avoid that argument.