All of our escrow accounts are voluntary (except for HPML loans). I was always under the assumption that if we did not REQUIRE the escrow account, that we didn't have to pay interest on it. Am I correct or way off base? Does MN regulations require the payment of interest on escrow no matter what?

Have you seen this document?

http://www.mortgagebankers.org/files/StateInterestonEscrowLaws-4-10-07.pdf

I see no exemptions for voluntary escrow here, but it does provide some regulatory citations that could be researched to see if it is addressed.

In the Statute it states;

" The requirement to pay interest shall apply to such accounts created in conjunction with mortgage loans made prior to July 1, 1996"

So, any loans made after that the interest requirement does not apply.

I am unfamiliar with Minnesota law, but the bank has just made a residential loan there. Am I reading correctly that there is no requirement to pay interest on escrow accounts created on or after 7/1/1996. However, on escrow accounts created on or after 7/1/1996, we are required to allow the borrower to elect to discontinue escrowing after the 7th anniversary of the date of the mortgage - unless the borrower has been more than 30 days past due in the previous 12 months. Thanks.