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#1730101 - 08/13/12 03:07 PM Escrow
LM2012 Offline
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Joined: Dec 2011
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I have read about when to escrow on flood and when not to in so many articles that I've gotten myself confused. Can anyone just tell me in plain terms? Thanks?

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Flood Compliance
#1730111 - 08/13/12 03:20 PM Re: Escrow LM2012
KPOC Offline
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Greater Boston Area
If you require a borrower to escrow for taxes and insurance, you must also require escrow for flood insurance (FDIC Part 339.5).

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#1730174 - 08/13/12 04:22 PM Re: Escrow LM2012
Doug Hendrickson Offline
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Doug Hendrickson
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And, I believe the only time, currently, that you have to require escrowing is if the loan meets the definition of an HPML.
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#1730188 - 08/13/12 04:43 PM Re: Escrow LM2012
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,016
Bloomington, IN
Word of advice - if you do not use an impound/escrow agreement then I would highly suggest you start using one. The one we use from our software has a section for the borrower to sign acknowledging the escrow was established at their request or that it was established as a requirement. FWIW, we require escrow for all loans with PMI and/or Flood Insurance.

Without such an agreement how do you document the escrow was not a loan requirement?

If you are escrowing for taxes and insurance at the borrower's request why would you not go ahead and require the escrow for flood insurance? I can speak from experience that escrowing the premiums eliminates a lot of headaches associated with maintaining flood insurance.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1730261 - 08/13/12 06:07 PM Re: Escrow LM2012
deh Offline
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Joined: Mar 2006
Posts: 866
We have some investment loans that have 1-4 family rentals. We have either had a change in terms on or added escrow for property taxes. We were told by outside examiners that in these cases we must also ensure that Flood insurance is escrowed as well.

I was thinking this was only required for owner occupied properties, so that surprised me. We are now attempting to get these corrected.

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#1730277 - 08/13/12 06:13 PM Re: Escrow LM2012
KPOC Offline
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Greater Boston Area
Occupancy does not affect flood insurance rules.

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#1765611 - 12/10/12 07:10 PM Re: Escrow LM2012
Sugarbaker Offline
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Posts: 265
Dan,
We are thinking of requiring escrow on all flood loans too. If we instate this on current loans what should we consider (escrow disclosures, escrow agreement) and can we start them on the same date (i.e. January 1) or should we begin each one when their flood insurance premium is due?

Also, our loan ops is afraid that requiring escrow on certain loans may be a fair lending issue, but I don't see that it is. Any insight on this?

Thanks.

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#1765645 - 12/10/12 07:56 PM Re: Escrow LM2012
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
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Bloomington, IN
Unless the borrowers are in default of their loan or security agreements you are going to be hard pressed to require escrows on existing loans.


What would be the fair lending concerns?
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1765648 - 12/10/12 08:04 PM Re: Escrow LM2012
Sugarbaker Offline
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Posts: 265
Thanks Dan. So you think it would be safest to require escrow on new flood loans rather than trying to do it on existing flood loans?

I don't know of any fair lending concerns. I think everyone is just cautious about requiring anything out of the ordinary as it may be construed as unfair treatment. I don't think in any way there is discrimination against one of the prohibited basis if we require escrow on flood.

Can anyone recommend any good flood force placement vendors? Due to remapping, our flood volumne has grown to the point we could use some help.

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