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?

If you require a borrower to escrow for taxes and insurance, you must also require escrow for flood insurance (FDIC Part 339.5).

And, I believe the only time, currently, that you have to require escrowing is if the loan meets the definition of an HPML.

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.

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.

Occupancy does not affect flood insurance rules.

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.

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?

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.