Thanks for that question waterdog, and the clarifications AIT and Dan.....that clarified things greatly for me and made me realize i had been looking at something within the rule incorrectly. Glad the lightbulb went on now instead of much later.

Thank you AIT and Dan. I obviously needed the help. I'm glad there is a forum like this out there. It's very useful.

So if our institution meets all of the requirements to be exempt, does that mean that we can offer HPML without escrow starting June 1, 2013?

That is my take JE.

Anyone know if that will apply to the Biggert-Waters Rules for mandatory escrow of flood insurance?

I believe that's still the same. If you escrow you have to..if you don't, you don't.

I am hoping that's the case, but you never know these days!

I am confused by the term "Affiliate". We have multiple owners and one owner that owns several banks in another state "not the primary owner here. Does this include common ownership of other banks that we are not involved with? I want to say "no" but because of our recent FDIC compliance exam we have to list on our privacy disclosure that we have "Affiliates" because of the common owner.

Under Reg O if the principal shareholder owns more than 25% or with others controls the company, then all the principal shareholder's business where they control the outside company become your affiliate.

Thanks Zitch70

It is dangerous to take the definition of terms from one regulation and apply them to another, especially when the term is defined within the regulation in question:

(Old) 1026.32(b)(2) and (New) 1026.32(b)(5):

Affiliate means any company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.).

12 U.S.C. 1841(k) Affiliate.— For purposes of this chapter, the term “affiliate” means any company that controls, is controlled by, or is under common control with another company.

12 U.S.C. 1841(a)(2)Any company has control over a bank or over any company if—

(A)the company directly or indirectly or acting through one or more other persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the bank or company;

(B)the company controls in any manner the election of a majority of the directors or trustees of the bank or company; or

(C)the Board determines, after notice and opportunity for hearing, that the company directly or indirectly exercises a controlling influence over the management or policies of the bank or company.

(3)For the purposes of any proceeding under paragraph (2)(C) of this subsection, there is a presumption that any company which directly or indirectly owns, controls, or has power to vote less than 5 per centum of any class of voting securities of a given bank or company does not have control over that bank or company.

(4)In any administrative or judicial proceeding under this chapter, other than a proceeding under paragraph (2)(C) of this subsection, a company may not be held to have had control over any given bank or company at any given time unless that company, at the time in question, directly or indirectly owned, controlled, or had power to vote 5 per centum or more of any class of voting securities of the bank or company, or had already been found to have control in a proceeding under paragraph (2)(C).

Thanks for the tip rlcarey I did read the definition in reg. O and P before. And just got done with this one. Thanks for the specific # it saved me sometime in looking.

We have been escrowing since April 2010. I want to make sure I understand. Do we have to continue to Escrow? We are a small bank and make very few mortgages, but they are HPML'S.

Thanks for your help in this matter.

No, if you qualify as exempt, you can discontinue escrow other than what you are required to maintain from prior loans.

I keep going around and around on this (and i missed Friday, so i'm a little behind): if you continue to "maintain" previous accounts that aren't HPMLs (voluntary escrow accounts, for example)...can you still claim the exemption?

raitch, I'm not entirely sure on that one. If memory serves me, they made this exemption for small banks that went to escrow simply to make HPML loans. Their study showed that unless you maintain 500+ escrow accounts, they are not cost effective, so they made this exemption. I think the stipulation was you couldn't continue to keep doing escrows, voluntary or not...but I don't remember any discussion on prior voluntaries specifically.

If you are set up to escrow, I would think you would want to continue to do so for S&S reasons. (Just my thinking!)

Oh i agree, but i don't get to make those sorts of calls around here. I just want to be sure i tell management correctly; if memory serves, i think if you "maintain" any escrow accounts that aren't HPMLs or other allowable escrow accounts after June (even if originated prior), you can't claim the exemption, but i just wanted to be sure. Thanks.

I think you are right on that one. I just wish I knew how Biggert-Waters and the mandatory flood escrow will come into play. I have had conflicting opinions on whether a bank exempt from escrow will still need to escrow for flood. Seems logical that you would be exempt from flood also, but that's only the logical answer, not the real one. Ha!

I'm curious on that as well, but haven't had time to study it. Escrow was already mandatory for flood, unless you didn't escrow...so it concerns me for those banks (like this one) that don't escrow and don't want to...I'm not convinced they can force escrow, but just let's say they DID, then that blows a complete hole in HMPL exemptions.

Hopefully, when they reduce BW to regulation, administrative powers will come into play to keep everything level...well, as much as possible! LOL!

Just hope they do it before we have to make a decision before June 1st.

I would say no:

Thus, as long as a creditor (or its affiliate) services and maintains escrow accounts for any mortgage loans, other than as provided in § 1026.35(b)(2)(iii)(D)(1) and (2), the creditor will not be eligible for the exemption for any higher-priced mortgage loan it may make.

I doubt that they will, as they are not required to do it before July 2014.

The flood rules have their own exemption criteria and it is not the same as the one's found in these rules. The examption from flood insurance escrows are in the Act, so the regulators will not be able to change them.

(i) the regulated lending institution has total
assets of less than $1,000,000,000; and

(ii) on or before the date of enactment of the
Biggert-Waters Flood Insurance Reform Act of 2012,
the regulated lending institution—

(I) in the case of a loan secured by residential
improved real estate or a mobile home, was not
required under Federal or State law to deposit
taxes, insurance premiums, fees, or any other
charges in an escrow account for the entire term
of the loan; and

(II) did not have a policy of consistently and
uniformly requiring the deposit of taxes, insurance
premiums, fees, or any other charges in an escrow
account for loans secured by residential improved
real estate or a mobile home.’’.

Thanks Randy, that takes the question totally away from me...I won't think about it anymore!

okay, I know the new rules indicate that we must leave the escrow in place for 5 years. Does this mean that we HAVE to stop escrowing at customer request after 5 years and all requirements are met or can we simply not offer that option?

Walden, I don't know of anything that says you have to stop if the customer requests...you just can't stop UNLESS the customer requests, but I don't think you have to.