We are trying to make some decisions regarding the new escrow rules that go into effect June 1st. As I read the new rule, it states that if you are considered a small rural creditor then you can choose to "not" escrow at all for HPMLs; however, there is a 2 prong test. The creditor and its affiliates could only provide escrow accounts for first-lien HPML mortgage loans on or after 4/1/10 to 6/1/13 or escrow accounts for distressed consumers. We are a very small bank with only 6 mortgage loans done last year. We escrowed for all of the HPML loans; however, we escrowed for one loan that was not an HPML. Does this one loan disqualify us from being able to use the exemption after June 1st?

Yes.

Wow - if we only would have known!!!

You could always cancel this one escrow before June.

I was wondering if we could allow the 1 non-HPML loan we are escrowing for sign a "voluntary" escrow agreement and let them continue to escrow after June 1st, but still use the escrow exemption for a small creditor. Thoughts???

We have voluntary escrow accounts on the books as of right now and my interpretation of the rule is that those voluntary accounts would disqualify us from claiming the exemption. We are contemplating cancelling our voluntary escrow accounts (we don't have that many) prior to June 1 in order to pursue the exemption.

Oh, that's great...I can't seem to find a loop hole. I was actually thinking it wouldn't work. Thank you for your interpretation.

Great discussions! What if we have escrows on the books; do we need to go back and change to 5 years or only if Refinance? Wondering how this will effect our annual analysis.

Thank you!

If you mean current HPMLs, there's no need to do anything specifically in regards to their escrow accounts. You'd maintain them as normal, but they'd still be under the 1-year maintenance rules (with a borrower requested and bank approved ending of the escrow account) as opposed to the new 5-year maintenance rules. That's my interpretation anyway.

Thank you -that was my interpretation as well. Appreciate your quick response!