Thanks Dan.

So, is this just going forward, or will all existing loans requiring flood insurance that are not escrowed need to be escrowed also?

Today's rule: If you are escrowing for anything else AND they are in a SFHA, you must escrow for flood insurance too.

Beginning 1/1/16: You must escrow for flood insurance regardless if you are escrowing for taxes/insurance. There is an exemption for SOME small institutions (less than $1B).

The new rule only applies to loans that go through a MIRE tripwire event on or after January 1, 2016, although there's a long list of exempt loans (HELOCs, business purpose loans, 2nd liens, etc.).

Could they make this any more confusing?

Question:

Borrower has purchased flood insurance but his property is not located in a flood zone. The bank required escrow for taxes.

Is the bank required to escrow for flood insurance?

§ 339.5 Escrow requirement.

If a bank requires the escrow of taxes, insurance premiums, fees, or any other charges for a loan secured by residential improved real estate or a mobile home that is made, increased, extended, or renewed on or after October 1, 1996, the bank shall also require the escrow of all premiums and fees for any flood insurance required under § 339.3. The bank, or a servicer acting on behalf of the bank, shall deposit the flood insurance premiums on behalf of the borrower in an escrow account. This escrow account will be subject to escrow requirements adopted pursuant to section 10 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2609) (RESPA), which generally limits the amount that may be maintained in escrow accounts for certain types of loans and requires escrow account statements for those accounts, only if the loan is otherwise subject to RESPA. Following receipt of a notice from the Director of FEMA or other provider of flood insurance that premiums are due, the bank, or a servicer acting on behalf of the bank, shall pay the amount owed to the insurance provider from the escrow account by the date when such premiums are due.

You placed emphasis on "any flood insurance required under 339.3". However, we are not requiring the borrower to purchase flood insurance. Let me rephrase the question:

If a property is not in flood hazard area, yet the borrower has voluntarily elected to obtain flood insurance (the bank is not requiring it). Is the Bank obligated to establish escrows for flood insurance premiums?

Thanks.
Jamar

No. This only applies if the bank requires flood insurance.

But mandatory escrow on HPML's is only required by law for a minimum of 5 years (now), after which it can be stopped once certain conditions are met, correct? Where is the requirement that escrow on HPML's is mandatory for the entire term of the loan?

Wow, i missed most of the additions to this thread. So we're back to the idea that even if you only escrowed for a time period when it was required in order to make an HPML, and have since claimed the R/U exemption and ceased escrowing new HPMLs, come January of 2016 you'll have to escrow for required flood insurance, thus ending your R/U exemption under HPML? Is all of that correct?

If that's the case, i guess i don't understand: what bank anywhere will be exempt? The HPML rules applied to all banks, so all banks were required under Federal or state law to set up escrow accounts for HPMLs if they made them......so who is left to get the exemption?

That's why I was questioning why making HPML's automatically precludes a bank from the exemption, when there has never been a regulatory requirement to escrow on HPML's for the entire term of the loan. Maybe I'm splitting hairs, but the reg reads that if the lender was required by law to escrow for the entire terms of the loan it would preclude it from the exemption.

Yes, i don't get the rationale behind putting in an exemption that no bank in America can meet. That would seem pointless to me.

Perhaps bike4life has nit the perverbial nail on the head?

Maybe...i hope so.

I'm not sure anymore who is arguing for what.

(1) 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 any loan secured by residential improved real estate or a mobile home;

and

(2) 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 any loans secured by residential improved real estate or a mobile home,

therefor:

(3) the institution may be eligible for the small lender exception provided it meets the size threshold.

OK - so if:

(1) you escrowed for HMPLs you were not were not required by law to escrow for the entire period

and

(2) you did not have a consistent policy to escrow

therefor:

(3) you may be eligible for the exemption.


Can some please explain to me what you guys are arguing about???

Randy, as i said, i hadn't visited this thread in quite some time and saw this from you, and since i respect your opinion on things, i read this as you saying that you had changed your opinion (previously in this thread, you had answered a question of mine basically re-assuring me that HPML escrows alone wouldn't disqualify you, so i took your "i guess this is different than i previously read it" as an "uh oh" for me).

I wasn't arguing...i was asking, because this has me confused.

Me three! I'm just trying to figure out why HPML's would be singled out as disqualification due to the escrow requirement. Escrow on HPML is not required for "the entire term of the loan" unless I missed something.

That's the way I'm interpreting it as well.

Well. maybe I do read this a little different than I originally did now that you mention it - sorry, I have slept a few times since this post was originally written.

Hopefully you all submitted your comment letters.

We have a loan that was made in June 2011. The customer escrows for taxes and insurance. We need to force place flood insurance on the loan. The 45 day letter has been sent. Do we now have to pay that forced place premium from his escrow account or not since the note date is prior to July 2014?

You were not escrowing flood insurance before now?? If you had an escrow account, this has always been a requirement to include the flood insurance in the escrow. There's nothing new about that.

Randy is correct IF it's a residential property.