Skip to content
BOL Conferences
Page 5 of 6 1 2 3 4 5 6
Thread Options
#2022728 - 06/24/15 05:57 PM Re: Flood Regs announced John Burnett
raitchjay Online
Power Poster
Joined: Oct 2009
Posts: 9,088
OK
I guess that's the one part of all of this i'm not understanding: banks that claimed the R/U exemption stopped escrowing for any new loans in 2013 (they had to, or else they would lose the R/U exemption). HPML escrows they had prior to 2013 only had the 1 year requirement attached. So what bank that is trying to keep their escrow exemption for flood too would have escrowed loans on their books that was required for the entire term of the loan? I'm just not thinking of any scenarios; unless maybe a certain state required it under state law or something?
_________________________
I'm fixin' to fix that.

Return to Top
Flood Compliance
#2022740 - 06/24/15 06:06 PM Re: Flood Regs announced John Burnett
raitchjay Online
Power Poster
Joined: Oct 2009
Posts: 9,088
OK
I guess i'm assuming that banks that claimed the R/U exemption wanted to stop escrowing and therefore wouldn't have been requiring all sorts of escrows on non-HPML loans prior to 2013.
_________________________
I'm fixin' to fix that.

Return to Top
#2022802 - 06/24/15 07:34 PM Re: Flood Regs announced John Burnett
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
At the point in time where you had no choice but to escrow and there was no such thing as an exemption, you would likely want to escrow as many loans as possible for cost/benefit purposes. I believe the study showed you needed at least 500 as your breaking point between cost/benefit...this was the main driving point of creating the R/U exemption...it was costing banks to handle escrow not only money, but staffing.

So yes...I can see where they would have been requiring all sorts of escrows to make a return.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#2022803 - 06/24/15 07:39 PM Re: Flood Regs announced John Burnett
raitchjay Online
Power Poster
Joined: Oct 2009
Posts: 9,088
OK
Ok Joker, that makes sense.
_________________________
I'm fixin' to fix that.

Return to Top
#2022837 - 06/24/15 08:35 PM Re: Flood Regs announced John Burnett
Indy Banker Offline
Platinum Poster
Joined: Aug 2010
Posts: 528
I think we've already spent more time analyzing this and running "what if" scenarios than the highly-compensated legal eagles that wrote the blasted regulation!

Return to Top
#2022937 - 06/25/15 12:44 PM Re: Flood Regs announced John Burnett
Soccer Offline
Diamond Poster
Joined: Jan 2010
Posts: 1,028
Utopia
Originally Posted By John Burnett
The law under which the rules were issued was effective, and the exemption from mandatory coverage for a structure that is part of a residential property if that structure is detached from the primary residence and does not itself service as a residence was effective, too. The regulations were not needed to make the law effective. But the regulations now are in place (or will be as of 10.1.15) and add the definition that somewhat limits the structures that qualify for the exemption.

So to clarify, detached structure exemption is or is not effective currently?
_________________________
Everything happens for a reason

Return to Top
#2022941 - 06/25/15 12:53 PM Re: Flood Regs announced John Burnett
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
It is effective currently.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2023284 - 06/26/15 01:45 PM Re: Flood Regs announced John Burnett
L Morris Offline
Member
L Morris
Joined: Sep 2010
Posts: 60
KY
Quote:
If a bank escrows insurance and taxes under the current HPML requirements, that escrow must be in place for a minimum of five years. Beginning 1/1/16, that bank will need to also escrow for any flood insurance premium or fees for that property. After the HPML escrow reaches its fifth anniversary and the borrower requests it be canceled, the lender will be able to cancel the HPML escrow (assuming there are no impediments to cancelation), but the flood escrow will remain in place for the rest of the loan's life unless a new flood map places the insured structures outside the designated flood hazard area and the lender agrees to allow the coverage to be canceled.


Can you tell me where the new rule refers to this scenario? Thanks !
_________________________
"Stay committed to your decisions, but stay flexible in your approach."


Return to Top
#2027023 - 07/14/15 05:07 PM Re: Flood Regs announced John Burnett
EKP Offline
New Poster
Joined: Feb 2010
Posts: 1
I just talked to my OCC examiners who are on-site. They checked their blogs and found that because HPML rules did't require the escrow for the entire term of the loan that we are still exempt if we meet the other two requirements.

Return to Top
#2028370 - 07/21/15 01:35 PM Re: Flood Regs announced John Burnett
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
‘‘(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.’’.


How do you allow a borrower to "voluntarily" pay their insurance, taxes, etc. through additions to their loan payment without requiring them to establish an escrow account?

I don't think "voluntary escrow account" means what a lot of people thinks it does. I would suggest reading 1024.17's definition of an escrow account. In order for an escrow account to be voluntary the borrower must have total control over the account. IOWs they can deposit to, withdraw from or close the account at any time without the FI's blessing.


I think one needs to address their procedures (requirements) before assuming they do not require escrow accounts. You may not require the borrower to escrow the premiums, but if they want to voluntarily pay those premiums on a monthly basis with their loan payment do you require them to deposit those premiums into an escrow account?
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#2029203 - 07/23/15 03:41 PM Re: Flood Regs announced Dan Persfull
Indy Banker Offline
Platinum Poster
Joined: Aug 2010
Posts: 528
Originally Posted By Dan Persfull
‘‘(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.’’.


How do you allow a borrower to "voluntarily" pay their insurance, taxes, etc. through additions to their loan payment without requiring them to establish an escrow account?

I don't think "voluntary escrow account" means what a lot of people thinks it does. I would suggest reading 1024.17's definition of an escrow account. In order for an escrow account to be voluntary the borrower must have total control over the account. IOWs they can deposit to, withdraw from or close the account at any time without the FI's blessing.


I think one needs to address their procedures (requirements) before assuming they do not require escrow accounts. You may not require the borrower to escrow the premiums, but if they want to voluntarily pay those premiums on a monthly basis with their loan payment do you require them to deposit those premiums into an escrow account?


I thought it seemed pretty straightforward in the official preamble analysis in the final rules:

Commenters also requested clarification on whether the small lender exception is available if the lender maintains escrows only on a borrower’s request or if the policy of consistently and uniformly requiring escrow accounts comes at the behest of a third party. Regarding the former situation, the Agencies note that the FDPA and the Agencies’ regulations state that the condition is based on a lender having a policy of requiring the escrow accounts. Therefore, if the lender is only maintaining escrows based on borrowers’ requests, the Agencies do not believe this to be a policy of uniformly or consistently requiring escrow.

Return to Top
#2029209 - 07/23/15 03:46 PM Re: Flood Regs announced John Burnett
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
That's a paragraph I missed Indy. Thanks for pointing it out and I agree it does address the issue of a "voluntary" escrow when requested by the borrower.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#2029263 - 07/23/15 05:12 PM Re: Flood Regs announced John Burnett
Indy Banker Offline
Platinum Poster
Joined: Aug 2010
Posts: 528
Well we've had to weed through a bazillion pages of rules, regs, guidance, commentary, analysis, opinion, FAQ's, etc., etc., over the last couple of years so I think we should all be forgiven for missing a paragraph or two! wink

Return to Top
#2029292 - 07/23/15 06:37 PM Re: Flood Regs announced John Burnett
Lilly2pet Offline
100 Club
Joined: Feb 2014
Posts: 150
Land of Pine Trees and Lobster...
We do not qualify for the small creditor exemption as it relates to HPML. We do not, as a rule, require escrows for our mortgage loans but do offer the option of escrows with one exception: HPML loans which are required to escrow.

We do qualify for the HFIAA small creditor exemption as it relates to Flood insurance escrows.

So, mortgage loan in a flood zone that is not an HPML we offer the option to escrow including flood.

HPML mortgage in a flood zone we mandate the escrow of taxes and all insurances including flood.

Anyone spot a problem with this interpretation?

Return to Top
#2029335 - 07/23/15 07:44 PM Re: Flood Regs announced John Burnett
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
What matters is what was your escrow policy PRIOR TO 7/6/12. At that time, if you were only escrowing on HPML's and not requiring escrows for the entire term of the loan (the HPML requirement was only for 1 year), then you still qualify for the small bank exception - assuming your assets are less than $1B.

The "option to escrow" is a borrower request, not a lender requirement. That doesn't disqualify you from the exception.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2032487 - 08/07/15 07:57 PM Re: Flood Regs announced Lilly2pet
peony Offline
Gold Star
peony
Joined: Mar 2013
Posts: 250
Originally Posted By Lilly2pet
We do not qualify for the small creditor exemption as it relates to HPML. We do not, as a rule, require escrows for our mortgage loans but do offer the option of escrows with one exception: HPML loans which are required to escrow.

We do qualify for the HFIAA small creditor exemption as it relates to Flood insurance escrows.

So, mortgage loan in a flood zone that is not an HPML we offer the option to escrow including flood.

HPML mortgage in a flood zone we mandate the escrow of taxes and all insurances including flood.

Anyone spot a problem with this interpretation?


Did anyone respond to this? This is exactly what we do. Is this considered as 'uniformly and consistently' and therefore, allow us to be exempt from the flood escrow part?

Thanks!

Return to Top
#2032523 - 08/07/15 09:17 PM Re: Flood Regs announced John Burnett
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
There's quite a bit of unknown on this. We can all have our opinions, but we need to hear more from the regulators about what "uniformly and consistently" means as well as the "for the entire term of the loan" issue. Until then, it's just everyone's opinion.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2033044 - 08/11/15 08:25 PM Re: Flood Regs announced John Burnett
Compli Offline
Member
Joined: Nov 2012
Posts: 73
Out there
HFIAA and escrow - if a loan secured by residential property (not for business purposese) that is outstanding as of 1/1/2016 and has a policy from the borrower that the borrower does not renew for the 2016-2017 policy period, should an escrow account be established for the force placed premium? Force placing is not a triggering event so the loan would not require escrow.

Return to Top
#2052900 - 12/07/15 10:04 PM Re: Flood Regs announced John Burnett
Red Raiders Offline
Diamond Poster
Red Raiders
Joined: May 2013
Posts: 1,069
Compliance Land
I was curious if there was any further comments/guidance on this. I went back and re-listened to the October 2015 FRB Consumer Outlook Live webinar covering the new changes but it was pretty vague. Here is our situation:

As of July 6, 2012, we escrowed as required for HPML loans, loans with PMI and offered the option to escrow on all other loans. We are currently well under $1 billion in assets. Do we qualify for the small credit exemption?
_________________________
How long until retirement?? smile

Return to Top
#2052902 - 12/07/15 10:10 PM Re: Flood Regs announced John Burnett
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
As of 7/6/12:
Escrowing for HPMLs: That alone allows you to still qualify for the exemption.
Offering the option to escrow = a voluntary escrow: That alone allows you to still qualify for the exemption.
Escrowing on loans with PMI: Sounds like you won't be able to qualify for the exemption as this is policy of consistently and uniformly establishing escrows.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2052906 - 12/07/15 10:25 PM Re: Flood Regs announced John Burnett
Red Raiders Offline
Diamond Poster
Red Raiders
Joined: May 2013
Posts: 1,069
Compliance Land
Does it make a difference if the escrows can be cancelled once the PMI is able to be cancelled (thus not requiring escrows for the entire term of the loan)?
_________________________
How long until retirement?? smile

Return to Top
#2053093 - 12/08/15 07:03 PM Re: Flood Regs announced John Burnett
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
No. See the regulation below. Section (c)(ii)(A) contains wording about "the entire term of the loan" but it also is referring to requirements under Federal or State law. PMI does not fit this exemption because it isn't a Federal or State law issue.



§339.5(c) Small lender exception. (1) Qualification. Except as may be required under applicable State law, paragraphs (a), (b) and (d) of this section do not apply to an FDIC-supervised institution:
(i) That has total assets of less than $1 billion as of December 31 of either of the two prior calendar years; and
(ii) On or before July 6, 2012:
(A) 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
(B) 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.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2053171 - 12/08/15 10:19 PM Re: Flood Regs announced John Burnett
Red Raiders Offline
Diamond Poster
Red Raiders
Joined: May 2013
Posts: 1,069
Compliance Land
Bummer....
_________________________
How long until retirement?? smile

Return to Top
#2053262 - 12/09/15 03:33 PM Re: Flood Regs announced John Burnett
Indy Banker Offline
Platinum Poster
Joined: Aug 2010
Posts: 528
This falls into the "take it for what it's worth" category. Having been confused and unsure as to whether or not we qualify for the small creditor exemption (to the mandatory escrow rule), I ran our scenario past our regulator. In our situation, we did not require escrow on every loan, in most cases it was voluntary; however, on a case by case basis, we did require a borrower to escrow for taxes and insurance. These situations were basically for safety and soundness reasons - for example, a borrower that was chronically delinquent on real estate taxes, chronically delinquent with us, OR, a loan approved with an exception for high LTV or bad credit. Escrowing for HPML is off the table, because the regulators have stated that making them does not disqualify a lender from the small creditor exemption. I told our regulator we didn't track the number of these loans we made, but they probably represent less than 1% of the loans we originated prior to 2012.

Our regulator came back and said based on those facts, we "should" be able to assume we qualify for the small creditor escrow exemption. We also check with our auditor who said the same thing. Our regulator did say that any loan in which we required escrow should contain documentation as to why it was required. Again, take it for what it's worth, and I don't doubt if you ask a different examiner you'd get a different answer, but at least we have ours. In writing... smile

Return to Top
#2053286 - 12/09/15 04:12 PM Re: Flood Regs announced John Burnett
raitchjay Online
Power Poster
Joined: Oct 2009
Posts: 9,088
OK
So, are we back to the belief that escrowing only for HPMLs (back when it was required) doesn't disqualify the bank from the requirement to escrow for flood insurance? I know several months ago, i ran thru this with my contact at the Fed, and they were good with us not escrowing for flood insurance, but then i heard later that the Fed and OCC were good with it, but the FDIC was not, and that we should all just wait for future developments.
_________________________
I'm fixin' to fix that.

Return to Top
Page 5 of 6 1 2 3 4 5 6