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#2028813 - 07/22/15 03:00 PM Mandatory Escrow or Not?
MBTCompliance Offline
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Upon reviewing FDIC FIL-32-2015 that came out yesterday,
I am still trying to digest these new flood escrow rules.

Consider these scenarios:

A) Residential Property, Rental Purpose Loan
B) Residential Property, Ag Purpose Loan
C) Residential Property, Home Equity Line of Credit

If I understand correctly, escrow of flood premiums are not mandatory on any of the above properties as of January 1, 2016, correct?

However, I believe the option to escrow flood premiums must be provided only to property C above by June 30, 2016, correct?

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Flood Compliance
#2028888 - 07/22/15 05:01 PM Re: Mandatory Escrow or Not? MBTCompliance
David Dickinson Offline
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David Dickinson
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Central City, NE
If your bank is over $1Billion (and possible for smaller banks) you must escrow flood insurance premiums and fees for consumer loans secured by residential improved real estate or mobile homes that are made, increased, extended or renewed (MIRE) on or after January 1, 2016, unless the loan qualifies for an exemption.

Therefore, A & B are exempt as they are not consumer purpose loans.

HELOC's are exempt under §339.5(a)(iv). The "Option" requirements in §339.5(d)(1)(i) also point back to the same exemptions, so you will not need to provide the option to escrow on HELOC's.
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#2028909 - 07/22/15 05:30 PM Re: Mandatory Escrow or Not? MBTCompliance
MBTCompliance Offline
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Thanks, David!

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#2029045 - 07/22/15 08:52 PM Re: Mandatory Escrow or Not? MBTCompliance
awilli Offline
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What about 2nd lien positions?
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#2029129 - 07/23/15 01:36 PM Re: Mandatory Escrow or Not? MBTCompliance
Dan Persfull Offline
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Bloomington, IN
What about 2nd lien positions?

Search the final rule using "subordinate" as your search term and you will find the exemption and also will find what you must do if you later find out your subordinate lien is now a first lien.
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#2042962 - 10/06/15 09:35 PM Re: Mandatory Escrow or Not? MBTCompliance
Tarhe Offline
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Joined: Nov 2006
Posts: 1,195
California
Just to confirm on HELOCs - does that include 1st lien HELOCs, too? I saw in another thread where it said that 1st lien HELOCs are not exempt and would require escrows - but the logistics would be challenging when a HELOC is interest only and may be at a zero balance such that the only payment due each month would be the flood escrow payment. I didn't see anything in the rule that said 1st lien HELOCs need escrow unless I missed it? Thank you!!

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#2042972 - 10/06/15 11:08 PM Re: Mandatory Escrow or Not? MBTCompliance
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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The exception is for home equity lines of credit. No mention of lien position.
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#2043026 - 10/07/15 02:10 PM Re: Mandatory Escrow or Not? MBTCompliance
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
I saw in another thread where it said that 1st lien HELOCs are not exempt and would require escrows

If I recall correctly when the proposed rule first came out HELOCs were not specifically exempt and some drew conclusions that 1st lien HELOCS would be covered. The final rule exempted HELOCs.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2044749 - 10/16/15 07:04 PM Re: Mandatory Escrow or Not? MBTCompliance
morirse de risa Offline
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Midwest
Our bank has an escrow policy. What about business purpose loans secured by the non-residential real estate? Would these be required to escrow?

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#2044807 - 10/18/15 07:51 PM Re: Mandatory Escrow or Not? morirse de risa
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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No, business purpose loans are exempt from the escrow requirement.
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HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2044828 - 10/19/15 01:50 PM Re: Mandatory Escrow or Not? MBTCompliance
morirse de risa Offline
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Posts: 238
Midwest
Thanks for clarifying!

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