I have a question regarding escrow accounts on non-HPML loans. Can the bank terminate the escrow because we do not want to service them anymore? If the customer elected to have escrows 10 years ago and we are stil servicing their escrow can we terminate it with notice given to the customer that we will no longer collect for them?

Most likely you can but you need to have your agreements reviewed to make sure and to comply with nay notification requirements.

Thanks Dan, what agreements would those be? We used to have them sign a document that basically asked them if they wanted to have escrows or not and they marked the box that they did or they marked the box they didn't. Then we provided them with an Escrow Initial Disclosure. There is nothing in the Promissory Note or on the Final TIL or any other document they signed that says anything about their escrow account. The only other information the customer received was their annual statement and annual analysis documents.

Also, can we pick and choose what customers we want to terminate? Can we look at 80 accounts and pick 40 that we want to terminate because we feel they are good customers and will pay their own taxes & insurance, but keep the ones we think aren't as good and may not pay them if we terminate them? I'm a little worried about a possible UDAAP or Fair Lending type of situation by hand picking & choosing. Most of our customers like the escrow on their loan and I'm afraid we will be getting calls about terminating them and especially only some and not all. We are a small community so our customers know each other and could easily talk about this amongst themselves.

Keep in mind the rules for escrowing flood insurance are changing.

Talk to attorney. You may have an "implied" contract if your state honors such contracts.

Only you know the rationale for terminating escrows but if canceling escrows is such a big deal all of sudden then why pick and choose, why not just terminate them all. For those "good" customer you terminate and if they really want to continue the escrow are you going to make exceptions?

I am not a proponent of picking and choosing customers to satisfy the "needs" of the financial institution when they have decided to eliminate a service.