We have a loan customer that currently escrows taxes, insurance, flood, etc. The loan originated in 2010, and the borrower opted to escrow everything at that time. We currently require escrow of taxes and insurance, so under the new flood rules are now escrowing flood insurance premiums for loans originated since new rules were implemented.

This borrower is now asking whether he can cancel his escrow for all payments, including flood insurance premiums, and pay independently. We have reviewed the flood rules, and so far have not found any guidance on whether a borrower that opted to escrow flood prior to the new rules may not opt to cancel that same escrow.

Does anyone know of any guidance to assist us further or run into the same situation? Thanks!

Looking a this further, I found rules from 1996 that appear to require escrow of flood insurance if the Bank requires escrow of taxes and insurance. So, I'm really confused- the 2015 rules almost give the impression that the requirement to escrow for Flood didn't exist until 2015. Can anyone fill in this gap for me?

Prior to 2016, you had to escrow for flood insurance IF you were escrowing for anything else. Starting in 2016, you must escrow on all residential RE loans in a SFHA - whether you are escrowing for other things. There are several exemptions.

Back to your original question: Since this loan was made prior to 1/1/2016, you don't have to escrow for flood insurance if you aren't escrowing for other things. It's the borrower's option.