During a compliance review, it was sited that a HPML loan was originated without escrows. What should be the bank's next course of action? I know that it is a regulatory violation and it should be reported as such to the board of directors. Should the bank may an attempt to establish a escrow account for the borrower? What if the borrower refuses to escrow? What are the regulatory repercussions if the bank does nothing but report the violation?

The horse is out of the barn. There is no corrective action. Fix the internal control breakdown.

One time occurrence - a hand slap. Pattern and practice - the sky is the limit.

Thank you for your response!

If this was an error (lender didn't ID the loan as an HPML), that's one thing. If you dig around a bit, however, and find out the lender know it was an HPML and succumbed to pressure from the borrower to skip the escrow requirement, you have a larger problem. That would be a lender I'd show the door.