Can anyone shed some light on the regulations regarding when we are allowed to close and escrow account. I know we can after 5 years. However, I have read that it was proposed that there had to be 20% equity in the property. Is this true?
Is this an HPML loan? If so, the requirement is at least 5 years. Keep in mind there are notification requirements for any escrow cancellation under TRID (customer or lender requested)
From the CFPB compliance guide for HPML Loans: You must maintain the escrow account until one of the following occurs: 1) the underlying debt obligation is terminated or 2) after the five-year period, the consumer requests that the escrow account be canceled. However, if you are canceling the escrow account at the consumer’s request, the loan’s unpaid principal balance must be less than 80 percent of the original value of the property securing the underlying debt obligation, and the consumer must not be currently delinquent or in default on the underlying obligation – so if these conditions are not met, you will need to maintain the escrow account beyond five years.
What about if the escrow was established for an HPML prior to the requirement to wait 5 years after the escrow was established...back when the wait was just 1 year? Is there any kind of grandfather clause for those?
The only expansion of substantive requirements under this final rule is the extension from one to five years of the minimum duration generally applicable to escrow accounts required by the rule. The Bureau believes that even this expansion of the protection afforded consumers by escrow accounts will impose at most a modest increase in compliance burden for creditors because it simply extends an otherwise already applicable requirement by four additional years. Even this minimal additional burden will not be encountered by any creditor until at least one year after the rule’s effective date, when cancellation of mandatory escrow accounts otherwise first would have become permissible for the earliest higher-priced mortgage loans to be made after this final rule takes effect.
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I thought that five year escrow rule was only effective for applications received on or after June 1, 2013. It seems if I made an HPML on May 1, 2013 it would still be under the old 1-year escrow cancellation rule.
Bville - you are correct, I with my previous statement
DATES: Effective date: The rule is effective June 1, 2013. Applicability date: Its requirements apply to transactions for which creditors receive applications on or after that date.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com