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#2144724 - 09/01/17 08:28 PM Escrow of Flood Insurance
Jay McGee Offline
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Joined: Apr 2016
Posts: 62
Flood insurance is not required, but the borrower elects to purchase flood insurance.

Do you allow them to escrow at closing?

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Flood Compliance
#2144732 - 09/01/17 08:59 PM Re: Escrow of Flood Insurance Jay McGee
David Dickinson Offline
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David Dickinson
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Posts: 18,762
Central City, NE
It's not a regulatory requirement. If they want to escrow for the flood insurance, be sure to have them sign a Voluntary Agreement. That makes it clear that the escrow is not subject to RESPA too.
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#2144773 - 09/05/17 01:12 PM Re: Escrow of Flood Insurance Jay McGee
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
A voluntary agreement between the FI and borrower does not necessarily exclude it from RESPA escrow requirements.

From 1024.17.

Escrow account means any account that a servicer establishes or controls on behalf of a borrower to pay taxes, insurance premiums (including flood insurance), or other charges with respect to a federally related mortgage loan, including charges that the borrower and servicer have voluntarily agreed that the servicer should collect and pay. The definition encompasses any account established for this purpose, including a “trust account”, “reserve account”, “impound account”, or other term in different localities. An “escrow account” includes any arrangement where the servicer adds a portion of the borrower's payments to principal and subsequently deducts from principal the disbursements for escrow account items. For purposes of this section, the term “escrow account” excludes any account that is under the borrower's total control.

An account established by the FI to pay taxes, insurance, etc. from for the benefit of the borrower would not be under the total control of the borrower unless the borrower can deposit to, withdraw from or close it at the borrower's discretion without consent of the FI.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2144799 - 09/05/17 03:04 PM Re: Escrow of Flood Insurance Jay McGee
Jay McGee Offline
Member
Joined: Apr 2016
Posts: 62
Thanks for the information.

The problem has occurred in Servicing, we do not lender place on anything insurance that is not required. Some of the insurance companies are not sending us bills in a timely manner and we are unable to pay without a bill. A few of these policies have lapsed and we are stuck with trying to overnight payments to get policy back reinstated (once the bill is received late). It may be less risk to not allow anything to be escrowed that is not required.

I am open to feedback and suggestions.

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#2144800 - 09/05/17 03:13 PM Re: Escrow of Flood Insurance Jay McGee
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
Based on the number of people flooded in Houston that were not in SFHAs - assuming responsibility for the payment of flood insurance premiums unless you are forced to do so, might not be the wisest choice.
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#2144809 - 09/05/17 03:33 PM Re: Escrow of Flood Insurance Jay McGee
Jay McGee Offline
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Joined: Apr 2016
Posts: 62
I agree and thanks

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#2144835 - 09/05/17 05:37 PM Re: Escrow of Flood Insurance Jay McGee
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
A voluntary agreement between the FI and borrower does not necessarily exclude it from RESPA escrow requirements.
Dan: I don't disagree with you. My point was this is not an escrow account the loan or lender is requiring. IF you want to set up an escrow account, make it voluntary and make that clear by having them sign a voluntary agreement.
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David Dickinson
http://www.bankerscompliance.com

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