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#2171299 - 04/02/18 03:44 PM Combined Policies
bgehres Offline
100 Club
Joined: Mar 2005
Posts: 126
We have a borrower who is wanting to combine their home insurance policy with their farm policy and pay it out of pocket each year. I'm guessing we probably can't allow this until the 5 years is up. Other than a.) escrow for the entire policy amount or b.) make them get a separate policy is there anything else I'm not thinking of that would allow them to do this?

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Escrows on Higher-Priced Mortgages
#2171650 - 04/03/18 09:18 PM Re: Combined Policies bgehres
NorthernAnalyst Offline
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Joined: Aug 2015
Posts: 20
United States
I have seen one institution interpret the escrow account requirements under the HPML rule to apply only to the premiums associated with hazard insurance coverage for the subject property when multiple locations are covered. In that case, they only required the cost of the location endorsement extending coverage to the securing property to be included in the initial and monthly escrow contribution.

Their justification was: § 1026.35(b)(1)-1 says:

"Section 1026.35(b)(1) requires creditors to establish an escrow account for payment of property taxes and premiums for mortgage-related insurance required by the creditor..." which goes on to refer to § 1024.17 with regards to administration of the escrow account, which then refers to the definition of Hazard Insurance under § 1024.31.

Hazard insurance is defined therein to mean "insurance on the property securing a mortgage loan that protects the property against loss caused by fire, wind, flood, earthquake, theft, falling objects, freezing, and other similar hazards for which the owner or assignee of such loan requires insurance."

So escrow account requires hazard insurance, hazard insurance the premiums for coverage defined by RESPA, RESPA says hazard insurance is the coverage that protects the subject property, which on a multi-location policy is through endorsement to the master policy form.

Thus, only the cost of the endorsement for the location is required to be held in escrow, so their analysis goes.

I am not sure I would jump on that ship, but it's the closest thing I've seen to a rationalization of that position.
Not legal advice. Not the opinion of my employer.

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