2954.8 says that any lender who finances the purchase of a one-to-four family residence and maintains an impound account must pay interest on the amount of at least 2 percent simple interest per year. The interest must be credited to the borrower's account annually. Does that mean as of 12/31 or within the escrow account year?

The law is vague enough that you can select a month (same every year) to credit the interest. You also need to credit interest when the loan is paid in full. Interested is also paid on restricted escrow accounts (insurance proceeds) for rebuilding after a property loss.Our servicer has selected December for the annual credit of interest on escrow.

How would this interest be paid out for interim servicing which loans are held less than a month?