I started questioning today whether the escrow cancellation notice and waiting periods under 1026.20(e) become effective for all covered loans on our books October 3rd, or if instead the rule covers only applications received on/after October 3, 2015 -- meaning that we would be required to follow the cancellation and waiting requirements only for new loans that were applied for on/after Oct 3rd. Practically speaking, I recognize that it doesn't make sense to split the process, and there is no harm in complying with the rule for all, but I like to know whether the rule technically covers old loans.

The commentary to 1026.1 indicates that the revises apply to covered loans for which the credit or mortgage broker receives an application on or after October 3rd and does not provide an exception, so it seems that technically speaking the cancellation notice and waiting periods may not be required for existing loans. Has anyone read anything to the contrary?

I thought I had figured out that 1026.20(e) would apply to any escrow cancellation other than those carved out as exceptions in that section. It just made sense that it would apply to any consumer loan with an escrow.

But your question pressed me to dig deeper. Even in the prefatory text to the regulation in the Federal Register, 1026.20(e) is not an exception to the general statement that the overall rule (which includes the escrow cancellation notice requirement) would be effective 8/1/15 (now 10/3/15).

It would not, IMO, be a violation to provide the notice for consumer mortgage loans with an escrow, when escrow is being cancelled, without regard to when the loan was applied for.

So John, are you saying that you agree, that the rule does not apply to covered loans (consumer purpose, term loan, 1st lien, secured by dirt) where the application for credit was taken before Oct 3rd? The rule provides an effective date for loans with applications taken on/after -- and then provides exceptions to that rule, so like you noted, 1026.20(e ) was not specifically mentioned, so I'm thinking that technically speaking the escrow cancellation/wait will not apply to loans with application dates before Oct 3rd. Are we saying the same thing?

I agree, there is no harm in providing the notice/waiting period.

Yes, are using different words to say the same thing. I'll add, though, that having two different procedures dependent upon when an application for a loan was received can make sense at the front end of the loan. But as the months and years after consummation drag on, it becomes easier to have as few "variations" in processing as possible. For that reason, and because closing escrows before loan payoff isn't an event to happens every day, I'll go so far as to advocate providing the notice for any closed-end consumer credit transaction secured by a first lien on real property or a dwelling, other than a reverse mortgage, with an escrow account, when the escrow is to be cancelled other than in connection with loan payoff.

Makes sense. Thank you John.

Follow up to this thread - It appears that this notice technically is only applicable if the borrower requests to cancel the escrow account outright, but this question came up today as we apparently have more than the occasional request to remove an item from the escrow but not to cancel the entire account. For instance, the borrower requests to remove his HOI from the escrow but continue with the real estate taxes. Would this require the escrow cancellation notice? I think the answer is no but would appreciate other opinions. Thank you!

The notice is only required when the escrow is to be entirely terminated.

It appears that this notice technically is only applicable if the borrower requests to cancel the escrow

Unless I've missed something the notice is required regardless if the borrower requested the cancellation or if the servicer cancels the escrow.

See 1026.20(e)(5) for the different timing requirements based on whether the escrow is canceled due to the borrower's request or canceled by the servicer for any other reason.

I agree the notice is required regardless of who initiates the cancellation. The difference is timing.

And good luck to any of you who plan to have a different process for loan prior to TRID effective date and loans after. May the odds be ever in your favor.

Welcome to Bankers' Threads, jmt1714.

I'm going to go back to my posts in this thread on August 17 and point out that although you can make an argument that section 1026.20(e) doesn't apply to loans for which you received an application before October 3, 2015, there is nothing in the rule to prevent you from applying it generally to any consumer mortgage loan with an escrow account. And once you have a preponderance of TRID loans in your servicing portfolio, you'll benefit more from having a single procedure.

Dan - The part of my original post that you quoted has more to it that I maybe should have explained more explicitly.

It appears that this notice technically is only applicable if the borrower requests to cancel the escrow account outright...

The rest of my post goes on to explain that the borrower only requests one component of the escrow to be discontinued, not the entire escrow account. So my concern was whether or not a notice would be required in this situation.

I understand that a notice is required whether or not the termination is at the request of the borrower or canceled by the servicer, and I didn't intend to mislead anyone else in that regard. I was only focused on my narrow question regarding my specific situation when I originally posted.

I have an odd situation that I think fits well into this thread.
Closing agent, upon returning the closing documents (signed), stated that the borrower does not want to escrow.
Should my FI provide the Escrow Cancellation Notice, and use the timing requirements? The account was established in the closing documents, but the loan has not been "booked" to our system yet...Thoughts?

FWIW, this was additional proof that the consumers don't really read through the LE's...The loan was escrowed since the initial disclosure.

May I resurrect this thread? I am curious as to the outcome of Cheli's odd situation. Did you reissue the CD removing the escrow account information? That's probably what I would have done.

I'm also wondering about the Escrow Closing Fee in the "Cost to You" section on the Escrow Closing Notice. We've never charged a fee for closing an escrow account at a borrower's request, our Lending manager now wants to start charging a fee. I would imagine that we would need to advise the borrower at consummation that should they request to cancel their escrow account at a later date they will be charged a fee. And I assume we could only do this on a go forward basis, not on loans already on the books. Correct?

Hi Darn Regs - I did advise to still follow procedures; send Notice, provide 3-day waiting period after presumption of receipt, and re-issued CloD upon termination.

We do not charge a fee either. But I don't read where the rule requires the creditor to inform the consumer of a fee if they do so wish to cancel their account. However, for customer service, that may not be a bad idea....just my thinking though...