Good Afternoon,

I am fairly new to the world of lending compliance as my background was always BSA, recently my role changed and I am now tasked with becoming the real estate secured lending guru for our institution. . I have read every thread I can find and read through the Reg. I want to make sure I am interpreting this right before I provide my advice.

The question posed was "Can we collect the initial escrow deposit at closing and then suspend the collection of escrows during the construction phase? If so, can escrow analysis be suspended as well during this period? Information from our industry sources indicate this is possible. Reading through TRID, and RESPA, noting specifically addresses this aspect. Currently we establish escrows when the loan moves to the permanent phase. This causes several challenges customer and system wise that we would like to eliminate."

My thoughts are that no we cannot do this, it would violate the pre-accrual rules in RESPA. There are limitations set forth on escrow accounts in RESPA and one is "The servicer shall not practice pre-accrual." What they are asking to do does qualify as pre-accrual correct?

Thank you for any and all input.

You cannot collect at the closing of the construction loan and then hold that initial deposit until the permanent loan begins. That is correct as it would violate the pre-accrual prohibitions. Lender have forms that are signed at closing that obligates the consumer to provide the lender with insurance costs and property tax information (if applicable) for the establishment of the escrow account when the construction period ends and to fund the required initial deposit at that time. The initial escrow analysis would be due at that time or within 45 days (1024.17(g)(2) .

Thank you rlcarey, for the confirmation!

Wow. Your work is cut out for you!

The laws, regs, and products have a 50-year head start. If most of your experience is in deposits, payments, and operations, you may need to spend some time getting familiar with the various types of credit products and the way they are marketed, contracted, and serviced. Do the same thing with the applicable regs. Resist the urge to attend conferences and seminars focused on changes and hot topics until you're comfortable with the basic principles, e.g. - TIL101, ECOA101, Flood Insurance101, etc.

As your general awareness grows, then get a firm grip on the highest risk items. Most of the time, that's not the latest-and-greatest hot topics presented in seminars. You already know that you NEVER want to hear the bank's name and the term "money laundering" in the same sentence. Now, add "discrimination", "kickbacks", "restitution" and probably a few other career-threatening problems that can occur right under your nose at any time. You want to become an expert on all regulatory problems that have unacceptable consequences.

Good luck!