I know that the reg says that an escrow account can be cancelled once the loan his broken the 80% LTV barrier, but with the caveat of the account existing for at least 5 years prior. But, what if the loan is starting out at/under the 80%? I didn't see an exemption in the reg about it, but just want to make sure I am not missing anything.

I am assuming you are referring to the 1026.35 requirements.

Regardless of the LTV if a loan is a HPML the escrow account must be maintained for no less than 5 years.

If at the end of 5 years the borrower request cancellation under 1026.35(b)(3)(i)(B) then 1026.35(b)(3)(ii) requires the LTV to be less than 80% and the loan not delinquent or in default.

Thank you, Dan, that is what I was thinking, but wanted to make sure. I appreciate it sir!

To go back to this, because I am getting challenged by another LO, are the rules the same for secondary market?

The 2nd market can't reduce the 5 years, but they could require longer.