Reg Z, RESPA, and the 45-day Clock

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Question:

Here is our situation, borrowers signed acknowledgment on Reg Z disclosure wishing for life insurance on settlement dated 6-26-01. Loan account entered on computer system 7-2-01.(bank considers this entry as "booking the loan". On 7-23-01 the life insurance application form is filled in/signed by borrowers and mailed to company for approval. Question, according to 3500.17 (g), when does the clock begin counting for the 45 day window? the TIL date 6-26-01, the computer input date 7-2-01, or will it begin on the date the bank receives notice of the approval for the application for insurance coverage? Could you possibly elaborate on the specifics, "when the servicer establishes the escrow account"? Understanding this terminology will help in the future.

Answer:

In RESPA itself, 10(c)(1)(B) says (B) The statement required under subparagraph (A) shall be submitted to the borrower at closing with respect to the property for which the mortgage loan is made or not later than the expiration of the 45-day period beginning on the date of the establishment of the escrow account.

In this case, if the insurance isn't yet approved or known, you may find this as your reason for nondisclosure at closing.

Under Reg. X, 3500.17(c)(1)(i) alludes to "when the account is created" which would indicate that if the amounts are not known at closing, you may be to start the clock when they are known.

First published on BankersOnline.com 9/3/01