We believe that Section 5 (requiring lenders to notify borrowers of the option to terminate an escrow account) would apply when a borrower holds a time deposit account in lieu of an escrow account. While Section 5 mentions only “escrow accounts,” we believe that it was intended to also cover pledged accounts established under Section 6 as well, since those accounts are held by borrowers “in lieu” of the required escrow account; this option was added as a consumer-friendly measure to give consumers more choices, not to restrict their ability to cancel the escrow account under Section 5. 765 ILCS 910/6.
Under the Mortgage Escrow Account Act, if a customer opts to establish a certificate-in-lieu account instead of an escrow account, would we have to notify the customer of their option to terminate the account once the loan is reduced to 65%? Would we have to release the pledge if requested after reducing the loan amount to 65%?
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