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If we modify a mortgage loan with escrow, is the 65% Illinois Mortgage Escrow Account Act notice requirement calculated based on the original loan amount, or the loan amount as of the modification? – IBA Compliance Connection

IBA Compliance Connection

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If we modify a mortgage loan with escrow, is the 65% Illinois Mortgage Escrow Account Act notice requirement calculated based on the original loan amount, or the loan amount as of the modification?

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The 65% trigger is based on the original loan amount. The Illinois Mortgage Escrow Account Act requires lenders to notify borrowers when the “mortgage is reduced to 65% of its original amount by payments of the borrower . . . .” The fact that the loan has been modified will not change the trigger.

For resources related to our guidance, please see:

  • Mortgage Escrow Account Act, 765 ILCS 910/5 (“When the mortgage is reduced to 65% of its original amount by payments of the borrower, timely made according to the provisions of the loan agreement secured by the mortgage, and the borrower is otherwise not in default on the loan agreement, the mortgage lender must notify the borrower that he may terminate such escrow account or that he may elect to continue it until he requests a termination thereof, or until the mortgage is paid in full, whichever occurs first.”)