No, we do not believe that the MEAA applies to commercial loans or refinancings. The MEAA applies only when mortgage lenders extend a loan or service a loan made for the purpose of purchasing a “single-family owner occupied residential property.”

Note, however, that the MEAA applies to loans within its scope regardless of their loan-to-value (LTV) ratios. None of its requirements are tied to a loan’s LTV ratio. For example, the required notice and termination option apply when a mortgage loan is reduced to 65% of its original amount (assuming timely payments by the borrower). These provisions are triggered when the loan balance is reduced from the original loan amount, not by comparison to the loan’s LTV ratio. Other requirements in the MEAA apply throughout the loan term, such as the requirement to accept a borrower’s interest bearing time deposit in lieu of an escrow account.

In your example, the MEAA would apply, and you would be required to provide the borrower with notice of the right to terminate their escrow account when the $50,000 mortgage is reduced to 65% of its original amount (which would be $32,500).

For resources related to our guidance, please see:

• Mortgage Escrow Account Act, 765 ILCS 910/4 (“On or after the effective date of this Act, each mortgage lender in conjunction with the granting or servicing of a mortgage on a single-family owner occupied residential property, shall comply with the provisions of this Act.”)

• Mortgage Escrow Account Act, 765 ILCS 910/2(c) (“‘Mortgage Lender’ means any bank, savings bank, savings and loan association, credit union, mortgage banker, or other institution, association, partnership, corporation or person who extends the loan of monies for the purpose of enabling another to purchase a residence or who services the loan, including successors in interest of the foregoing.”)

• 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.”)

• Mortgage Escrow Account Act, 765 ILCS 910/6 (“In lieu of the mortgage lender establishing an escrow account or an escrow-like arrangement, a borrower may pledge an interest bearing time deposit with the mortgage lender in an amount sufficient to secure the payment of anticipated taxes.”)