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If we establish an escrow account for a mortgage loan after the loan closing has occurred, do we need to provide an Illinois Mortgage Escrow Account Act notice, an escrow account disclosure agreement, and an election form establishing the customer’s decision to open either an escrow account or interest bearing time deposit? We ordinarily provide these documents when establishing escrow accounts at the loan closing. – IBA Compliance Connection

IBA Compliance Connection

Your go to source for compliance!

If we establish an escrow account for a mortgage loan after the loan closing has occurred, do we need to provide an Illinois Mortgage Escrow Account Act notice, an escrow account disclosure agreement, and an election form establishing the customer’s decision to open either an escrow account or interest bearing time deposit? We ordinarily provide these documents when establishing escrow accounts at the loan closing.

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Yes, we recommend providing all three documents when establishing an escrow account for the first time, even if the loan closing already has occurred.

The Illinois Mortgage Escrow Account Act notice is required at the closing of any mortgage loan made for the purpose of purchasing a single-family owner occupied residential property. Your bank should have provided this notice at the loan closing, even if an escrow account was not established at that time. Consequently, we recommend providing the notice to the borrower as soon as possible.

We also recommend having the borrower sign your bank’s escrow account disclosure agreement, since it is customarily used by your bank when establishing new escrow accounts. Similarly, we recommend having the borrower sign your bank’s escrow election form, to confirm the customer’s decision between opening an escrow account or interest bearing time deposit.

For resources related to our guidance, please see:

  • Illinois Mortgage Escrow Account Act, 765 ILCS 910/11 (“Notice of the requirements of the Act shall be furnished in writing to the borrower at the date of closing.”)
  • Illinois 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.”)
  • Illinois 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.”)