Topic: Escrow Accounts
-
We provide annual escrow account statements to our mortgage borrowers. Does Illinois law require us to send receipts for every property tax payment?
—
by
No, Illinois law does not require lenders to send receipts for each property tax payment, provided that the lender is sending an annual escrow account notice (such as the annual notice required by RESPA) with contact information for borrowers to access additional details about individual property tax payments (such as through a toll-free number or…
-
When our bank receives a property tax bill, how long do we have to send a copy to the borrower?
—
by
You must send a copy of the tax bill to the borrower within 15 days of receiving the bill from the tax collector. However, if the property is located in a county that uses the estimated or accelerated billing methods, you only need to send the borrower the copy of the bill for the final…
-
Can we use an escrow account to fund default-related expenses (attorney’s fees, property preservation costs and utilities)? We are aware that for FHA-insured loans, “escrow funds shall be used only for the purpose for which they were collected [and not for] late charges, attorney’s fees, inspection fees, mortgage delinquencies or refunds of overpaid subsidy, etc. . . .” Does that limitation apply to loans that we have sold to Fannie Mae?
—
by
No, we do not recommend advancing money from a borrower’s escrow account to pay for attorney’s fees, property preservation costs or utilities. Even if a loan is not governed by the HUD guidance that you identified (which applies only to FHA-insured loans), we believe that the same principle would apply to non-HUD loans. Escrow account…
-
Is a temporary bridge loan with a term shorter than one year subject to the higher-priced and high-cost loan provisions? Are there any other issues with the interest rate or escrow requirements?
—
by
A bridge loan is covered by the high-cost mortgage requirements, but not the higher-priced mortgage requirements, in Regulation Z. A bridge loan secured by the borrower’s principal dwelling may qualify as a “high-cost mortgage” if the interest rate exceeds 6% or 8% over the average prime offer rate, or if it has points and fees…
-
We would like to escrow for flood insurance (and property taxes) but not homeowners insurance. If we escrow for flood insurance, are we required to escrow for homeowners insurance? We do not make higher-priced mortgage loans (for which escrow accounts are required).
—
by
No, we are not aware of any requirement to escrow homeowners insurance for non-higher-priced mortgage loans, even if you are escrowing flood insurance and property tax payments.
-
Under the Mortgage Escrow Account Act, we must notify a customer 45 business days after paying property taxes, but we also can send an alternative annual notice. Will we meet the annual notice requirement by sending the annual escrow account statement required by RESPA, since it includes our contact information?
—
by
Yes, the annual escrow account statement required by RESPA should be sufficient, assuming that the contact information on the notice (such as a phone number, email address, or internet website) provides a means of accessing the required information about property tax payments. The Illinois Mortgage Escrow Account Act requires lenders to provide an annual escrow…
-
Does the Illinois Mortgage Escrow Account Act apply to a mortgage secured by property that is outside of Illinois? The loan documents state that the law of the state where the property is located will apply.
—
by
We believe the best practice would be to comply with the Illinois Mortgage Escrow Account Act (the “Act”) for loans “granted or serviced” in Illinois that are secured by residential property located outside of Illinois, provided the Illinois law does not conflict with the law of the other state where the property or borrower is…
-
Does the Illinois Escrow Act apply to a second home that is owner-occupied?
—
by
Yes, the Mortgage Escrow Account Act applies to a second home that is owner-occupied. The Act applies to any “mortgage on a single-family owner occupied residential property,” without differentiating between a first or second home. For resources related to our guidance, please see: Mortgage Escrow Account Act, 765 ILCS 910/4 (“On or after the effective…
-
Assuming that we meet the small creditor and the rural/underserved loan prerequisites, do we qualify for the exemption from the escrow account requirements for higher-priced mortgage loans? We stopped using escrow accounts for first-lien higher-priced mortgage loans after January 1, 2014, and we have not established escrows for any consumer after that date.
—
by
Yes, you will qualify for the small creditor exemption from the higher-priced mortgage loan escrow requirements, provided that you (and your affiliates) do not maintain an escrow account for any extension of credit secured by real property or a dwelling for which a loan application is received on or after January 1, 2014. In addition:…
-
We have been providing a copy of the Mortgage Escrow Account Act and the Mortgage Tax Escrow Act at the time of loan application. Can we instead provide the notice at the loan closing?
—
by
The Mortgage Escrow Account Act requires you to provide notice of the Act’s requirements “at the date of closing,” not at the time of the loan application. 765 ILCS 910/11. We do not believe any notice is required under the Mortgage Tax Escrow Act. See 765 ILCS 915/0.01 et seq.