Topic: Escrow Accounts
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We do not require our mortgage customers to establish escrow accounts. Are we still required to comply with the notice provisions in the Illinois Mortgage Escrow Account Act?
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We recommend complying with the Mortgage Escrow Account Act’s notice provisions for all purchase money mortgages secured by single-family, owner-occupied residential properties, even though escrow accounts are not mandatory at your institution. The Act does not distinguish between mandatory or voluntary escrow accounts, and further, it does not distinguish between loans that have escrow accounts…
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Is a single-item analysis required for each escrow account item before the aggregate analysis is completed? We are not sure, because RESPA requires aggregate analysis but includes a definition for “single-item analysis,” and HUD’s guidance states that single-item analysis is required.
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We believe that the single-item analysis calculation method has been phased out. In its place, the RESPA rules require you to use the aggregate accounting method when conducting any escrow account analysis, whether the initial analysis or an annual analysis. 12 CFR 1024.17(c)(4). Of course, you should separately itemize the taxes, insurance premiums and other…
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Does Illinois law require that county property taxes must be paid in June and September?
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The Illinois Property Tax Code leaves property tax due dates in the discretion of county tax boards, so different due dates may apply in different counties. The default due dates for property taxes are June 1 and September 1. 35 ILCS 200/21-15. However, counties may choose to implement an accelerated billing method with different due…
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Can we provide the 65% notice required by the Illinois Mortgage Escrow Account Act with the annual escrow statement required by RESPA?
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We do not believe it would be permissible to combine an annual RESPA escrow account notice with the one-time notice required by the Mortgage Escrow Account Act, since different timing requirements apply to both notices. Section 5 of the Mortgage Escrow Account Act (MEAA) law requires mortgage lenders to send a notice informing a borrower…
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Do we need to provide the notices required by the Illinois Mortgage Escrow Account Act for mortgages that we make outside of Illinois? Does it depend on where the property is located?
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We believe it would be a best practice to comply with the Illinois Mortgage Escrow Account Act for loans involving property or borrowers located outside of Illinois, provided that the Illinois law does not conflict with the law of the state where the property or borrower is located. Otherwise, we cannot predict how other states…
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Our mortgage servicing company prepares the escrow statements for our loans, and our auditors identified a recurring issue on the initial escrow account statements for loans where a property tax installment is paid (by the title company) before the first loan payment. For these loans, the initial escrow statements are showing only one disbursement of property taxes. Should we be showing two property tax installments on the initial escrow statement?
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Yes. From what you have told us, it sounds like the initial escrow account statements are not being prepared correctly. Even if a property tax installment is paid before the first loan payment, the initial escrow account statement should include every disbursement made in the 12 months following the first loan payment. So, if the…
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Our examiners told us that we cannot charge an escrow set up fee (a one-time fee for the initial set up). Does Regulation X prohibit such fees?
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While we agree that Regulation X prohibits charging fees for preparing and distributing escrow account statements, we believe it is permissible to charge an initial escrow set up fee, provided that it is unrelated to the preparation and distribution of the initial escrow account statement. Section 12 of Regulation X prohibits escrow account fees for…
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What requirements/documents are required by the State of Illinois regarding escrowing on business purpose loans for rental property? The customer is requesting the escrowing.
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We are not aware of any federal regulations that apply to escrow accounts for commercial loans. RESPA excludes from coverage any loan made “primarily for a business, commercial, or agricultural purpose,” as Regulation Z defines the term (in 12 CFR 1026.3(a)(1) and the accompanying official staff commentary). 12 CFR 1024.5(b)(2). The Regulation Z commentary specifically…