Escrowing for Higher-Priced Mortgage Loans
Written by Steve Van Beek
Effective April 1, 2010, credit unions will need to ensure they are escrowing for first-lien "higher-priced mortgage loans" as defined in Regulation Z - 12 CFR 226.35. As Anthony mentioned last month, if your home equity products are in first lien position, the escrow requirement could apply to those loans as well. The escrow requirement kicks in October 1, 2010 for manufactured homes.
Additionally, this blog post from September outlines the requirement to also escrow for flood insurance if the credit union is required to escrow for taxes and insurance. It also discusses some preemption legal opinion letters from NCUA regarding state laws attempting to require FCUs to pay dividends on escrow accounts.
Lastly, this article from the Philadelphia Federal Reserve's Consumer Compliance Outlook (2nd Quarter 2009) details the escrow accounting requirements in a reader-friendly approach. If you need to set up escrow accounts, be sure to check your procedures against this article and review the best practices advice.
Have a great weekend everyone!