CMG Question: Flood Escrow Exception – Business Purpose

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    We received this question during our most recent CMG session:

    What about a loan that is written on commercial paper for residential rentals, for example duplex. or investment property. Are they exempt from the escrow requirement?

    Footnote 50 in the preamble addressing this exact question. The agencies say to refer to the Regulation Z discussion on what constitutes primarily for business, commercial or agricultural purposes.

    Here’s the language of the footnote: “One credit union association commenter inquired whether a loan for residential investment properties would be considered a loan that is “primarily for business, agricultural or commercial purposes.” The Agencies note that Regulation Z contains commentary that addresses this question. See comments 3 and 4 under 12 CFR 1026.3(a).”

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