[TheBank]

In determining if my bank meets the small lender exemption, on 7/6/12 we were requiring escrow of taxes and insurance for HPMLs. Outside of HPMLs, it was the customer’s option to escrow. Is this considered a “policy of uniformly and consistently escrowing taxes and insurance.”?

[kowsley]

There is still a bit of unknown surrounding the described situation above; however, this is what we have been made aware of recently.

The regulatory agencies have agreed that if a bank was only escrowing for HPML purposes prior to July 6, 2012, the small lender exemption may be utilized. However, you stated that you allowed customer’s the option to escrow outside of HPML’s; therefore, it appears that because the bank offered this option apart from HPMLs your financial institution would not qualify under the small lender exception.

This is only speculation on our part as we have nothing in regulation or the interagency Q/A’s at this point. We are hoping that the regulatory agencies will provide additional insight into this topic prior to escrow provisions becoming effective January 1, 2016.

Jack wrote a recent blog article on this topic linked here: https://mycomplianceresource.com/logic-behind-the-small-bank-flood-escrow-exemption/

[Author]

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