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14.6 Mortgage Servicing

<< Title XIV Overview

14.6 Mortgage Servicing

The following links provide expanded analysis within this section:

14.6.     Mortgage Servicing

                        14.6.1.    Mandatory Escrow and Impound Accounts. Creditors are required, for certain consumer credit transactions, to establish an escrow account for the payment of taxes and hazard insurance, mortgage insurance, and any other required periodic payments or premiums associated with a mortgage loan. [§1461(a)]

                                     Duration.  The mandatory escrow or impound account shall remain in existence for a minimum period of 5 years from the consummation of the loan, unless and until the borrower has sufficient equity in the dwelling to no longer require mortgage insurance, the borrower is delinquent, the borrower does not comply with certain legal obligations, or the mortgage is terminated.

                                     Disclosure for Waiving Borrowers. Creditors must provide specified disclosures to consumers who waive escrow services. [§1462]

                                     Exemptions. The Fed may, through regulations, exempt certain creditors from the escrow requirement [§1461]

                                     Administration.  The escrow or impound account must be administered in accordance with the RESPA, the Flood Disaster Protection Act, and the law of the state where the real property securing the transaction is located. The creditor, if required by state or federal law, is to pay interest to the consumer on the amount in the account.

                                     Escrows Included in Repayment Analysis. Any repayment analysis required under TILA will be required to include escrow payments. [§1465]

                        14.6.2.    Restrictions on Obtaining Force-Placed Insurance. Servicers are prohibited from obtaining force-placed hazard insurance unless there is a reasonable basis to believe the borrower has failed to maintain property insurance as require by the loan contract. [§1463]  A servicer must terminate any force-placed insurance within 15 days of receiving confirmation of a borrower's existing insurance coverage. 

                        14.6.3.    Requirements for Prompt Crediting of Home Loan Payments. Servicers must promptly credit home loan payments as of the date of receipt, unless a delay in crediting does not result in any charge to the consumer or in the negative reporting to a consumer reporting agency.  Consumer payments that are accepted by the servicer but do not meet written requirements for payment must be credited as of 5 days after receipt.  Also, a creditor or servicer of a home loan must send an accurate payoff balance within 7 business days after receipt of a written request from the borrower. [§1464]

The Fed may issue regulations that revise the exemptions for the mandatory insurance, as well as the criteria for the administration of such escrow accounts.