12 U.S.C. § 2609 : US Code - Section 2609: Limitation on requirement of advance deposits in escrow accounts

Search 12 U.S.C. § 2609 : US Code - Section 2609: Limitation on requirement of advance deposits in escrow accounts

(a) In general
A lender, in connection with a federally related mortgage loan,
may not require the borrower or prospective borrower -
(1) to deposit in any escrow account which may be established
in connection with such loan for the purpose of assuring payment
of taxes, insurance premiums, or other charges with respect to
the property, in connection with the settlement, an aggregate sum
(for such purpose) in excess of a sum that will be sufficient to
pay such taxes, insurance premiums and other charges attributable
to the period beginning on the last date on which each such
charge would have been paid under the normal lending practice of
the lender and local custom, provided that the selection of each
such date constitutes prudent lending practice, and ending on the
due date of its first full installment payment under the
mortgage, plus one-sixth of the estimated total amount of such
taxes, insurance premiums and other charges to be paid on dates,
as provided above, during the ensuing twelve-month period; or
(2) to deposit in any such escrow account in any month
beginning with the first full installment payment under the
mortgage a sum (for the purpose of assuring payment of taxes,
insurance premiums and other charges with respect to the
property) in excess of the sum of (A) one-twelfth of the total
amount of the estimated taxes, insurance premiums and other
charges which are reasonably anticipated to be paid on dates
during the ensuing twelve months which dates are in accordance
with the normal lending practice of the lender and local custom,
provided that the selection of each such date constitutes prudent
lending practice, plus (B) such amount as is necessary to
maintain an additional balance in such escrow account not to
exceed one-sixth of the estimated total amount of such taxes,
insurance premiums and other charges to be paid on dates, as
provided above, during the ensuing twelve-month period: Provided,
however, That in the event the lender determines there will be or
is a deficiency he shall not be prohibited from requiring
additional monthly deposits in such escrow account to avoid or
eliminate such deficiency.
(b) Notification of shortage in escrow account
If the terms of any federally related mortgage loan require the
borrower to make payments to the servicer (as the term is defined
in section 2605(i) of this title) of the loan for deposit into an
escrow account for the purpose of assuring payment of taxes,
insurance premiums, and other charges with respect to the property,
the servicer shall notify the borrower not less than annually of
any shortage of funds in the escrow account.
(c) Escrow account statements
(1) Initial statement
(A) In general
Any servicer that has established an escrow account in
connection with a federally related mortgage loan shall submit
to the borrower for which the escrow account has been
established a statement clearly itemizing the estimated taxes,
insurance premiums, and other charges that are reasonably
anticipated to be paid from the escrow account during the first
12 months after the establishment of the account and the
anticipated dates of such payments.
(B) Time of submission
The statement required under subparagraph (A) shall be
submitted to the borrower at closing with respect to the
property for which the mortgage loan is made or not later than
the expiration of the 45-day period beginning on the date of
the establishment of the escrow account.
(C) Initial statement at closing
Any servicer may submit the statement required under
subparagraph (A) to the borrower at closing and may incorporate
such statement in the uniform settlement statement required
under section 2603 of this title. The Secretary shall issue
regulations prescribing any changes necessary to the uniform
settlement statement under section 2603 of this title that
specify how the statement required under subparagraph (A) of
this section shall be incorporated in the uniform settlement
statement.
(2) Annual statement
(A) In general
Any servicer that has established or continued an escrow
account in connection with a federally related mortgage loan
shall submit to the borrower for which the escrow account has
been established or continued a statement clearly itemizing,
for each period described in subparagraph (B) (during which the
servicer services the escrow account), the amount of the
borrower's current monthly payment, the portion of the monthly
payment being placed in the escrow account, the total amount
paid into the escrow account during the period, the total
amount paid out of the escrow account during the period for
taxes, insurance premiums, and other charges (as separately
identified), and the balance in the escrow account at the
conclusion of the period.
(B) Time of submission
The statement required under subparagraph (A) shall be
submitted to the borrower not less than once for each 12-month
period, the first such period beginning on the first January
1st that occurs after November 28, 1990, and shall be submitted
not more than 30 days after the conclusion of each such 1-year
period.
(d) Penalties
(1) In general
In the case of each failure to submit a statement to a borrower
as required under subsection (c) of this section, the Secretary
shall assess to the lender or escrow servicer failing to submit
the statement a civil penalty of $50 for each such failure, but
the total amount imposed on such lender or escrow servicer for
all such failures during any 12-month period referred to in
subsection (b) (!1) of this section may not exceed $100,000.
(2) Intentional violations
If any failure to which paragraph (1) applies is due to
intentional disregard of the requirement to submit the statement,
then, with respect to such failure -
(A) the penalty imposed under paragraph (1) shall be $100;
and
(B) in the case of any penalty determined under subparagraph
(A), the $100,000 limitation under paragraph (1) shall not
apply.