Q: If the bank escrows for taxes on a multifamily or commercial office building, does it also have to escrow for flood insurance, or does this requirement apply only to single family residential loans?
A: Currently, the escrow requirement applies if the loan is secured by residential, improved real estate, including multifamily residential properties or mixed-use buildings that are primarily for residential purposes. Current escrow requirements do not apply to commercial office buildings. However, it should be noted that the Biggert-Waters Act includes revisions to current escrow requirements that will apply to any residential mortgage outstanding or entered into after July 6, 2014. These revisions will be addressed in the future through implementing regulations by the federal banking agencies.
– This Q&A was included in the materials from the FDIC New York Region Regulatory Teleconference: “Flood Insurance – Flood Insurance Compliance and an Examiner’s Perspective” which took place on December 3, 2012. These materials may be found here: https://www.fdic.gov/news/conferences/NY/2012-12-03.html