FDIC FAQs – When must a bank begin escrowing if it no longer qualifies as a small lender?

Compliance > Lending > Flood > FAQs
Q:  When must a bank begin escrowing if it no longer qualifies as a small lender?
 
A:    A bank must escrow flood insurance premiums and fees for any loans made, increased, extended, or renewed on or after July 1 of the succeeding calendar year after it has a change in status.
 
Example:
 
Lender C qualifies for the small lender exemption at the beginning of 2017.  That lender has assets of $1.3 billion on December 31, 2017, and $1.4 billion on December 31, 2018.  Lender C will be required to escrow flood insurance premiums and fees for any loans made, increased, extended, or renewed on or after July 1, 2019.
 
 
A bank that no longer qualifies for the small lender exemption must also provide notice of the option to escrow by September 30th of the first calendar year in which it has a change in status.   It must begin escrowing as soon as reasonably practicable after receiving the borrower’s request to escrow.
 
Example:
 
Lender C qualifies for the small lender exemption at the beginning of 2017. That lender has assets of $1.3 billion on December 31, 2017, and $1.4 billion on December 31, 2018. Lender C must provide notices of the option to escrow by September 30, 2019.
 
 
 
ADDITIONAL INFORMATION:
This Q&A was included in the FDIC’s Flood Insurance Videos, which were updated in 2016, which may be found here:   https://www.fdic.gov/news/news/financial/2016/fil16018.html
 

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