Int Q&A – Escrow 4 – Does the requirement to escrow flood insurance premiums and fees apply when a loan does not experience a triggering event?

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Q:  Escrow 4 – Does the requirement to escrow flood insurance premiums and fees apply when a loan does not experience a triggering event?
 
A:   No, subject to certain exceptions. The Regulation provides that a lender or its servicer is required to escrow flood insurance premiums and fees when a designated loan is made, increased, extended, or renewed (a triggering event), unless either the lender or the loan is excepted from the escrow requirement. Until the loan experiences a triggering event, the lender is not required to escrow flood insurance premiums and fees, unless:
 
(i) a borrower requests the escrow in connection with the requirement that the lender provide an option to  escrow for outstanding loans; or
 
(ii) the lender determines that a loan exception to the escrow requirement no longer applies.
 
 
ADDITIONAL INFORMATION:
This Q&A was included in the Interagency Questions and Answers Regarding Flood Insurance, which were issued on 05/11/2022.  They were published in the Federal Register on 05/31/2022 and may be found here:  https://www.federalregister.gov/documents/2022/05/31/2022-10414/loans-in-areas-having-special-flood-hazards-interagency-questions-and-answers-regarding-flood
 

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