Int Q&A – Escrow 5 – Are multi-family buildings…included in the definition of “residential improved real estate” under the Regulation for which escrows are required (unless an exception applies)?

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Q:  Escrow 5 – Are multi-family buildings or mixed-use properties included in the definition of “residential improved real estate” under the Regulation for which escrows are required (unless an exception applies)?
 
A:   Yes. For the purposes of the Act and the Regulation, the definition of residential improved real estate does not make a distinction between whether a building is single- or multifamily, or whether a building is owner- or renter-occupied. Single-family dwellings (including mobile homes), two-to-four family dwellings, and multi-family properties containing five or more residential units are considered residential improved real estate.

However, with regard to mixed-use properties, the lender should look to the primary use of a building to determine whether it meets the definition of “residential improved real estate.” See Q&As Amount 3 and 4 for guidance on residential and non-residential buildings. A loan secured by residential improved real estate is not subject to the escrow requirement if the loan is an extension of credit primarily for business, commercial or agricultural purposes.
 
 
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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