July 2015 Flood Final Rule – What are the January 2016 mandatory escrow rules?

Compliance > Lending > Flood > 2015 Flood Final Rule - Escrows
Q:   What are the flood mandatory escrow rules that become effective January 1, 2016?  And, are certain types of credit exempt?
 
A:  The final rules include requirements to escrow flood insurance premiums and fees for any designated loan secured by residential improved real estate or a mobile home that is made, increased, extended, or renewed on or after January 1, 2016.  Payments must be made with the same frequency as payments on the designated loan, for the duration of the loan. 
 
This specific provision includes various exceptions for:
 
  • Extensions of credit that are primarily for business, commercial or agricultural purposes
  • Loans in a subordinate position to a senior lien secured by the same property for which flood insurance is being provided
  • Flood insurance for residential improved real estate or a mobile home that meets certain requirements, is provided by a condominium association (or other applicable group) and the premium is paid by that group as a common expense.
  • Home equity lines of credit
  • Nonperforming loans (as defined in the rule) or
  • Loans with terms not longer than 12 months.
 
 
See additional details in the July 2015 Final Rule on Loans in Areas Having Special Flood Hazards, here:  https://www.federalregister.gov/articles/2015/07/21/2015-15956/loans-in-areas-having-special-flood-hazards

 

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