US LAWS, STATUTES & CODES ON-LINE

US Supreme Court Decisions On-Line | US Laws



§ 2609. —  Limitation on requirement of advance deposits in escrow accounts.



[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 12USC2609]

 
                       TITLE 12--BANKS AND BANKING
 
              CHAPTER 27--REAL ESTATE SETTLEMENT PROCEDURES
 
Sec. 2609. Limitation on requirement of advance deposits in 
        escrow accounts
        

(a) In general

    A lender, in connection with a federally related mortgage loan, may 
not require the borrower or prospective borrower--
        (1) to deposit in any escrow account which may be established in 
    connection with such loan for the purpose of assuring payment of 
    taxes, insurance premiums, or other charges with respect to the 
    property, in connection with the settlement, an aggregate sum (for 
    such purpose) in excess of a sum that will be sufficient to pay such 
    taxes, insurance premiums and other charges attributable to the 
    period beginning on the last date on which each such charge would 
    have been paid under the normal lending practice of the lender and 
    local custom, provided that the selection of each such date 
    constitutes prudent lending practice, and ending on the due date of 
    its first full installment payment under the mortgage, plus one-
    sixth of the estimated total amount of such taxes, insurance 
    premiums and other charges to be paid on dates, as provided above, 
    during the ensuing twelve-month period; or
        (2) to deposit in any such escrow account in any month beginning 
    with the first full installment payment under the mortgage a sum 
    (for the purpose of assuring payment of taxes, insurance premiums 
    and other charges with respect to the property) in excess of the sum 
    of (A) one-twelfth of the total amount of the estimated taxes, 
    insurance premiums and other charges which are reasonably 
    anticipated to be paid on dates during the ensuing twelve months 
    which dates are in accordance with the normal lending practice of 
    the lender and local custom, provided that the selection of each 
    such date constitutes prudent lending practice, plus (B) such amount 
    as is necessary to maintain an additional balance in such escrow 
    account not to exceed one-sixth of the estimated total amount of 
    such taxes, insurance premiums and other charges to be paid on 
    dates, as provided above, during the ensuing twelve-month period: 
    Provided, however, That in the event the lender determines there 
    will be or is a deficiency he shall not be prohibited from requiring 
    additional monthly deposits in such escrow account to avoid or 
    eliminate such deficiency.

(b) Notification of shortage in escrow account

    If the terms of any federally related mortgage loan require the 
borrower to make payments to the servicer (as the term is defined in 
section 2605(i) of this title) of the loan for deposit into an escrow 
account for the purpose of assuring payment of taxes, insurance 
premiums, and other charges with respect to the property, the servicer 
shall notify the borrower not less than annually of any shortage of 
funds in the escrow account.

(c) Escrow account statements

                        (1) Initial statement

        (A) In general

            Any servicer that has established an escrow account in 
        connection with a federally related mortgage loan shall submit 
        to the borrower for which the escrow account has been 
        established a statement clearly itemizing the estimated taxes, 
        insurance premiums, and other charges that are reasonably 
        anticipated to be paid from the escrow account during the first 
        12 months after the establishment of the account and the 
        anticipated dates of such payments.

        (B) Time of submission

            The statement required under subparagraph (A) shall be 
        submitted to the borrower at closing with respect to the 
        property for which the mortgage loan is made or not later than 
        the expiration of the 45-day period beginning on the date of the 
        establishment of the escrow account.

        (C) Initial statement at closing

            Any servicer may submit the statement required under 
        subparagraph (A) to the borrower at closing and may incorporate 
        such statement in the uniform settlement statement required 
        under section 2603 of this title. The Secretary shall issue 
        regulations prescribing any changes necessary to the uniform 
        settlement statement under section 2603 of this title that 
        specify how the statement required under subparagraph (A) of 
        this section shall be incorporated in the uniform settlement 
        statement.

                        (2) Annual statement

        (A) In general

            Any servicer that has established or continued an escrow 
        account in connection with a federally related mortgage loan 
        shall submit to the borrower for which the escrow account has 
        been established or continued a statement clearly itemizing, for 
        each period described in subparagraph (B) (during which the 
        servicer services the escrow account), the amount of the 
        borrower's current monthly payment, the portion of the monthly 
        payment being placed in the escrow account, the total amount 
        paid into the escrow account during the period, the total amount 
        paid out of the escrow account during the period for taxes, 
        insurance premiums, and other charges (as separately 
        identified), and the balance in the escrow account at the 
        conclusion of the period.

        (B) Time of submission

            The statement required under subparagraph (A) shall be 
        submitted to the borrower not less than once for each 12-month 
        period, the first such period beginning on the first January 1st 
        that occurs after November 28, 1990, and shall be submitted not 
        more than 30 days after the conclusion of each such 1-year 
        period.

(d) Penalties

                           (1) In general

        In the case of each failure to submit a statement to a borrower 
    as required under subsection (c) of this section, the Secretary 
    shall assess to the lender or escrow servicer failing to submit the 
    statement a civil penalty of $50 for each such failure, but the 
    total amount imposed on such lender or escrow servicer for all such 
    failures during any 12-month period referred to in subsection (b) 
    \1\ of this section may not exceed $100,000.
---------------------------------------------------------------------------
    \1\ So in original. Probably should be subsection ``(c)''.
---------------------------------------------------------------------------

                     (2) Intentional violations

        If any failure to which paragraph (1) applies is due to 
    intentional disregard of the requirement to submit the statement, 
    then, with respect to such failure--
            (A) the penalty imposed under paragraph (1) shall be $100; 
        and
            (B) in the case of any penalty determined under subparagraph 
        (A), the $100,000 limitation under paragraph (1) shall not 
        apply.

(Pub. L. 93-533, Sec. 10, Dec. 22, 1974, 88 Stat. 1728; Pub. L. 94-205, 
Sec. 8, Jan. 2, 1976, 89 Stat. 1158; Pub. L. 101-625, title IX, 
Sec. 942(a), Nov. 28, 1990, 104 Stat. 4411; Pub. L. 104-208, div. A, 
title II, Sec. 2103(g)(2), Sept. 30, 1996, 110 Stat. 3009-401.)


                               Amendments

    1996--Subsec. (c)(1)(C). Pub. L. 104-208 substituted ``The 
Secretary'' for ``Not later than the expiration of the 90-day period 
beginning on November 28, 1990, the Secretary'' in second sentence.
    1990--Pub. L. 101-625 designated existing provisions as subsec. (a), 
inserted heading, and added subsecs. (b) to (d).
    1976--Pub. L. 94-205 provided that in addition to amounts required 
for the payment of taxes, insurance premiums, and other charges due at 
settlement, the buyer could not be required at settlement to place into 
an escrow account more than one-sixth of the estimated total amount of 
such taxes, insurance premiums, and other charges payable within a 
twelve month period beginning on the date of settlement, but the buyer 
could be required to make monthly payments into an escrow account 
sufficient to maintain a surplus of one-sixth of the estimated total 
amount payable in the coming twelve month period.


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-205 effective Jan. 2, 1976, see section 12 
of Pub. L. 94-205, set out as a note under section 2602 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 2605, 2610 of this title; 
title 42 section 4012a.



chanrobles.com





ChanRobles Legal Resources:

ChanRobles On-Line Bar Review

ChanRobles Internet Bar Review : www.chanroblesbar.com

ChanRobles MCLE On-line

ChanRobles Lawnet Inc. - ChanRobles MCLE On-line : www.chanroblesmcleonline.com