Small Lender Exception includes:
1. Must have total assets less than $1B as of December 31 of either of the two prior calendar years; and
2. On July 6, 2012 the Bank was not required to escrow for taxes, insurance, fees, or any other charges in escrow for the entire term of the loan AND did not have a policy of consistently and uniformly requiring an escrow account for any loans secured by residential improved real estate or a mobile home.
We meet the first requirement, but my concern is #2. The only loans we have a policy of establishing escrow accounts for are consumer primary residence loans subject to HPML. The escrow accounts are not required for the entire term of the loan as they are given an opt-out option within 1 or 5 years depending on the application date per Reg Z.
The way I am understanding this, we meet the Small Lender Exception.
This is something our staff has been discussing quite a bit lately. We have the same thought as you, but we also have concern that creditors are required to maintain the escrow on for the term of the loan unless the borrower requests termination at the applicable threshold.
We have reached out to the agencies for their opinions and we hope to be able to offer you clarification soon.