The Real Estate Settlement Procedures Act (Regulation X) has contained rules for administering escrow accounts for many years. The Truth in Lending Act (Regulation Z) requires escrow accounts in connection with higher-priced mortgage loans. The interagency flood regulations were amended effective October 1, 2015 to add revised escrow rules.
RESPA is broken into three major subparts and numerous appendices.
- Subpart A – General Provisions
- Subpart B – Mortgage Settlement and Escrow Accounts
- Subpart C – Mortgage Servicing
For the most part escrow rules are contained in §1024.17 in Subpart B. Those rules govern the creation and maintenance of escrow accounts.
There are a few escrow rules in §1024.34 of the mortgage servicing rules. Those rules deal with timely payments out of an escrow account.
Escrow account means any account that a servicer establishes or controls on behalf of a borrower to pay taxes, insurance premiums (including flood insurance), or other charges with respect to a federally related mortgage loan, including charges that the borrower and servicer have voluntarily agreed that the servicer should collect and pay.
- The definition includes:
- Any account established for this purpose, including a “trust account”, “reserve account”, “impound account”, or other term in different localities.
- Any arrangement where the servicer adds a portion of the borrower’s payments to principal and subsequently deducts from principal the disbursements for escrow account items.
- The definition excludes any account that is under the borrower’s total control.
For additional resources on the topic of RESPA visit the following pages: