While you might be aware of the Loan Estimate and Closing Disclosure changes effective October 3, 2015, did you also know that the Consumer Financial Protection Bureau’s Integrated Mortgage Disclosure rule includes an Escrow Closing Notice disclosure requirement that is effective October 3, 2015, as well?
The Escrow Closing Notice disclosure rule applies to all consumer closed-end loans secured by a first lien on real property or a dwelling for which an escrow account was established in connection with the loan and for which the escrow account will be cancelled. The term “real property” includes vacant and unimproved land. The definition of “dwelling” includes vacation homes, second homes, and manufactured (mobile) homes as well as boats and trailers used as residences. This rule does not apply to reverse mortgages.
The notice is not required to be provided for cancelled escrow accounts originally established solely in connection with the consumer’s delinquency or default on the underlying debt obligation. The notice is also not required when the loan for which an escrow account was established is terminated, including by repayment, refinancing, rescission, and foreclosure.
When an escrow account will be cancelled, the servicer is required to clearly and conspicuously disclose the following information to the consumer under the heading “Escrow Closing Notice.”
- The date the consumer will no longer have an escrow account.
- That an escrow account may also be called an impound or trust account.
- The reason why the escrow account will be closed.
- A statement that without an escrow account, the consumer must pay all property costs, such as taxes and homeowner’s insurance themselves, possibly in one or two large payments per year.
- A table titled “Cost to you” that contains an itemization of the amount of any fee the creditor or servicer imposes on the consumer in connection with the closure of the consumer’s escrow account, labeled “Escrow Closing Fee” and a statement that the fee is for closing the escrow account.
Under the reference “In the future,” the following must be included:
- A list of the consequences if the consumer fails to pay property costs, including the actions a State or local government may take if property taxes are not paid and the actions the servicer may take if the consumer does not pay some or all property costs, such as adding amounts to the loan balance, adding an escrow account to the loan, or purchasing a property insurance policy on the consumer’s behalf that may be more expensive and provide fewer benefits than a policy the consumer could obtain directly.
- A telephone number that the consumer can use to request additional information about the cancellation of the escrow account.
- A statement of whether the servicer offers the option of keeping the escrow account open, and as applicable, a telephone number the consumer can use to request that the account be kept open.
- A statement of whether there is a cut-off date by which the consumer can request that the account be kept open.
The notice must be provided in writing in a form the consumer may keep. The notice information must be grouped together on the front side of a separate one-page document that contains no other material.
The timing of the notice depends on whether or not the cancellation is at the consumer’s request. If the consumer has requested the escrow account to be closed, the servicer is to provide the disclosure no later than three business days before the closure of the escrow account. If the escrow account is cancelled, but not at the consumer’s request, the Escrow Closing Notice disclosure is to be provided to the consumer no later than 30 business days before the escrow account is closed. If the disclosure is not provided to the consumer in person, such as by mail or electronic mail, the consumer is considered to have received the disclosure three business days after it is delivered or placed in the mail. The definition of “business day” is all calendar days except for Sunday and legal public holidays.