Mortgage Loan Escrow Accounts

Tuesday, January 17, 2012 at 3:53PM
Banking Spectrum in Compliance, Consumer Lending

The General Obligations Law, the Banking Law and New York State Banking Board General Regulation Part 10 specifically requires a lender to pay 2% on mortgage loan escrow accounts.  Institutions are expected to pay 2% on these accounts even if they offer other interest bearing accounts at 2% or less. It is important to remember that for mortgage loan escrow accounts, the customer is not a depositor but a borrower.

Banks require an escrow balance for the payment of taxes and insurance and to protect the lien against a tax foreclosure.  The bank requires the deposit as an incident to the loan and the bank must pay the statutory rate (not the prevailing rate).

Article originally appeared on Banking Spectrum (https://www.bankingspectrum.com/).