This article, originally published in March 2010, has been updated to reflect the separate mandatory escrow requirements for Jumbo Higher-Priced Mortgage Loans that became effective April 1, 2011.
In July 2008, the Federal Reserve Board issued an amendment to Regulation Z requiring lenders to establish escrow accounts for certain mortgage loans. Under these rules, which were effective for loan applications received on or after April 1, 2010, and for loans on manufactured housing beginning October 1, 2010, a creditor may not extend a loan secured by a first lien on a principal dwelling if the loan is also a higher-priced mortgage loan under Regulation Z Section 226.35 unless, prior to consummation, an escrow account is established for the payment of property taxes and mortgage-related insurance premiums required by the creditor, such as hazard insurance, liability insurance and mortgage insurance. A creditor or servicer may permit the escrow account to be cancelled only pursuant to a consumer's dated written request received no earlier than 365 days after consummation.
