12 CFR 1024.34 – Timely escrow payments and treatment of escrow account balances
(a) Timely escrow disbursements required. If the terms of a mortgage loan require the borrower to make payments to the servicer of the mortgage loan for deposit into an escrow account to pay taxes, insurance premiums, and other charges for the mortgaged property, the servicer shall make payments from the escrow account in a timely manner, that is, on or before the deadline to avoid a penalty, as governed by the requirements in § 1024.17(k).
Terms Used In 12 CFR 1024.34
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
(b) Refund of escrow balance—(1) In general. Except as provided in paragraph (b)(2) of this section, within 20 days (excluding legal public holidays, Saturdays, and Sundays) of a borrower’s payment of a mortgage loan in full, a servicer shall return to the borrower any amounts remaining in an escrow account that is within the servicer’s control.
(2) Servicer may credit funds to a new escrow account. Notwithstanding paragraph (b)(1) of this section, if the borrower agrees, a servicer may credit any amounts remaining in an escrow account that is within the servicer’s control to an escrow account for a new mortgage loan as of the date of the settlement of the new mortgage loan if the new mortgage loan is provided to the borrower by a lender that:
(i) Was also the lender to whom the prior mortgage loan was initially payable;
(ii) Is the owner or assignee of the prior mortgage loan; or
(iii) Uses the same servicer that serviced the prior mortgage loan to service the new mortgage loan.