This document is provided pursuant to the following provisions under Minnesota law:
“Unless the [escrow] account is exempt from the requirements of paragraph (a), a mortgagee shall allow a mortgagor to elect to discontinue escrowing for taxes and homeowner’s insurance after the seventh anniversary of the date of the mortgage, unless the mortgagor has been more than 30 days delinquent in the previous 12 months. . . . The mortgagor’s election shall be in writing. The lender or mortgage broker shall, with respect to mortgages made on or after August 1, 1997, notify an applicant for a mortgage of the applicant’s rights under this paragraph. This notice shall be given at or prior to the closing of the mortgage loan and shall read substantially as follows:
NOTICE OF RIGHT TO DISCONTINUE ESCROW
If your mortgage loan involves an escrow account for taxes and homeowner’s insurance, you may have the right in five years to discontinue the account and pay your own taxes and homeowner’s insurance. If you are eligible to discontinue the escrow account, you will be notified in five years.” (Minn. Stat. Ann. § 47.20[9][b])
A “mortgage loan” is not defined under Minnesota law, therefore we have interpreted these provisions to apply to all mortgage loans. However, we have been informally told by a representative from the Minnesota Department of Commerce that this provision applies only to loans subject to Subsection (9)(a), which are described as follows:
“ . . . a mortgaged one-to-four family, owner-occupied residence located in [Minnesota], unless the [escrow] account is required by federal law or regulation or maintained in connection with a conventional loan in an original principal amount in excess of 80 percent of the lender’s appraised value of the residential unit at the time the loan is made or maintained in connection with loans insured or guaranteed by the secretary of housing and urban development, by the administrator of veterans affairs, or by the administrator of the Farmers Home Administration or any successor . . .” (Ibid. § 47.20[9][a])
Due to this, we will be changing the configurations for Cx1004 so that it prints under the following conditions:
- Base Type = Conventional
- Document Package Type = Closing
- Loan Has Escrow = Yes
- Occupancy = Primary Residence
- State Code = Minnesota
Please note that we will not be adding a condition that the loan’s LTV must exceed 80%. The reason for this is because the LTV exception only applies to “conventional loans,” which are basically loans which:
- Have a principal loan amount of less than $100,000;
- Are not made by a credit union;
- Are not eligible to be purchased by FNMA or FHLMC; and
- Are not authorized or allowed by the Office of the Comptroller of the Currency (see § 47.20[2]:[3])
We do not have a trigger to distinguish these types of loans from other types of conventional loans. Therefore, we will be providing Cx1004 for all types of conventional loans even if not legally required. This should not be a problem since the language of Cx1004 is flexible enough that it can be provided in connection with loans where it is not mandated that the borrower have the right to cancel the escrow account, without affirmatively stating that that they have such a right (e.g. the language states that the borrower “may” have the right to cancel the account, not that they “do” have such right).
This change will take effect on January 27, 2015. If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.
January 20, 2015
DR 164421