Higher-Priced Mortgage Loans must have an Escrow account except when?

Higher-Priced Mortgage Loans must have an Escrow account except when?

• A. It's a construction loan
• B. It's a FHA loan
• C. If the down payment exceeds a certain amount
• D. A 2nd Appraisal is completed

Answer: (A)

Higher-Priced Mortgage Loans require an escrow account to ensure timely payment of property taxes and homeowners insurance, protecting the lender’s security. This escrow obligation helps prevent tax liens or insurance lapses that could jeopardize the loan. The only common exception to this rule is when the loan is a construction loan; during construction there isn’t a steady tax or insurance bill yet, and the loan structure is different, so the escrow requirement does not apply. An FHA loan can still be an HPML and would generally require escrow if it falls under HPML rules, so it doesn’t create an exemption. The size of the down payment does not remove the escrow obligation, and a second appraisal isn’t related to escrow requirements.

Higher-Priced Mortgage Loans require an escrow account to ensure timely payment of property taxes and homeowners insurance, protecting the lender’s security. This escrow obligation helps prevent tax liens or insurance lapses that could jeopardize the loan. The only common exception to this rule is when the loan is a construction loan; during construction there isn’t a steady tax or insurance bill yet, and the loan structure is different, so the escrow requirement does not apply. An FHA loan can still be an HPML and would generally require escrow if it falls under HPML rules, so it doesn’t create an exemption. The size of the down payment does not remove the escrow obligation, and a second appraisal isn’t related to escrow requirements.