Unless an exception applies, the Bank or a servicer acting on its behalf, must require the escrow of all premiums and fees for any required flood insurance for any designated loan secured by residential improved real estate or a mobile home that is made, increased, extended, or renewed on or after January 1, 2016, payable with the same frequency as payments on the designated loan are required to be made for the duration of the loan.
The exceptions to the escrow requirement are:
•The loan is an extension of credit primarily for business, commercial, or agricultural purposes;
•The loan is in a subordinate position to a senior lien secured by the same residential improved real estate or mobile home for which the borrower has obtained flood insurance coverage that meets the requirements;
•Flood insurance coverage for the residential improved real estate or mobile home is provided by a policy that:
o Already meets the requirements;
o Is provided by a condominium association, cooperative, homeowners association, or other applicable group; and the premium for which is paid by the condominium association, cooperative, homeowners association, or other applicable group as a common expense;
o The loan is a home equity line of credit;
o The loan is a nonperforming loan, which is a loan that is 90 or more days past due and remains nonperforming until it is permanently modified or until the entire amount past due, including principal, accrued interest, and penalty interest incurred as the result of past due status, is collected or otherwise discharged in full; or
o The loan has a term of not longer than 12 months.
If the Bank, or a servicer acting on its behalf, determines at any time during the term of a designated loan secured by residential improved real estate or a mobile home that is made, increased, extended, or renewed on or after January 1, 2016, that an exception no longer applies, the Bank or its servicer must require the escrow of all premiums and fees for any flood insurance required as soon as reasonably practicable and, if applicable, shall provide any required disclosure.