Compliance Question of the Week

Question: HELOCs and escrow for flood–are they always exempt even if in 1st position?

Answer: Yes, that’s correct–there’s a specific exemption for HELOCs in and of themselves:

  • 339.5   Escrow requirement.

(a) In general—(1) Applicability. Except as provided in paragraphs (a)(2) or (c) of this section, an FDIC-supervised institution, or a servicer acting on its behalf, shall require the escrow of all premiums and fees for any flood insurance required under §339.3(a) 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.

(2) Exceptions. Paragraph (a)(1) of this section does not apply if:

(iv) The loan is a home equity line of credit;

So the loan doesn’t necessarily have to meet one of the other exemptions, like the lien position exemption for example, in order to be exempt from the escrow requirement.


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