Title 12, Banks and BankingRelease 119-110
§2609 Limitation on Requirement of Advance Deposits in Escrow Accounts
Title 12 › CHAPTER 27 — REAL ESTATE SETTLEMENT PROCEDURES › § 2609
Summary
Lenders may not make a borrower put more money into an escrow account than what is needed to pay property taxes, insurance, and similar charges. At the start of the loan, the total deposit can only cover the period from the last time each charge would have been paid under normal practice up to the due date of the first full mortgage payment, plus one-sixth of the estimated total of those charges for the next 12 months. Each monthly deposit generally can be no more than one‑twelfth of the estimated yearly charges plus enough to keep a buffer not over one‑sixth of the yearly estimate. If the lender finds a shortage, it may require extra monthly payments to fix it. The loan servicer (the company that collects payments) must tell the borrower at least once a year if the escrow account is short. The servicer must give an initial escrow statement that lists the estimated taxes, insurance, and other charges and the expected payment dates either at closing or within 45 days after the account is opened. The servicer must also send an annual statement at least once every 12 months showing the borrower’s current monthly payment, how much goes into escrow, totals paid into and out of the account (with taxes and insurance listed separately), and the ending balance. The first annual period began on the first January 1 after November 28, 1990, and each yearly statement must be sent no more than 30 days after that period ends. If a required statement is not sent, the lender or servicer pays $50 for each failure, up to $100,000 in any 12‑month period. If the failure was done on purpose, the penalty is $100 per failure and there is no $100,000 cap.
Full Legal Text
Title 12, §2609
Banks and Banking, Source: USLM XML via OLRC
(a)In general
A lender, in connection with a federally related mortgage loan, may not require the borrower or prospective borrower—
(1)to deposit in any escrow account which may be established in connection with such loan for the purpose of assuring payment of taxes, insurance premiums, or other charges with respect to the property, in connection with the settlement, an aggregate sum (for such purpose) in excess of a sum that will be sufficient to pay such taxes, insurance premiums and other charges attributable to the period beginning on the last date on which each such charge would have been paid under the normal lending practice of the lender and local custom, provided that the selection of each such date constitutes prudent lending practice, and ending on the due date of its first full installment payment under the mortgage, plus one-sixth of the estimated total amount of such taxes, insurance premiums and other charges to be paid on dates, as provided above, during the ensuing twelve-month period; or
(2)to deposit in any such escrow account in any month beginning with the first full installment payment under the mortgage a sum (for the purpose of assuring payment of taxes, insurance premiums and other charges with respect to the property) in excess of the sum of (A) one-twelfth of the total amount of the estimated taxes, insurance premiums and other charges which are reasonably anticipated to be paid on dates during the ensuing twelve months which dates are in accordance with the normal lending practice of the lender and local custom, provided that the selection of each such date constitutes prudent lending practice, plus (B) such amount as is necessary to maintain an additional balance in such escrow account not to exceed one-sixth of the estimated total amount of such taxes, insurance premiums and other charges to be paid on dates, as provided above, during the ensuing twelve-month period: Provided, however, That in the event the lender determines there will be or is a deficiency he shall not be prohibited from requiring additional monthly deposits in such escrow account to avoid or eliminate such deficiency.
(b)Notification of shortage in escrow account
If the terms of any federally related mortgage loan require the borrower to make payments to the servicer (as the term is defined in section 2605(i) of this title) of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall notify the borrower not less than annually of any shortage of funds in the escrow account.
(c)Escrow account statements
(1)Initial statement
(A)In general
Any servicer that has established an escrow account in connection with a federally related mortgage loan shall submit to the borrower for which the escrow account has been established a statement clearly itemizing the estimated taxes, insurance premiums, and other charges that are reasonably anticipated to be paid from the escrow account during the first 12 months after the establishment of the account and the anticipated dates of such payments.
(B)Time of submission
The statement required under subparagraph (A) shall be submitted to the borrower at closing with respect to the property for which the mortgage loan is made or not later than the expiration of the 45-day period beginning on the date of the establishment of the escrow account.
(C)Initial statement at closing
Any servicer may submit the statement required under subparagraph (A) to the borrower at closing and may incorporate such statement in the uniform settlement statement required under section 2603 of this title. The Bureau shall issue regulations prescribing any changes necessary to the uniform settlement statement under section 2603 of this title that specify how the statement required under subparagraph (A) of this section shall be incorporated in the uniform settlement statement.
(2)Annual statement
(A)In general
Any servicer that has established or continued an escrow account in connection with a federally related mortgage loan shall submit to the borrower for which the escrow account has been established or continued a statement clearly itemizing, for each period described in subparagraph (B) (during which the servicer services the escrow account), the amount of the borrower’s current monthly payment, the portion of the monthly payment being placed in the escrow account, the total amount paid into the escrow account during the period, the total amount paid out of the escrow account during the period for taxes, insurance premiums, and other charges (as separately identified), and the balance in the escrow account at the conclusion of the period.
(B)Time of submission
The statement required under subparagraph (A) shall be submitted to the borrower not less than once for each 12-month period, the first such period beginning on the first January 1st that occurs after November 28, 1990, and shall be submitted not more than 30 days after the conclusion of each such 1-year period.
(d)Penalties
(1)In general
In the case of each failure to submit a statement to a borrower as required under subsection (c), the Secretary shall assess to the lender or escrow servicer failing to submit the statement a civil penalty of $50 for each such failure, but the total amount imposed on such lender or escrow servicer for all such failures during any 12-month period referred to in subsection (b) may not exceed $100,000.
(2)Intentional violations
If any failure to which paragraph (1) applies is due to intentional disregard of the requirement to submit the statement, then, with respect to such failure—
(A)the penalty imposed under paragraph (1) shall be $100; and
(B)in the case of any penalty determined under subparagraph (A), the $100,000 limitation under paragraph (1) shall not apply.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2010—Subsec. (c)(1)(C). Pub. L. 111–203, which directed amendment of “section 10(c) (12 U.S.C. 2609(c) and (d))” by substituting “Bureau” for “Secretary”, was executed by making the substitution only in subsec. (c) as directed. 1996—Subsec. (c)(1)(C). Pub. L. 104–208 substituted “The Secretary” for “Not later than the expiration of the 90-day period beginning on November 28, 1990, the Secretary” in second sentence. 1990—Pub. L. 101–625 designated existing provisions as subsec. (a), inserted heading, and added subsecs. (b) to (d). 1976—Pub. L. 94–205 provided that in addition to amounts required for the payment of taxes, insurance premiums, and other charges due at settlement, the buyer could not be required at settlement to place into an escrow account more than one-sixth of the estimated total amount of such taxes, insurance premiums, and other charges payable within a twelve month period beginning on the date of settlement, but the buyer could be required to make monthly payments into an escrow account sufficient to maintain a surplus of one-sixth of the estimated total amount payable in the coming twelve month period.
Statutory Notes and Related Subsidiaries
Effective Date
of 2010 AmendmentAmendment by Pub. L. 111–203 effective on the designated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employees.
Effective Date
of 1976 AmendmentAmendment by Pub. L. 94–205 effective Jan. 2, 1976, see section 12 of Pub. L. 94–205, set out as a note under section 2602 of this title.
Effective Date
Section effective 180 days after Dec. 22, 1974, see section 20 of Pub. L. 93–533, set out as a note under section 2601 of this title.
Reference
Citations & Metadata
Citation
12 U.S.C. § 2609
Title 12, Banks and Banking
Last Updated
Sep 23, 2026
Release point: 119-110