4000 - Advisory Opinions
Custodial Accounts: Insurability of Mortgage Servicing Accounts
December 15, 1994
Dirck A. Hargraves, Attorney
This letter is in response to your October 31, 1994 letter to Ms. Josi Tucker of the FDIC's Division of Compliance & Consumer Affairs, which was forwarded to me.
Based on your correspondence, it is my understanding that Bank maintains custodial accounts (mortgage servicing accounts) on behalf of the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation and Government National Mortgage Association. Bank, as a part of its fiduciary obligation, maintains separate principal and interest ("P & I") and, taxes and insurance ("T & I") bank accounts for the collection of the remitted mortgage payments. Bank deposits the principal and interest portion of the mortgage payments into the P & I account, while the escrow portion of the payment is deposited into the T & I account. As the mortgage servicer for numerous mortgagors, Bank collects and disperses the tax and insurance payments from mortgagors when due. You request clarification on how the FDIC insures mortgage servicing accounts.
As you may be aware, part 330.6(d) of the FDIC's regulations, 12 C.F.R. § 330.6(d), provides:
Accounts maintained by a mortgage servicer, in a custodial or other fiduciary capacity, which are comprised of payments by mortgagors of principal and interest, shall be added together and insured in the amount of up to $100,000 for the interest of each owner (mortgagee, investor or security holder) in such accounts. Accounts maintained by a mortgage servicer, in a custodial or other fiduciary capacity, which are comprised of payments by mortgagors of taxes and insurance premiums shall be added together and insured in the amount of up to $100,000 for the ownership interest of each mortgagor in such accounts.
Accordingly, the FDIC provides insurance coverage of up to and interest payments ("P & I payments") on a per owner (mortgagee, investor or security holder) basis. The FDIC also provides insurance coverage of up to $100,000 for mortgage servicing accounts comprised of tax and insurance premium payments ("T & I payments") on a per mortgage borrower (mortgagor) basis. Since these accounts are custodial in nature, part 330.6(a) provides that the principal's interest in these types of accounts will be aggregated with any individually owned (single ownership) account(s) that the principal may have at the same insured depository institution.
Thus, if an individual owner has interests in more than one mortgage account held in Bank P & I account, those interests would normally be aggregated and insured for up to $100,000. In addition, if an owner maintains single ownership accounts, or corporate accounts if the owner is a corporation, at American Savings, the owner's interests in the P & I account would be aggregated with those other accounts for deposit insurance purposes.
With respect to the T & I account that Bank maintains, the FDIC will provide up to $100,000 insurance coverage for the interest of each mortgagor. However, if an individual mortgagor has interests in more than one mortgage account held in Bank T & I account, those interests would be aggregated for insurance purposes. Moreover, to the extent that a mortgagor maintains single-ownership accounts at Bank, the mortgagor's interests in the T & I account would be added to those single ownership accounts at the Bank, prior to applying the $100,000 insurance limit.
In summary, each mortgagee's interest in P & I account and each mortgagor's interest in T & I account held at Bank in mortgage servicing accounts would be separately insured for up to $100,000. Should either the mortgagors or mortgagees have single ownership or corporate accounts at Bank, these accounts would be aggregated with the mortgagors' and mortgagees' respective interests in all mortgage servicing accounts held at Bank and insured for up to $100,000.
I hope this is fully responsive to your questions. If you have additional questions or comments, feel free to call me at (202) 898-7049.