FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
Deposit Insurance Coverage for Mortgage Servicing Accounts
September 22, 1989
Claude A. Rollin, Senior Attorney
I am writing to bring to your attention a provision in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (the "FIRRE Act") which mandates a change in the deposit insurance coverage afforded by the FDIC to certain mortgage servicing accounts maintained with FDIC-insured banks.
Section 402(d)(1) of the FIRRE Act provides, in relevant part, that "amounts held in custodial accounts in insured depository institutions (as defined in section 3(c)(2) of [the FDI] Act) for the payment of principal, interest, tax and insurance payments for mortgage borrowers, shall be insured under the Federal Deposit Insurance Act in the amount of $100,000 per mortgage borrower." The term "insured depository institution" is defined, in section 3(c)(2) of the FDI Act, to include both FDIC-insured banks and FDIC-insured savings associations that were insured by the FSLIC prior to the enactment of the FIRRE Act.
Accordingly, custodial accounts comprised of principal and interest payments by mortgage borrowers ("P & I payments") maintained at FDIC-insured banks which have heretofore been insured on a per investor (mortgage owner) basis must now be insured on a per mortgagor (mortgage borrower) basis. Accounts comprised of tax and insurance premium payments by mortgage borrowers ("T & I payments") have heretofore been insured on a per mortgagor basis and thus the FIRRE Act does not mandate any change in insurance coverage for those accounts. Pursuant to section 402(d)(2) of the FIRRE Act, such insurance coverage is mandated only until the FDIC adopts uniform deposit insurance regulations for deposits in all insured depository institutions.
With respect to custodial accounts comprised of either P & I payments or T & I payments which are maintained at savings associations that became FDIC-insured as a result of the enactment of the FIRRE Act, there is no change required in the insurance provided for such accounts. This is because the FSLIC had insured both types of accounts on a per mortgagor basis prior to the enactment of the FIRRE Act and the FDIC is required to follow the FSLIC's rules and interpretations relating to deposit insurance coverage until such time as the FDIC adopts uniform deposit insurance regulations.