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4000 - Advisory Opinions


Bank's Practice of Carrying Tax and Insurance Escrow Funds on General Ledger Does Not Affect Eligibility for Deposit Insurance Coverage of Such Funds

FDIC--92--64

September 18, 1992

Lisa M. Stanley, Senior Attorney

This is in response to your letter of August 19, 1992 and our recent telephone conversations in which you requested an opinion on [Bank]'s practice of carrying tax and insurance escrow funds in general ledger form rather than in a demand deposit or savings account and on the deposit insurance coverage of such funds.

For the reasons set forth below and based upon the information submitted to us, we have determined that [Bank]'s practice of carrying tax and insurance escrow funds on the general ledger does not affect the eligibility for deposit insurance coverage of such funds. Further, tax and insurance escrow accounts maintained by [Bank] as a mortgage servicer would be added together and insured in an amount of up to $100,000 for the ownership interest of each mortgagor in such accounts, provided the recordkeeping requirements of 12 C.F.R. § 330.4(b) are met. We are unable to express an opinion concerning [Bank]'s satisfaction of recordkeeping requirements as you did not provide us with information on recordkeeping.

Section 7(a)(4) of the Federal Deposit Insurance Act (the Act) generally requires insured depository institutions to report the total amount of liability for deposits in their main offices and in certain branch offices according to the definition of the term "deposit" in the Act. As defined in the Act, the term "deposit" includes escrow funds.

For our review, you enclosed copies of [Bank]'s certified statement of insurance assessment filed with the FDIC for the period ending June 30, 1992 and the supporting Thrift Financial Report (TFR) schedules. Although amounts in escrow accounts are reported separately from amounts in deposit accounts on the TFR, escrow funds are added to time and savings deposits on the certified statement of insurance assessments filed with the FDIC. Thus, [Bank]'s escrow accounts are a part of its deposit base for purposes of calculating its deposit insurance assessment.

The FDIC's deposit insurance regulation defines "deposit account records" to include "account ledgers." 12 C.F.R. § 330.1(d). Accordingly, the practice of carrying tax and insurance escrow funds in general ledger form rather than in a demand deposit or savings account does not affect the eligibility of such funds for deposit insurance coverage.

In determining the amount of insurance available to a depositor, the FDIC presumes that deposited funds are actually owned in the manner indicated on the deposit account records of the insured institution. 12 C.F.R. § 330.4(a). In the case of mortgage servicing accounts, our regulations provide that the interest of each beneficial owner may be determined on a fractional or percentage basis. 12 C.F.R. § 330.4(b).

The FDIC will not recognize a claim for insurance coverage based on a fiduciary relationship which is not evident from the deposit account records of the insured institution. 12 C.F.R. § 330.4(b). Deposit account records must expressly disclose, by specific reference, the existence of any fiduciary relationship, including relationships involving a custodian, pursuant to which funds in an account are deposited and on which a claim for insurance coverage is based. Id. We are unable to ascertain from the information you provided whether [Bank]'s recordkeeping satisfies these requirements.

Deposit insurance coverage for mortgage servicing custodial accounts is determined pursuant to the FDIC's regulation at 12 C.F.R. § 330.6(d). 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 are added together and insured up to $100,000 for the ownership interest of each mortgagor in such accounts. All tax and insurance escrow funds of an individual mortgagor at the same depository institution would generally be combined for insurance purposes regardless of the number of underlying mortgage loans.

Please write to me at the above address or call me at (202) 898-7494 if you have any further questions.


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