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4000 - Advisory Opinions

Insurability of Church-related and Mortgage Servicing Escrow Accounts


November 19, 1993

Walter P. Doyle, Counsel

Thank you for your November 12 letters to Claude Rollin concerning deposit insurance coverage of church-related accounts and of escrow accounts.

As to church-related accounts, coverage depends essentially on what entities have ultimate ownership and control over the funds on deposit and, in some cases, on the operational purpose of such entities. Under § 330.9 of our regulations (12 C.F.R. 330.9), deposits of church-related corporations and unincorporated associations at any one insured institution are insured separately up to $100,000 per entity unless the entity is operated primarily for the purpose of increasing deposit insurance.

In general, FDIC coverage is based on actual ownership of deposited funds, and State law plays an important part in determining that ownership, as do the account records of the insured depository (12 C.F.R. 330.3(h)).

In practice FDIC normally presumes accounts to be owned as indicated on the records of the depository and pays claims accordingly; however, it does have authority to determine actual ownership on the basis of all available evidence and to pay claims on that basis (12 C.F.R. 330.4(a)).

The crucial issue, then, is who actually has ultimate authority over the funds on deposit. Daily operational control is not determinative, but rather ultimate legal entitlement. In some cases this is the local church or church-related organization. In other circumstances such ownership ultimately resides at a higher echelon of the denominational structure.

Of course, church-related funds on deposit could also be held subject to a trust and, thus, insurable under § 330.8 (revocable) or § 330.11 (irrevocable).

I hope these general principles are helpful for your purposes. Obviously, the extent of FDIC coverage in a specific situation depends on the precise facts of that case.

You also inquire whether pass-through insurance for a commingled escrow account maintained by a mortgage loan servicing company at an insured institution on behalf of various mortgagors for taxes and insurance premiums would be abrogated by virtue of the fact that one or more of the constituent mortgagors' escrow accounts might be overdrawn at the time of the depository institution's failure. I've been unable to substantiate your memory in this regard and am of the opinion that the interest of any such overdrawn mortgagors in the commingled escrow account would be zero, but that other mortgagors with credit balances at the mortgage servicing company would continue to be entitled to pass-through coverage.

Please let us know if we can be of further assistance.

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