Opinion ID: 378909
Heading Depth: 2
Heading Rank: 2

Heading: Escrow account

Text: 28 The Real Estate Settlement Procedures Act imposes certain limits on the amount that a lender may require a borrower to deposit in an escrow account with respect to taxes and insurance. The relevant section of the Act provides that: 29 No lender, in connection with a federally related mortgage loan, shall require the borrower or prospective borrower 30 (1) to deposit in any escrow account which may be established in connection with such loan for the purpose of assuring payment of taxes and insurance premiums with respect to the property, prior to or upon the date of settlement, an aggregate sum (for such purpose) in excess of 31 (A) in any jurisdiction where such taxes and insurance premiums are postpaid, the total amount of such taxes and insurance premiums which will actually be due and payable on the date of settlement and the pro rata portion thereof which has accrued, or 32 (B) in any jurisdiction where such taxes and insurance premiums are prepaid, a pro rata portion of the estimated taxes and insurance premiums corresponding to the number of months from the last date of payment to the date of settlement, 33 plus one-twelfth of the estimated total amount of such taxes and insurance premiums which will become due and payable during the twelve-month period beginning on the date of settlement. 34 12 U.S.C. § 2609. 7 The Vegas contend that they were required to deposit an excessive sum in an escrow account for the payment of taxes. 8 35 The only dispute between the parties is as to the meaning of one-twelfth of the estimated total amount of such taxes and insurance premiums which will become due and payable during the twelve-month period beginning on the date of the settlement. It seems clear, both from the statutory language and its legislative history, that this clause refers to one-twelfth of the annual taxes payable on the property. Applying this construction of the statute, the Vegas were not required to deposit an excessive sum in escrow for the payment of taxes.