We use Zero-Option Monthly Premiums (ZOMP) as PMI from MGIC which eliminates mortgage insurance closing cost. There are no funds collected up front at closing and no reserves. The initial premium is not due until the month in which the borrower’s first monthly mortgage payment is made. There is no annual premium

My question is whether an escrow account analysis statement is required. (The current loan I am reviewing has no other escrows as insurance and taxes were waived).

Lending says it is not necessary since the mortgage insurance is monthly and there are no reserves collected or held in escrow account. Our computer however does show a monthly amount under an escrow section of the loan.


RESPA's Escrow definition is below. The PMI is added to the payment which seems to fit part of the definition but I am not sure and would appreciate any guidance. Thanks

"Escrow account means any account that a servicer establishes or controls on behalf of a borrower to pay taxes, insurance premiums (including flood insurance), or other charges with respect to a federally related mortgage loan, including charges that the borrower and servicer have voluntarily agreed that the servicer should collect and pay. The definition encompasses any account established for this purpose, including a ``trust account'', ``reserve account'', ``impound account'', or other term in different localities. An ``escrow account'' includes any arrangement where the servicer adds a portion of the borrower's payments to principal and subsequently deducts from principal the disbursements for escrow account items"

OK, I'll bite.

I disagree with your lending department's interpretation, because I don't think the definition of 'escrow' hinges on whether reserves are collected.

Take a second look at the RESPA definition - it talks about charges that both parties voluntarily agree that the servicer should collect & pay. That's what you're doing with the PMI premium.

I checked the definition of discretionary payments at 3500.17(o), but it doesn't fit because PMI is a settlement service (3500.2(b)(10)) and because it's required by the lender. (This last part assumes you wouldn't make the loan without PMI...)

In our shop, we take 2 months PMI reserve as a cushion at closing. Monthly premiums are listed in the initial & annual analysis, just like 'deposited' amounts from the customer payments and regular disbursements to other insurance companies or taxing authorities.

Hope this is helpful.

Ditto. The key element is that the lender has control over the consumer's money -- when it is collected and when the payments are made. That is what triggers RESPA's escrow rules.

Lucy, Bart - I appreciate the time you took to respond and will get back with our lending folks.