Will the bank lose its exempt status as a small creditor under the HPML escrow rule as a result of being required to escrow for flood insurance?
Yes. The small creditor exemption in the HPML escrow rule requires, among other things, that the Bank, together with its affiliates, does not escrow for any mortgage it or its affiliates currently services (with two unrelated exceptions). If the Bank is required to escrow for flood insurance on even one of its loans, it will fail to meet this requirement.
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