Overview
Unless prohibited by applicable law, or granted a waiver by Pennymac, the Seller must, pursuant to the guidelines set forth in this Delivery Procedure, establish an escrow/impound account for each mortgage loan sold to Pennymac. Mortgage Loans with an established escrow/impound must include the Initial Escrow Account Disclosure (IEAD) in the file.
The IEAD shall include the amount of the borrower’s monthly mortgage payment and the portion of the monthly payment going into the escrow account and shall itemize the estimated taxes, insurance premiums, and other charges that the servicer reasonably anticipates to be paid from the escrow account during the escrow account computation year and the anticipated disbursement dates of those changes.
Note: The escrow/impound account must include a two-month escrow cushion for all items with the exception of mortgage insurance, in which no cushion is to be established.
Exceptions to the two-month cushion policy exist for properties located in the following states:
- Limited to one month: MT
- Zero months: ND, NV
The following defines the premiums that may be paid from a Pennymac Escrow/Impound account:
Held and paid from a Pennymac Escrow Account (as applicable)
- Real estate taxes
- Hazard insurance premiums
- Flood insurance premiums
- Mortgage insurance premiums
Not held or paid from a Pennymac Escrow Account:
- Ground rents
- Water or sewer taxes
- Homeowner’s association dues
- Fire hydrant taxes
- Refuse taxes
- Tax service fees
- Special assessments
PUD and Condos
The Seller is responsible for complying with all applicable federal, state, and local laws and regulations relating to the creation of escrow/impound accounts and, prior to the transfer of the escrow account to Pennymac, and the maintenance thereof.
Escrow/impound deposits are not required to cover hazard insurance premiums for individual condominium or PUD units if the project containing the unit is adequately covered by a blanket hazard insurance policy purchased by the homeowners association.
Escrow Waiver
In certain states and counties, certain borrowers may not be required to pay property taxes. If a property tax escrow is normally required and the loan is delivered without a property tax escrow, the Correspondent must provide explicit evidence showing the borrower is not required to pay property taxes.
The Correspondent may waive the real estate taxes and hazard insurance escrow/impound account specification with respect to conventional mortgage loans, if the loan-to-value (LTV) is 80% or less (90.00% in California), but the standard escrow provision must remain in the mortgage loan documents. If a waiver is used, there may be a pricing impact as noted on the rate sheet.
The Correspondent’s waiver of the right to collect escrow/impound funds must not weaken the right of Pennymac to subsequently enforce the escrow provision contained in the mortgage loan documents in the event that the borrower fails to act responsibly.
Escrow Accounts That May Not Be Waived
If flood insurance is required, an escrow/impound account for flood insurance premiums is required on all loans, regardless of LTV or investor. The only exception to this requirement is for Condominiums and PUDS where the master policy flood insurance premium is paid by the HOA. HO-6 flood policies, where required, must be impounded if flood insurance is required.
An escrow account for the payment of monthly premiums for borrower-purchased mortgage insurance (if applicable) is required for all loans with an LTV greater than 80.00% and may not be waived.
New York Co-op Loans
Pennymac does not accept mortgages for cooperative share (Co-Op) loans.