Operational Escrow Accounts

Refers to deposits from counterparties that are operational deposits as defined in the LRM Standards in the form of operational escrow deposits. Operational escrow deposits refers to an account that a designated third party (e.g., a servicer) establishes or controls on behalf of another party to process transactions such as the payment of taxes, insurance premiums (including flood insurance), or other charges with respect to a loan or transaction, 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. With respect to, e.g., mortgage escrow accounts, 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. For purposes of this section, the term "escrow account" excludes any account that is under the servicer's total control (e.g., payments collected by depository institution secured by real estate and other loans serviced for others that have not yet been remitted to owners of the loans)