FDIC Simplifies Coverage Rules For Mortgage Servicing Accounts

The Federal Deposit Insurance Corp.'s (FDIC) board of directors has adopted an interim final rule, effective immediately, to simplify the deposit insurance rules for accounts held at FDIC-insured institutions by mortgage servicers.

Under the FDIC's current rules, accounts maintained by a mortgage servicer comprising principal and interest payments made by borrowers are insured based on the ownership interest of each lender (or investor) in those accounts. Over the past several years, securitization methods and vehicles for mortgages have become more layered and complex.

Thus, it has become much more difficult and time-consuming for a servicer to identify and determine the share of any investor in a securitization and in the principal and interest funds on deposit at an insured depository institution, the FDIC says.

Under the interim rule, coverage will be provided to the lenders/investors, as a collective group, based on the cumulative amount of the borrowers' payments of principal and interest into the account. Because servicers are able to identify borrowers more quickly than investors, the per-borrower coverage provided for under the interim rule would enable the FDIC to make deposit insurance determinations on mortgage servicing accounts more quickly and to pay deposit insurance more quickly.

This insurance coverage afforded in connection with principal and interest payments in mortgage servicing accounts would not be aggregated with or otherwise affect the coverage provided to borrowers in connection with other accounts the borrowers might maintain at the same insured depository institution.

Source: Federal Deposit Insurance Corp.


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