Tax Escrow Reporting Responsibilities of Mortgagees - Q1 2000

By the Division of Banks

The issue raised is whether a mortgage company may file a property tax escrow report containing information for all of the escrowed Massachusetts loans it subservices or whether each client must file a separate report is governed by Massachusetts General Laws chapter 183, section 61.

A mortgage company is the holder of Massachusetts collection agency license, and its principal business is the contract subservicing of mortgage loans for its clients. As a subservicer, the mortgage company is rarely, if ever, named the mortgagee of record. The mortgage company's subservicing clients either own the subserviced mortgage loans; own beneficial interest in the subserviced loans; or own the servicing rights to mortgage loans owned by other mortgage investors.

Massachusetts General Laws chapter 183, section 61 requires that a mortgagee holding a first mortgage on an owner-occupied one-to-four family household which requires advance payments of real estate taxes on the property must pay interest on such advance payments. The interest is to be paid once a year at a rate and in a manner to be determined by the mortgagee. The remaining provisions of the law require such mortgagees to file an annual report showing the interest paid and other related financial information. It also requires the Division to maintain as a public record an annual report on the interest rates paid on tax escrow accounts by such mortgagees.

The statute imposes the requirements relative to escrow accounts on mortgagees, regardless of whether they choose to enter into contractual arrangements with Mortgage Company or its affiliates. The responsibility for filing each mortgagee's report with the Division rests with the mortgagee, which has the option of contracting with entities such as Mortgage Company to prepare and/or submit the required reports in the name of the mortgagee. Since each mortgagee must meet its statutory reporting requirements, it is the position of the Division that Mortgage Company should submit the reports separately for each mortgagee, rather than in aggregate form.