When an escrow account is canceled during the term of a loan, the Truth in Lending Act generally requires an “Escrow Closing Notice” be provided to the consumer. If the consumer has requested the cancellation, the Notice must be in their hands at least three business days before closing the escrow account. Otherwise, the Notice must be in the consumer’s hands at least 30 business days prior to closing the escrow account. The Regulation provides a model notice, which we recommend using, as there are specific font size and other formatting requirements.
Keep in mind, there are some restrictions on canceling certain escrow accounts, including those created in connection with Higher-Priced Mortgage Loans (HPMLs) and, for certain creditors, escrow accounts that include flood insurance.
Jerod explains more in the video.