A compliance guide related to a rule designed to simplify federal bank deposit insurance rules for trust and mortgage service accounts at small entities was released Wednesday by the federal agency that provides the insurance.
The rule, which takes effect April 1, 2024, and was published by the Federal Deposit Insurance Corp. (FDIC) in January, is aimed at making federal bank deposit insurance rules easier to understand, facilitating more timely insurance determinations for trust accounts in the event of a bank failure, and enhancing consistency of insurance coverage for mortgage servicing account deposits, according to the agency.
The compliance date, the agency pointed out, gives banks about two years to get ready for the new rule.
The new guide announced Wednesday, the agency said in a financial institution letter (FIL-23-2022), is aimed at helping insured depository institutions and community banking organizations in understanding and preparing for the changes in deposit insurance coverage.
Among other things, the FDIC FIL pointed out that the compliance guide notes that the final rule expands the current per-borrower coverage of up to $250,000 to include any funds paid into the account to satisfy the principal and interest obligation of the mortgagors to the lender. “Some depositors within excess of $1.25 million in trusts deposits at a particular IDI (insured depository institution) may want to make changes given the new coverage limits that take effect on April 1, 2024,” FDIC said.
The final rule also, the agency stated, amends the deposit insurance regulations by merging the revocable and irrevocable trusts categories into one category