United States: FDIC offers simplified and expanded deposit insurance for trusts and mortgage accounts
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FDIC proposed amend deposit insurance rules by (i) merging revocable trusts and irrevocable trusts under the newly created category of “trust accounts” and (ii) providing a consistent regime for mortgage servicing accounts consisting of principal and interest.
For trust accounts, the proposed amendments will create a general rule that a trust deposit will be insured up to $ 250,000 per beneficiary for five beneficiaries. This would mean a maximum coverage of US $ 1,250,000 per owner per insured depository institution.
With regard to mortgage servicing accounts, the proposed amendments would provide insurance for advances to servicers against principal and interest on behalf of mortgage holders up to $ 250,000 for each mortgagor.
FDIC Chair Elena McWilliams stated The proposal aims to provide depositors with access to their insured deposits in the event of a major bank failure, citing the 2008 IndyMac bankruptcy as a case where insured depositors were unable to access insured funds for several months. In addition, Ms McWilliams said the proposed rule-making would make it easier for depositors and bankers to understand trust rules, given that half of all insurance requests received by the FDIC are related to trust accounts.
Comments on a proposal must be submitted within 60 days of its publication in the Federal Register.
The content of this article is intended to provide general guidance on the subject. You should seek professional advice regarding your specific circumstances.
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