FDIC Proposes to Simplify Deposit Rules for Trusts, MSAs

The FDIC board today approved a proposal to simplify the deposit insurance rules for deposits of trusts and mortgage servicing accounts. Comments on the proposal will be due 60 days after publication in the Federal Register, and the American Bankers Association will file a comment letter.

Currently, the FDIC recognizes three different insurance categories for deposits held in connection with trusts: revocable trusts, irrevocable trusts, and irrevocable trusts with an insured depository institution as trustee. The proposed rule would merge the revocable and irrevocable trusts categories into a new “trust accounts” category. A depositor’s trust accounts would be insured in an amount up to $250,000 multiplied by the number of trust beneficiaries, not to exceed five—effectively limiting FDIC coverage for each grantor’s trust deposits to a total of $1,250,000.

The deposit insurance coverage provided in the “trust accounts” category would continue to remain separate from and in addition to the coverage provided for deposits held in a different right and capacity at the same bank, the FDIC said.

With regard to mortgage servicing accounts, the FDIC proposed that MSAs maintained by a mortgage servicer in an agency, custodial, or fiduciary capacity that are comprised of payments of principal and interest, would be insured for the cumulative balance paid into the account to satisfy principal and interest obligations to the lender, whether paid directly by the borrower or by another party, up to $250,000 per mortgagor.