INSIDER's Pop Quiz!
Q: You may not open multiple security deposit accounts at different banks for one site. True or false?
A: False. The balance in a security deposit account may not exceed the FDIC insurance limit, so if you collect more than the FDIC limit in security deposit funds at a particular site, you’ll have to open security deposit accounts at more than one bank to ensure that the account balances remain below the FDIC limits. Also, because the security deposit account balance is constantly changing as residents move in and out throughout the year, you must remain watchful and make sure that the balance doesn’t go over the FDIC limit at any time [Handbook 4381.5, par. 6.47(b); Handbook 4370.2, par. 2-9(A)].
For more information on complying with HUD rules when handling security deposits, see “Follow Eight Rules for Proper Handling of Security Deposits,” available to subscribers here.