Can a private lender create an impound account for home buyer?

[Christine Kielpinski]

Hi there,

First time posting!  We're in the process of closing on a house for our employee of many years. We are acting as the bank, setting up an installment note tied to deed, etc.  What is unusual with this one is that we'd like to set up an impound account to collect property taxes and home insurance payments from borrower monthly.  Is this doable as a private lender? It looks like there are rules banks must follow like: don't collect too much, pay interest on impound funds. Not sure where to find this information or if I'm missing any crucial rules/regulations . . . We're in California.

Thanks in advance for any guidance.