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#1185394 - 05/18/09 03:59 PM
Escrows and Pay Offs
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Gold Star
Joined: Jan 2005
Posts: 375
NM
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I just tried doing a search and couldn't find a question that fits mine. Our system is set up to quote payoffs by taking the principal balance plus accured interest and minus the esrow balance. However, during a training seminar we were told that we can't do that; but we weren't given the citation in the regulation that backs up the statement. Where can I find this information in the regulation or is it just a best practice to refund the entire escrow back to the customer?
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#1185650 - 05/18/09 07:10 PM
Re: Escrows and Pay Offs
Denovo Co
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10K Club
Joined: Aug 2002
Posts: 47,673
Bloomington, IN
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There has been a lot of debate on this issue. And for the most part I have in the past agreed with the contention that you could not deduct the escrow balance from the payoff figure.
However I want to throw this out for discussion.
3500.17(f)(2) states the following:
(i) If an escrow account analysis discloses a surplus, the servicer shall, within 30 days from the date of the analysis, refund the surplus to the borrower if the surplus is greater than or equal to 50 dollars ($50). If the surplus is less than 50 dollars ($50), the servicer may refund such amount to the borrower, or credit such amount against the next year's escrow payments.
and 3500.17(i)(4)
(iii) Short year statement upon loan payoff. If a borrower pays off a mortgage loan during the escrow account computation year, the servicer shall submit a short year statement to the borrower within 60 days after receiving the payoff funds.
If I look at the escrow account and it shows a positive balance of $X I subtract it from the payoff quote, on the other hand if it shows a negative balance of $X I add it to the payoff quote.
In either case I have not performed an escrow account analysis, therefore I do not fall under the direction of .17(f)(2).
Once the payoff is received and processed I perform the shot year analysis required by .17(i)(4). This analysis will result in a neither a shortage or surplus balance, or at least it shouldn't. However, if it does, for whatever reason, result in a surplus then I follow the requirements of .17(f)(2). If it results in a shortage, then I attempt to collect as allowed by .17(f)(3).
Opinions please.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1186253 - 05/19/09 03:49 PM
Re: Escrows and Pay Offs
Dan Persfull
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10K Club
Joined: Aug 2002
Posts: 47,673
Bloomington, IN
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bump
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#1248231 - 09/10/09 06:25 PM
Re: Escrows and Pay Offs
Dan Persfull
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Power Poster
Joined: Nov 2008
Posts: 4,132
Somewhere in the middle
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Bump again,
Is there no clear answer (I know what am I thinking and clear answer from HUD) as to whether the Escrow Balance can be applied to a payoff quote?
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I'm only responsible for what I say, not for what you understand.
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#1248458 - 09/10/09 10:04 PM
Re: Escrows and Pay Offs
DD Regs
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10K Club
Joined: Nov 2000
Posts: 18,765
Central City, NE
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This is a gray area - obviously from the lack of response. My personal opinion is that escrow money can never be applied to the loan balance. This opinion comes from the HUD Q&A that addresses loans that are past due and applying a surplus to the loan. HUD states this not the lender's money and it can't be applied. Therefore, I believe any escrow balance should not be netted in a loan payoff - whether short or long. As Dan quoted: 3500.17(i)(4) (iii) Short year statement upon loan payoff. If a borrower pays off a mortgage loan during the escrow account computation year, the servicer shall submit a short year statement to the borrower within 60 days after receiving the payoff funds.You MUST complete an escrow analysis when receiving a loan payoff so you can calculate the short year statement. Dan said "In either case I have not performed an escrow account analysis, therefore I do not fall under the direction of .17(f)(2)." I believe you have per the direction of §3500.17(i)(4)(iii) to conduct a loan payoff (short year) statement. Let's see what discussion this creates.
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#1264440 - 10/09/09 02:07 PM
Re: Escrows and Pay Offs
David Dickinson
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10K Club
Joined: Aug 2002
Posts: 47,673
Bloomington, IN
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David, I scanned the new FAQ and found nothing related to payoffs and the escrow balance. I did see the question where "transferred" escrow balances are to be shown in the 200 serious. However, I read that to apply to an in-house refinancing and not when a payoff is received from an outside source. 3) Q: Where should the transferred escrow balance in a refinance transaction be listed on the HUD-1?
A: The transferred escrow balance should be listed as a credit in lines 204-209 of the HUD-1. I'm not going to be transferring any escrow balance to a new lender. )." I believe you have per the direction of §3500.17(i)(4)(iii) to conduct a loan payoff (short year) statement. That section requires you to perform the short year statement within 60 days of receiving a payoff, not quoting a payoff. Quoting a payoff does not automatically equate to receiving one. Therefore would you expect a bank to do a short year statement each time a payoff quote request was received? Again, as you and I both said this is a gray area and I'm not sure there is a clear cut opinion from HUD. Like you David, I'm just offering an alternative opinion for discussion. (I know what am I thinking and clear answer from HUD) Do you have a clear answer from HUD?
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1265221 - 10/10/09 01:53 AM
Re: Escrows and Pay Offs
Dan Persfull
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10K Club
Joined: Nov 2000
Posts: 18,765
Central City, NE
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As I stated in my post, this is a gray area. Here is a Q&A from HUD concerning escrows. http://www.hud.gov/offices/hsg/ramh/res/resindus.cfmRefer to #39: If the borrower's escrow account includes a surplus greater than $50 which HUD's rules require be refunded, may the servicer credit the surplus directly to the principal, rather than refund the surplus to the borrower?
No. However, the servicer may inform the borrower in the information accompanying the return of the surplus that the borrower may elect to use the refund to reduce principal or have it credited against the next year's escrow payments. I agree the new rules are referring to an in-house refinance. This Q&A makes it clear to me the lender does not have the right to make a decision with what to do with the borrower's escrow money. You can hang on to the money up to 60 days after a loan payoff, but I don't believe you can apply it to the principal amount.
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#1462670 - 11/02/10 07:08 PM
Re: Escrows and Pay Offs
Glutes
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Platinum Poster
Joined: Dec 2005
Posts: 597
Texas
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#1462695 - 11/02/10 07:23 PM
Re: Escrows and Pay Offs
Dan Persfull
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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But, I know at least 3 of us (included Dan) have submitted a request for clarification to HUD, so maybe we'll get an answer sooner than later!
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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