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Late Payment Charges Paid by Escrow Funds
Answer by Dan Persfull, BOL Guru
Guru Bios
Question: On the "Late Charges and Escrow Analysis" Q & A, you responded that an escrow fund cannot be used to pay off late charges, however, a very prominent lending institution includes the statement in their payoff quotes that "if the payoff remittance is insufficient to pay the total amount secured by the mortgage, we will withdraw funds from the borrower's escrow account, if available, to complete such payoff." If the payoff amount included late payment charges can the escrow funds still be withdrawn and applied to the payoff amount without having to get the borrower's permission?
Answer: They cannot arbitrarily use the surplus in the escrow account to reduce the amount owed. RESPA is specific in that escrow surpluses in excess of $50 must be refunded to the borrower. If they receive an amount insufficient to payoff the amount quoted then they should contact the appropriate person to submit the shortage and not release their mortgage until the shortage is received. All payoff quotes should include any unpaid accrued late fees or any other unpaid accrued fees.
First published on BankersOnline.com 4/14/08
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