Must Escrow be collected monthly? or should it be collected according to the repayment terms of the loan, quarterly or semi-annual payments?

Can Escrow be collected monthly even if the loan terms are quarterly or semi-annual?

Thanks!

We have a loan with escrow that was originated in March. It is being refinanced because the customer cannot make the quarterly payments. The loan will be refinanced with semi-annual payments due. The loan will be refinanced in August with a first payment due in February 2014. Therefore, the escrow analysis period will begin with the first payment in February and will cover the taxes due in 2014.

We have been collecting escrow quarterly on the original loan in March, although I think the customer is currently past due. Anyway, when this loan is refinanced and the escrow analysis is performed, since the taxes and hazard insurance for 2013 has not been paid yet, not due until October and December, the amount already paid in escrow is a surplus.

Now we have a gap. We do not think the customer will pay the 2013 taxes and insurance when the escrow money is returned. The new loan term will cause us to escrow for what is due in 2014. Can we collect 2013 taxes and hazard insurance as a requirement of the loan and we pay these debts directly in October and December 2013? This would mean that we have to hold on the money for a while.

This brings me back to the question above. With the new loan with a first P&I payment in February, can we collect escrow monthly from the first 30 days after the loan date and continue to collect monthly or does collecting escrow have to correspond with the P&I terms, in this case beginning February with semi-annual payments?

Any suggestions on how to handle this would be greatly appreciated!

When you set up an escrow account, you set it to pay bills over the upcoming year period. So you would definitely collect monies to pay the insurance and taxes that will come due in 2013 when you refinance.

In addition, if you go with PITI payments, the February payment will have to have half the 2014 taxes and insurance money paid with it and the rest paid with the second 2014 payment.

Further, all bills due within 60 days of closing should be paid at time of closing so the October tax bill should be paid when you close the refi.

Can I just say that if the borrower is having trouble making quarterly payments I'm not sure I understand how going to semi-annual payments is going to be better for them. Sounds like someone is just prolonging the trip south this loan is on.