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#1871711 - 11/15/13 06:32 PM Escrow - Customer in Default
Lele Offline
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Lele
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We service a mortgage where we bill for the escrow. The customer has defaulted and has not made a payment for over 90 days. What are our options? Where do I start to find information on what we should be doing in cases like this?
Thanks!
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#1871761 - 11/15/13 07:31 PM Re: Escrow - Customer in Default Lele
rlcarey Online
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You mean beside moving to foreclosure at a rapid pace??

You have no responsibility to do an annual escrow analysis when the customer is part due. Do you mean making payments on insurance and taxes?? I guess I'm not sure of your question.
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#1871812 - 11/15/13 08:42 PM Re: Escrow - Customer in Default Lele
Lele Offline
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I did see we do not have to send out the annual escrow analysis since they are delinquent. Yes, the question is, what to do about making the payments for the insurance and taxes since the customer is not making any payments.
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#1871892 - 11/15/13 10:20 PM Re: Escrow - Customer in Default Lele
rlcarey Online
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Well, I would think the bank would want to make them regardless to protect the collateral. When you said you service - does that mean you are just the servicer? If so, you would have to refer to your servicing agreement.
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#1871922 - 11/15/13 11:25 PM Re: Escrow - Customer in Default Lele
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We generally do not escrow or service loans except in this case- it came from an affilate because it could not be sold on the secondary market. We did force-placed insurance. We are trying to find ideas if possible to lessen the burden on the bank without violating any escrow regs. We will review the Service Agreement. Was hoping there were general rules for delinquent loans with escrow provisions.
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#1871936 - 11/16/13 12:49 PM Re: Escrow - Customer in Default Lele
rlcarey Online
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Well, the general rules are here:

http://www.bankersonline.com/regs/12-1024/12-1024-017.html

Section k addresses making payments out of the escrow and if the customer is more than 30 days past due, then it relieves the bank from those requirements also. It becomes a safety and soundness issue.
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#2023645 - 06/29/15 11:54 AM Re: Escrow - Customer in Default rlcarey
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So, if the bank has charged off the loan, does it still have to advance funds to pay taxes and insurance on the property? I realize it's a safety and soundness issue, but could the bank decide to accept the risk and not expend any more money for an uncollectible debt?
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#2023681 - 06/29/15 01:53 PM Re: Escrow - Customer in Default Lele
rlcarey Online
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Charge-off is an accounting function.


The servicer must advance funds to make disbursements in a timely manner as long as the borrower's payment is not more than 30 days overdue.
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#2023692 - 06/29/15 02:12 PM Re: Escrow - Customer in Default rlcarey
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I understand that charge-off is an accounting function, but the loan was charged off because the customer was more than 30 days delinquent and the bank determined the loan to be uncollectable. I just want to know if the bank has to, by law, maintain the insurance or if it can decide not to.
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#2023694 - 06/29/15 02:17 PM Re: Escrow - Customer in Default Lele
rlcarey Online
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If the bank has deemed the loan uncollectable, then I would say maintaining the security interest in the property is likely to be considered a UDAAP by the regulators.

There is no regulatory requirement to maintain insurance on any property - other than flood insurance - which transcends any delinquency or charge-off.

I mentioned charge-off because the regulations have nothing to say about it. Delinquency is the only key event.
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#2023701 - 06/29/15 02:41 PM Re: Escrow - Customer in Default rlcarey
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Thanks, Randy. I appreciate your help.
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