When a loan that has escrow balloons, how is the escrow handled when the Bank refinances the balance? Since an escrow account is already established, can it just continue? If so, is there a need for the escrow account opening disclosure...since escrow already exists? Or, should a short year statement be cut and the customer paid the balance of the escrow account with a new escrow account created? I don't think it matters, but we use the same note number and account on the computers system it just modified for the new terms...but new documents are signed.

If you are simply modifying the loan you would not need new disclosures. You would just continue the escrow until its next analysis.

We like to call them modifications, Dan, but a new note is signed along with all new disclosures, as applicable. So according to Reg Z, that would be a refinance.

If it is a refinance under Reg. Z then it would be a refinance under RESPA also and you would have to provide the proper initial escrow analysis based on the terms of the new loan. You can however disclose any surplus in the escrow as a credit in the 200 series of the HUD.