Our document provider is calculating the Escrowed Property Costs over Year 1 table on page 4 by taking the total of payments to the escrow account from the loan until exactly 1 year from the loan date. Generally there are only 11 monthly payments during the first 365 days of loan.

I interpret the wording next to the check box to be that the amount below would be the payouts from the escrow account over the next 365 days, not payments to the account. Specifically, the sentence "Without an escrow account, you would pay them directly", means that that number should be based on payouts rather than payments into escrow.

Is there any other guidance on that table? The CFPB form guide doesn't clarify this issue, however, you can do the calculation from the CFPB sample disclosure and it would equal 12 payments or the total payouts, not just the monthly payments to escrow.

We're also having this issue at our bank. Our system is calculating 11 months * the monthly escrow payment. The closing attorney's system is calculating 12 months * the monthly escrow payment.

Which one is correct?

Thanks.

This just came up here too.
We're digging to see if we can find anything.

I did find the explanation in the reg this morning. 1026.38(l)(i)(A)(1) does say "The total amount the consumer will be required to pay into an escrow account over the first year after consummation for payment of the charges". Even though it doesn't seem logical to do it that way since they will most likely only have 11 payments into escrow during the first year it does specially say into the account.

To further complicate the issue, the commentary says (referring to the LE) "The creditor complies with this provision by disclosing the amount of such charges used to calculate the estimated taxes, insurance, and assessments disclosed pursuant to § 1026.38(c)(1) as the total amount scheduled to be paid during the first year after consummation." I'm assuming that you still use the payments into rather than out of though.

What doesn't seem right is if it's not escrowed, you would use the amount that will not be paid from the account, which will likely be higher and more accurate being all taxes and insurance for a year instead of 11 payments. Unless you also added in the initial deposit which would then probably overstate the true "cost" if that's what the CFPB is going for.

***BUMP***

We are seeing this as well, anyone reached out to CFPB/outside council on this. The sample forms point to 12 months, reg appears to reference 11 and we are seeing different LOS's refer to both 11 and 12.

Did anyone get more information on this? We are having the same issue as well.

Thanks!

Bump

Another bump.

Without being able to see how your software works I'm not going to attempt to make a guess on their calculations. However the escrow account computation year is not 365 days nor is it 11 months. It is the 12 month period from the date of the first payment. See 1024.17(b) - Escrow account computation year.

If the initial payment is due 12-1 then your computation year runs from 12-1 to 11-1 and includes the scheduled payments and payouts for those dates.

Someone write the CFPB and ask them. Logic says twelve payments, the regulation reads 11 as that is all the payments that will be made in the first year after consummation if you have odd-days interest.

Any update on this....

Ideally we should go with regulation but, as sample provided by CFPB is showing 12 payments, there is possibility of interpretation gap.

I don't know, did anyone write to the CFPB??

Can someone explain the concern here because it seems to be going over, or through, my head?

If the loan closes on 11-1 then the first year after consummation ends on 11-1 of the following year so in my calculation 12 payments will be collected in that year (12/1 - 11/1) and 1026.38(c) informs you to follow 1024.17 for projecting the escrow payments so the projected payments would be based on the RESPA computation year (again 12/1 - 11/1).

I think the following comment from Avinash is the current situation - there is possibility of interpretation gap.

I'm gone until 1/4/16 after noon today so I won't be back in the threads until then...hopefully by then this will be resolved.

This is the hang-up: 1026.38(l)(7)(i)(A)(1): calculated as the amount disclosed under paragraph (l)(7)(i)(A)(4) of this section multiplied by the number of periodic payments scheduled to be made to the escrow account during the first year after consummation;

If the loan closes 11/15/15, the first year after consummation ends 11/15/16. If this is a loan that has 15 days of odd days interest and the first payment is not due to 1/1/16, only 11 payments will have been made.

I submitted this question to the CFPB last week. I don't hold out much hope that they will indicate to always use 12 months however. Has anyone else submitted the question? Any response from them?

Our system is using the 11 mo. due to odd days interest collected on Fannie loans. Loans closed in Jan '16 first payment starts 03-01-16. That's only 11 pmts. made in first year. Any word from the bureau.

Nothing yet.

I didn't look in other threads to verify if this was resolved, so for that I do apologize, but would this be a case by case basis where, depending on consummation date, some loans may pay 12 months over Year 1 whereas others may only pay 11 months over Year 1, perhaps there is no "always use 12 months" or "always use 11 months". Any response from the CFPB?

Ok--So I heard from the CFPB. Apparently, they lost my original submitted question and somehow located it...(hmmmm) Here's a summary of the response I received.

The attorney indicated that the CFPB is aware of the confusion and due to the confusing and inconsistent language in the rule, the CFPB is permitting either of the following disclosure approaches for boxes 1 and 2 of the Escrow Account IS Established Table:

1. Amounts that are the sum of either 11 or 12 months of escrow payments depending on the number of escrow payments collected in the first year beginning on the date of the note; or
2. Always disclose 12 months of payments

The attorney indicated that the approach taken for box 2 (where an escrow is established but there are costs not included in the escrow such as HOA dues, the method used to determine the amount (option 1 vs 2) should be consistent with that used to determine the amount to disclose in box 1. This means that if you disclose the sum of 11 months of payments for the escrowed costs over 1 year, you should also use 11 months for the disclosure of any non-escrowed property costs in box 2.

FYI--He also indicated that the same is true for disclosure of the 1 year costs disclosed in the "no escrow table" -- we may use either the 11 or 12 month approach or always disclose 12.

I'm not feeling warm and fuzzy with this response, but since I promised to follow up I feel obligated to pass the info along. At this point we are using the disclosure approach produced by our vendor which is option 1 above.

Thanks for the follow-up - be it what it may