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#2102450 - 10/10/16 04:10 PM Escrow Disclosure Issue
Compliance NABW Offline
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This kind of goes with my posting on Construction loans from a couple days ago. We do a single close/single disclose where escrow is not actually collected/setup until the house is completed and the permanent phase kicks in. Not sure if our LOS will let us do it like this, but because we have to try to capture all this on one set of disclosures here are my thoughts (which I want to see if others agree):

(1) On Page 1 of the LE in the ETI&A section under Projected Payments, we will answer "Yes" to the question "In escrow?"
(2) On Page 2 of the LE in Section G., we would leave the line items blank as the Regulation mentions amounts collected at "consummation." At consummation we do not collect any escrow funds.
(3) On Page 1 of the CD in the ETI&A section, we would answer "Yes" as noted above.
(4) On Page 2 of the CD, we would leave Section G. blank as we did with the LE.
(5) On Page 4 of the CD, we would check the box "will have an escrow account under "For now, your loan." This would require us to fill out the table below. For Escrowed Property Costs and Non-Escrowed Property Costs over Year 1, we would do our best to come up with an estimate of what these numbers would be. For "Initial Escrow Payment" we would have $0 because we do not collect anything at closing. For "Monthly Escrow Payment" we would have what the monthly amount will be when it is setup.

I know the CFPB didn't do a good job of understanding all the nuances that can occur with Construction Loans. I guess the main problem I see with my description style above is that there is no way to disclose the Escrow cushion that will be setup when the permanent phase begins, but I do not see any other way to disclose when using only one set of disclosures. Thank you for your time and assistance.

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TRID - TILA/RESPA Integrated Disclosures Rule
#2102452 - 10/10/16 04:22 PM Re: Escrow Disclosure Issue Compliance NABW
Compliance NABW Offline
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Joined: Oct 2015
Posts: 1,669
Now, I am confused again because the Regulations related to the CD also mentions Escrow amounts established at or before consummation. However, if you check the box "will not" have an escrow account, then that would not be accurate either because then it is saying the customer will have to pay all property costs directly, when in reality, there would always be a portion paid by the escrow that is setup after consummation.

Bottom line, the CFPB just really didn't do a good job of accounting for entities doing a single close/single disclosure Construction to Permanent product.

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#2102454 - 10/10/16 05:17 PM Re: Escrow Disclosure Issue rlcarey
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Thank you. The initial lay out?

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#2102455 - 10/10/16 05:20 PM Re: Escrow Disclosure Issue Compliance NABW
rlcarey Online
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rlcarey
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Galveston, TX
Sorry, I wanted to add another comment and deleted my first post. Yes - The initial layout.

I am fully assuming that you have an escrow agreement in place that outlines the fact that the consumer will be responsible for funding the escrow account at the time of conversion to the permanent funding phase based on an escrow analysis to be performed at that time. That establishes the legal obligation of the customer and supports the disclosure as you described.
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#2102463 - 10/10/16 06:37 PM Re: Escrow Disclosure Issue rlcarey
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Yep. Thank you for your assistance!

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#2102473 - 10/10/16 06:55 PM Re: Escrow Disclosure Issue Compliance NABW
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Well, RL, kind of. For some reason we use an in-house legal team to come up wit a lot of our lending documents, which tends to not work out so well in my opinion. The legal agreement does note that that escrow will be established when the permanent phase payments begin, but doesn't really go into performing an analysis, establishing a cushion, etc.

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#2102568 - 10/11/16 06:57 PM Re: Escrow Disclosure Issue Compliance NABW
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Of course our LOS will not let us disclose as I had outlined. If you put "Yes" in the ETI&A section on Page 1, then you have to have at least 1 month of payments show up in Section G.

Back to Square 1, lol.

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