I wanted to get other compliance personnel's take on the initial escrow account calculations, specifically in situations where a Tax amount is due the same month as the initial payment.
We have a county tax due December 2016, which is also when the initial escrow payment is scheduled to occur. The full amount of the County tax is being collected at closing. The issue I am having is that technically the next payment of County taxes in December 2017 does not fall into the initial escrow computation year, as this ends with the November 2017 payment. How do you account for this amount. If we fail to collect anything in escrow, then the borrower will have a big lump sum due all at once in December 2017. If we do collect then we have an issue with the initial escrow account analysis, because it doesn't seem like it would be included in the initial computation year. There is also the issue with collecting the cushion for similar reasons. Do you not setup a cushion and just collect the monthly? Do you have a big negative every year in December when the payment is due?
Thank you for your time and assistance.