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#2178254 - 05/15/18 05:32 PM Construction to Permanent - Escrow
Comply Offline
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Registered: 07/09/15
Posts: 19
​We are working on a new product setup specific to a single closing Construction to Permanent financing mortgage loan. The escrow payments will not begin until the Permanent Financing begins. Are we required to provide the Initial Escrow Account Disclosure Statement at time of closing or when the permanent financing begins or can it be omitted?

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TRID - TILA/RESPA Integrated Disclosures Rule
#2178261 - 05/15/18 05:50 PM Re: Construction to Permanent - Escrow [Re: Comply]
rlcarey Offline
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Registered: 07/16/01
Posts: 67912
Loc: Galveston, TX
Since you cannot collect the initial deposit for the escrow account and then just hold it for a year, the escrow would not be reflected on a the CD nor would an initial escrow statement be required. You should be executing a future escrow agreement with the customer that sets forth the requirement to establish the escrow account as the construction portion of the loan is completed. At that time you would provide them with the initial escrow account statement.
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#2179011 - 05/21/18 03:50 PM Re: Construction to Permanent - Escrow [Re: Comply]
Comply Offline
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Registered: 07/09/15
Posts: 19
Can you help with giving me citations for this detail, for me to reference back to?
We would not show on our disclosures that we are escrowing? Currently our LOS system is showing the escrow amounts on the LE and CD and showing under section G. Our current intent was to collect the initial escrow at closing, and then collect escrow when P&I begins. Is this incorrect?

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#2193781 - 09/25/18 04:55 PM Re: Construction to Permanent - Escrow [Re: Comply]
Vivian Offline
Member

Registered: 05/14/09
Posts: 82
When disclosing a C/P loan with escrow, the LE/CD need to reflect that an escrow payment is included in the projected payments section. I believe we still have some testing that needs to be done, but it appears that in order to get the escrow included in the projected payments on the LE/CD, it also completes section G on page 2. Does anyone else have this issue or have found a workaround? It is also creating an initial escrow statement and is including the escrow payment on the construction first payment letter within our LOS system.

Also, when talking about a future escrow agreement is this something that legal would need to prepare or does anyone have a sample of what one may look like?

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#2193792 - 09/25/18 06:59 PM Re: Construction to Permanent - Escrow [Re: Comply]
rlcarey Offline
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Registered: 07/16/01
Posts: 67912
Loc: Galveston, TX
Originally Posted By Comply
Can you help with giving me citations for this detail, for me to reference back to?
We would not show on our disclosures that we are escrowing? Currently our LOS system is showing the escrow amounts on the LE and CD and showing under section G. Our current intent was to collect the initial escrow at closing, and then collect escrow when P&I begins. Is this incorrect?


You are going to violate the pre-accrual rules of RESPA. You cannot collect an initial escrow deposit and then sit on it for 9-12 months.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2193793 - 09/25/18 07:01 PM Re: Construction to Permanent - Escrow [Re: Comply]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 67912
Loc: Galveston, TX
Vivian, you are going to have to get with your vendor that does your docs for a work around. With some vendors, this is not an issue smile
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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