The vendor we use anticipates whether payments will be made in the last 2 months of the escrow year. The rule says to assume that the last 2 payments will be made.

(1) Contents of annual escrow account statement. The annual escrow account statement shall provide an account history, reflecting the activity in the escrow account during the escrow account computation year, and a projection of the activity in the account for the next year. In preparing the statement, the servicer may assume scheduled payments and disbursements will be made for the final 2 months of the escrow account computation year.

If a customer makes a mtg pmt at the end of month 10 that is due on the 1st of month 11, they do not assume an escrow payment in month 11. The problem with that theory is that the customer continues to make payments in month 11 and 12. The start balance for the next escrow year is more than allowed by RESPA. (because the history only shows 11 payments and the history is used to determine a surplus or shortage) Management thinks this is acceptable. I see no where in the escrow rules where the bank is to anticipate that payments WILL not be made in the final 2 months of the escrow computation year.

You assume they will make 12 payments unless they are past due. They have already made the payment for month 11, even if it was made at the end of month 10. You would only project one more escrow payment for the year.

So I don't worry that we are holding more in the new escrow year than is allowed? (because the customer makes 12 payments in a year, but the history only shows 11) Sometimes the amount is as high as $500.

I guess I do not understand - does it not show two payment in month 10? How can you have more than allowed. What am I missing?

First, let me thank you in advance for your patience. All of our mtg payments are due on the 1st. Customers never pay on the 1st. They pay a few days ahead. Thus, a payment due Jan 1st is shown in Dec because it is actually paid in Dec. This continues for all 12 months. However, the Vendor instead of Assuming the last 2 payments will be made on history, they anticipate whether a payment will be made. For an escrow year Jan - Dec, if the very 1st payment is due in Jan but paid at the end of Dec, it won't show on the escrow statement (will be in beg bal) because it was paid in Dec. The pmt shown on the escrow stmt for Jan is actually the pmt due Feb 1st, since is was paid in late Jan (shown in the month paid). The customer continues to pay this way for the whole 12 month escrow period. However, our vendor doesn't assume the 11th payment because they anticipate instead of simply assuming the customer will make 12 payments in escrow year history. They base the anticipation on date due rather than assuming continuing payments. So for November, it anticipates no payment, when in reality the customer makes a payment in late Nov for Dec and another in late Dec for Jan. The customer actually makes 12 payments. It's like the vendor correctly shows what goes in and out of the escrow for 10 months, based on what actually happens. When they get to the last 2 months, they then try to guess what will happen instead of simply assuming they will continue making payments.

The pmt shown on the escrow stmt for Jan is actually the pmt due Feb 1st, since is was paid in late Jan (shown in the month paid).

Are you sure about that? Why would it not be considering the payment at the end of December of the previous year the January payment on the activity statement? Are these simple interest loans or are these loans on scheduled payments?

I don't know for sure which statement you are referring to when you say "it won't show on the escrow statement."
If you're referring to the Projection for Next Year statement, it should show up because it is a Jan payment. You are projecting the next year. It is due in the next year. Therefore, it should be shown in the next year.
If you're referring to the Historical Statement, it would show when it was actually paid.


The regulation says they should assume actual payments being made when they are actually due. So it should project the last 2 months being paid in the last 2 months (on the due date). If the customer already paid the 11th payment in the 10th month, when you prepare the statement, you would know this and just assume the 12th payment. If you don't know this at the time of preparation of the annual statement, it would show actual historical info and the 2 assumed payments would be listed in Nov and Dec but their payment in Oct (actually for Nov) wouldn't show up.

Are you saying the historical info statement shows 13 payments (because it has the actual 11 made in the first 10 months and then 2 more are assumed)? If so, this should all work out in the next year.

Yes, these are scheduled payments. They show payments on the escrow statement according to what is actually paid into the escrow during a month. Since the escrow year starts in Jan, only payments made in Jan will be shown.

On the very first escrow stmt, the Jan pmt, which was paid in late Dec, doesn't appear as a payment on the escrow statement (it is in the beg bal). The Jan payment shown on the escrow stmt is actually for Feb 1st and is shown because it was actually paid in the month of Jan. (Jan 30th).

Not if they are scheduled payments. The payments post on the due date regardless of when received.

David, I'm talking about the annual escrow history. The customer actually makes 12 payments, but only gets credit for 11. They don't anticipate 1 or 2 payments when they do the analysis. For 10 months, they post actual activity in the history. When they get to the last 2 months of the history, instead of assuming 2 payments for the last 2 months of the history, they anticipate whether a customer will make the last two payments, based on the 'date paid to'. The customer makes payments during the last 2 months.

In other words, they give the customer credit for only 11 payments instead of 12 because they anticipate he won't make any payments in month 11. (they base this on date pd to) They anticipate rather than simply assuming that the customer will make the last 2 payments (a total of 12 payments) during the escrow year.

Sorry, it's hard to explain. Thanks for your patience.

Randy, not at our bank The payments post when they are received.

Then they are not on schedule payments. Sounds like you need to review your notes and your servicing system because you can't have it both ways.