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#2237405 - 06/01/20 01:44 PM Cancel Escrow
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In the mountains
We have a consumer closed-end loan secured by a principal dwelling that was originated on 5.21.2013 (before the 6.1.2013 requirements) . The taxes and insurance are escrowed. Since origination this loan has had extensions and forbearance agreements but never a refinancing. The customer was in default on their anniversary this year so we did not provide the annual escrow analysis. The customer will be refinancing with another FI but is just waiting on the completion of their 2019 tax return. We have given another 6 month extension and so now the customer is "current".

The customer's hazard insurance is due this month and so we will be paying it this week out of the escrow account. After that payment, can we cancel the escrow at our option, not by customer request? If so, can we apply any monies that are left over to the loan balance or must we send it to the customer. We have never just cancelled an escrow, what documents are required?

Thanks in advance.
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#2237407 - 06/01/20 02:00 PM Re: Cancel Escrow Likes to Comply
rlcarey Offline
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rlcarey
Joined: Jul 2001
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Galveston, TX
30 days prior notice and you have to mail them a check.
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#2237409 - 06/01/20 02:12 PM Re: Cancel Escrow Likes to Comply
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In the mountains
Do you have a reg reference so I can do some reading?

Thanks
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#2237410 - 06/01/20 02:21 PM Re: Cancel Escrow Likes to Comply
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
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#2237411 - 06/01/20 02:23 PM Re: Cancel Escrow Likes to Comply
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
I forgot to paste the RESPA reference: Search for surplus

https://www.bankersonline.com/regulations/12-1024-017
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#2237412 - 06/01/20 02:29 PM Re: Cancel Escrow Likes to Comply
rlcarey Offline
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rlcarey
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Galveston, TX
I would sort of argue that if you cancel the escrow account, it is not a surplus. You have no option but to give them any monies in the escrow account at the time of cancellation.
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#2237413 - 06/01/20 02:32 PM Re: Cancel Escrow Likes to Comply
Dan Persfull Offline
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Dan Persfull
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Posts: 46,953
Bloomington, IN
Good point....canceling the escrow would negate the surplus guidance since there would no longer be an escrow.
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#2237416 - 06/01/20 03:48 PM Re: Cancel Escrow Likes to Comply
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In the mountains
Due to extension agreement, this loan is now considered current as of the end of last week. If we send the notice of cancellation of the escrow account in the next few days and close 30 business days from now, do you think we should still send out the annual statement that we didn't previously send out because of the default? or are we good to just cancel?


(1024.17(i)(2)-No annual statements in the case of default, foreclosure, or bankruptcy. This paragraph (i)(2) contains an exemption from the provisions of § 1024.17(i)(1). If at the time the servicer conducts the escrow account analysis the borrower is more than 30 days overdue, then the servicer is exempt from the requirements of submitting an annual escrow account statement to the borrower under § 1024.17(i). This exemption also applies in situations where the servicer has brought an action for foreclosure under the underlying federally related mortgage loan, or where the borrower is in bankruptcy proceedings. If the servicer does not issue an annual statement pursuant to this exemption and the loan subsequently is reinstated or otherwise becomes current, the servicer shall provide a history of the account since the last annual statement (which may be longer than 1 year) within 90 days of the date the account became current.
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#2237419 - 06/01/20 04:00 PM Re: Cancel Escrow Likes to Comply
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In the mountains
Do we have to do a short year statement when cancelling the escrow account?
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#2237420 - 06/01/20 04:02 PM Re: Cancel Escrow Likes to Comply
rlcarey Offline
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rlcarey
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Galveston, TX
If the loan was brought current and the closing of the escrow account is within 90 days of that occurring, then an annual statement would not be required, but a closing analysis to go along with the check would be.
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#2237449 - 06/01/20 08:57 PM Re: Cancel Escrow Likes to Comply
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In the mountains
Thanks everyone for the help!
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