Have a loan where we are escrowing taxes and insurance. Customer had decided to pay taxes on her own (outside of the escrows) and is asking what to do with her escrow. Two options that I see. 1. Issue a check from the customers escrow account directly to the customer, or 2. Pay taxes like we agreed with the escrows and have the customer seek a refund from them.

Obviously the best/easiest is to handle this through option number 1. Are there any issues with doing this?

Well, paying the taxes twice is not a great option - likely the taxing authority would just return it to you. I would just wait until the next annual escrow analysis or do a short year analysis now and follow your normal escrow surplus procedures.

Thank you Randy.