I'm just catching up on my summer reading of Supervisory Highlights, and this one struck me as strange, so I wanted to make sure I was reading it correctly. The September 2020 CFPB Supervisory Highlights (https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-22_2020-09.pdf
) includes the following:
Examiners found that one or more servicers sent consumers annual escrow account statements which included options for repayment of shortages and deficiencies that are not enumerated in Regulation X. Specifically, for borrowers with either shortages or deficiencies equal to or greater than one month’s escrow account payment, servicers listed two options borrowers could choose for repayment: (1) equal monthly payments over a 12-month period or (2) a lump sum payment. The first option is a permitted repayment option under Regulation X, while the second option is not. Regulation X requires that annual escrow account statements include an explanation of how shortages or deficiencies are to be paid by borrowers. Because the enumerated repayment options are exclusive, the servicers violated the regulatory requirements by sending disclosures that provided borrowers with repayment options that they cannot require under Regulation X.
Now I know that a bank can't REQUIRE a borrower to pay the full amount of a shortage of more than one month in a lump sum, but is it really a violation to give borrowers the option to do so? Am I reading that right?