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#1802397 - 04/08/13 04:55 PM Escrow & Deficiency already
Shopgirl Offline
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We are new to the whole escrow process so any help is much appreciated.

We have a loan that closed back in November and we established an escrow account on the loan and made an initial payment to the insurance company. Now there seems to be some insurance underwriting issues where the insurance company said the client didn't do some things that were required and the client had so many days to get them done or the insurance policy would cancel. Throug discussions with the client and the insurance company, the items were finally cleared up and a new insurance policy had to be issued. In the meantime, the refund from the previous policy was placed on the premium of the new policy and there is still a remaining balance of about $400 left to pay. This loan does not analyize for another 8 months or so. So, my question is what should we do? Should we force an anlysis, and then spread any increase over payments or how would others treat this situation? Obviously, we have to go ahead and make the payment but just doesn't seem right that the borrower gets to use the banks money for a period of time without repayment.

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#1802405 - 04/08/13 05:04 PM Re: Escrow & Deficiency already Shopgirl
Truffle Royale Offline

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Quote:
but just doesn't seem right that the borrower gets to use the banks money for a period of time without repayment.
Maybe not but this is the crux of doing escrows.
Make the payment and then do the analysis. You have to offer the borrower the option of making up the difference or spreading out the payments. You should check the Reg and decide if you're going to offer them the minimum number of months to repay or spread it longer.

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#1802411 - 04/08/13 05:17 PM Re: Escrow & Deficiency already Shopgirl
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Thanks Truffle......okay we make the payment....do we force an early analysis now and then readjust the computation year or do we just wait for the annual analysis to happen come November and settle up the difference then?

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#1802442 - 04/08/13 06:07 PM Re: Escrow & Deficiency already Shopgirl
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I believe you can and should do it now, especially since it is a significant increase. Otherwise the borrowers are going to go twice as deep come November what with having to make up this $400 and an additional $400 (maybe more) for next year.

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#1802484 - 04/08/13 07:06 PM Re: Escrow & Deficiency already Shopgirl
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Is there anything else required to give the client other than the escrow analysis?

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#1802503 - 04/08/13 07:23 PM Re: Escrow & Deficiency already Shopgirl
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The analysis is not the part the borrower needs to get.
They should get a new payment amount (coupons, whatever) that includes enough to cover the shortage and get the escrow where it should be prior to the next insurance premium coming due.

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#1802507 - 04/08/13 07:28 PM Re: Escrow & Deficiency already Shopgirl
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The analysis is not the part the borrower needs to get.

You don't send a copy of the analysis as part of the escrow account statement? Those are required for every annual or short-year statement. You can't just adjust the escrow payment without providing an analysis.
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#1802544 - 04/08/13 08:00 PM Re: Escrow & Deficiency already Shopgirl
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I was responding to the 'anything else' question but you're right. I could have worded it better.

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#1802676 - 04/09/13 02:29 PM Re: Escrow & Deficiency already Shopgirl
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Okay, gotcha now. So am I correct that if we wanted to spread the additional funds over the regular monthly payment then we would need the analysis forced. However, what if the client decides to make a lump sum payment? Would we still need to force an analysis now?

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#1802710 - 04/09/13 03:08 PM Re: Escrow & Deficiency already Shopgirl
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Depends...your first post isn't clear enough to understand if the current monthly amount will be sufficient to cover the next insurance payment. If it's going to be $400 short like this one was, then by all means do the short-year analysis and up the monthly amount now. The idea behind escrows is to make it easier for the borrower not leave them in the hole every time you pay their bills.

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#1802923 - 04/09/13 07:25 PM Re: Escrow & Deficiency already Shopgirl
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If the borrower makes the lump sum payment for the deficiency, this will carry the insurance policy payment for the remainder of the year. Then a new analysis will occur and that is when his payment should adjust to the new payment if the premium remains the same, correct? Sorry, hope that helps explain a little more.

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#1803004 - 04/09/13 08:33 PM Re: Escrow & Deficiency already Shopgirl
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No, I don't think it is correct.
By making the lump sum payment now, all the borrower is doing is paying you back for the loan to cover the deficiency.
Let's see if I understand this using fake numbers, ok?
At closing, you thought insurance was $500/yr.
So in order to have enough money when the bill comes due, you set up escrow at 1/12th (41.67) month.
Come to find out that the cost of the insurance is actually $900/yr.
So you should be escrowing at 1/12th of 900 (75) month.
If you don't start collecting that now, the borrower is going to have to come up with another $400 in 8 months or so. Trust me, they are NOT going to be happy about that.
I'd do the short-year analysis and bump the payment up now.

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#1803008 - 04/09/13 08:36 PM Re: Escrow & Deficiency already Shopgirl
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Or, just contact the borrower and ask them what they would like to do. If they want to pony up the $400 - let them. But also let them know if they do not, you will be raising their monthly payment to cover the additional charge either now or the beginning of the next escrow year.
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#1803137 - 04/10/13 01:33 PM Re: Escrow & Deficiency already Shopgirl
Shopgirl Offline
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Yes, the borrower is making the $400 deficiency payment now, so sounds like I don't need to do the anaylsis now. Thanks Randy and Truff......
Last edited by Shopgirl; 04/10/13 01:33 PM.
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#1803144 - 04/10/13 01:50 PM Re: Escrow & Deficiency already Shopgirl
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Shopgirl, you and Randy are missing my point.
The borrower owes $400 for this year.
In order for the borrower to break even on this, he needs to pay the $400 due for the current premium AND escrow enough for the next premium.
At the current escrow rate he's going to be short another $400 in less than 8 months.
You DO need to do the analysis and get him paying more every month now.

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#2253957 - 05/14/21 07:15 PM Re: Escrow & Deficiency already rlcarey
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Originally Posted by rlcarey
The analysis is not the part the borrower needs to get.

You don't send a copy of the analysis as part of the escrow account statement? Those are required for every annual or short-year statement. You can't just adjust the escrow payment without providing an analysis.

Is there a Regulatory basis for the last sentence? I could not find anything in RESPA that prohibits this. As an example, let's say a servicer performs their annual escrow account analysis in March, but then figures out in May that the projected disbursement was materially underestimated. Therefore, the servicer wants to increase the escrow payment going forward. Are they obligated to do a short-year analysis? I can't find anything that says "yes" to that question.

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#2253978 - 05/15/21 02:17 PM Re: Escrow & Deficiency already Shopgirl
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1024.17(i)(4) Short year statements. A servicer may issue a short year annual escrow account statement (“short year statement”) to change one escrow account computation year to another. By using a short year statement a servicer may adjust its production schedule or alter the escrow account computation year for the escrow account.

You can't just change their payment. How would you ever know or prove you where not violating the allowable cushion?
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#2253991 - 05/17/21 01:56 PM Re: Escrow & Deficiency already Shopgirl
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I know it's the logical thing to do, but I just don't see it specifically required by RESPA.

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#2254000 - 05/17/21 02:48 PM Re: Escrow & Deficiency already Shopgirl
rlcarey Online
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OK - if you think you can just change a required escrow payment without doing a new analysis and properly notifying the customer of any shortage and the new payment required and prove that you are not violating your allowed cushion - show me where it says you can do it.

This is not a argument you are going to win with any regulator.
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#2254002 - 05/17/21 03:00 PM Re: Escrow & Deficiency already Shopgirl
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1024.17(f)(1)(ii)

(ii) The servicer may conduct an escrow account analysis at other times during the escrow computation year. If a servicer advances funds in paying a disbursement, which is not the result of a borrower's payment default under the underlying mortgage document, then the servicer shall conduct an escrow account analysis to determine the extent of the deficiency before seeking repayment of the funds from the borrower under this paragraph (f).
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#2254172 - 05/20/21 05:27 PM Re: Escrow & Deficiency already Shopgirl
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That wouldn't have happened yet, rainman. Again, I understand your point RL. Thank you for the input.

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#2254252 - 05/22/21 06:42 PM Re: Escrow & Deficiency already Shopgirl
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Delivery is required, Randy's cite plus (i):

(i) Effect of short year statement. The short year statement shall end the “escrow account computation year” for the escrow account and establish the beginning date of the new escrow account computation year. The servicer shall deliver the short year statement to the borrower within 60 days from the end of the short year.
Last edited by Andy_Z; 05/22/21 06:43 PM.
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