This question is from Texas, I was asked if California is allowed to have 2 months in escrow under RESPA or does the California State Statute not allow it (if we are reading the Statute correctly).
Thank you for your help.

Can you list the statue you are referring to? Our laws in CA are extensive and a code and number would help. If you post that I think more will answer.

I suspect the original poster is referring to Civil Code Section 2942.1:

2954.1. No lender or person who purchases obligations secured by real property, or any agent of such lender or person, who maintains an impound, trust, or other type of account for the payment of taxes and assessments on real property, insurance premiums, or other purposes relating to such property shall do any of the following:
(a) Require the borrower or vendee to deposit in such account in any month an amount in excess of that which would be permitted in connection with a federally related mortgage loan pursuant to Section 10 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C.2609), as amended.
(b) Require the sums maintained in such account to exceed at any time the amount or amounts reasonably necessary to pay such obligations as they become due. Any sum held in excess of the reasonable amount shall be refunded within 30 days unless the parties mutually agree to the contrary. Such an agreement may be rescinded
at any time by any party.
(c) Make payments from the account in a manner so as to cause any policy of insurance to be canceled or so as to cause property taxes or other similar payments to become delinquent.
Nothing contained herein shall prohibit requiring additional
amounts to be paid into an impound account in order to recover any
deficiency which may exist in the account.
Any person harmed by a violation of this section shall be entitled
to sue to recover his or her damages or for injunctive relief; but
such violation shall not otherwise affect the validity of the loan or
sale.

I think the poster is having understandable problems reconciling the requirement of (a) versus (b). I think is could be read that (b) does not allow a cushion.

I think the poster is having understandable problems reconciling the requirement of (a)versus (b)under Section 2942.1. That is correct, the issue is am I allowed the 2 month cushion under (a) or does (b) state no cushion and trumps the 2 months allowed under (a)? What is the custom in California, do mortgage servicers have a two month cushion with their impound accounts?

Vic:
Did you ever resolve your confusion? We just expanded into CA and we've gotten an indication from other banks we buy and sell loans to that this is interpreted by some fairly large lenders as 2 months.

We're operating with 2 months also,so I'm anxious to see what everyone else is doing..................

We are a $2B bank in CA. We definitely do collect 2 mos. cushion. The CA code at 2954.1(a)requires CA lenders be consistent with RESPA. Section 2954.1(b) speaks to "reasonable". "Reasonable" is not definied, but generally the feeling is that if a lender is in compliance with RESPA (as instruction in (a)), then the impounds are reasonable. The biggest difference is in the notice required. RESPA requires an annual accounting of the escrow account w/in 30 days of the end of the escrow year. CA requires the accounting be provided within 60 days of the end of the calendar year.

I'm with you. But I'm curently in discussion with our area manager about this cushion now. We did set our annual CA cycle to January & I'm feeling better that we caught that but we are still debating this 2 vs 0 thing.

MBA used to have an escrow cushion website but they stopped publishing it. I would feel more confident if I knew what the most of the larger CA lenders are doing and if their choices had withstood direct audit by state and federal regulators.

Are you familiar with other banks' practices in your state? And have you experienced any direct examination of this practice with your state and or federal regulator?

I'd appreciate any info you have.