forgive my ignorance but I am an auditor and not a compliance professional!

3500.17 (8) Provisions in mortgage documents

We are noting situations where the mortgage loan note provides for lower cushion limits than section 17 allows. Reading this section, it appears that the note governs the allowable cushion and the bank should follow the limits set forth of the note. In two cases we noted that the amount in the escrow cushion is insufficient.

This creates problems 1)bank is not following the terms of the note 2) The borrower is faced with a large escrow shortage

My question is this: Are there any intpretations of RESPA that address this situation and allow the bank to escrow at the RESPA limit (not in accordance with the note) to eliminate this type of shortfall?

Your note is your contractual relationship with the borrower - RESPA will not overrule that. If your analysis process is correct, why should there be continuous shortfalls?

The note's provisions don't allow for a sufficient escrow balance

What type of note provision is it?

I have never seen a note that limits the escrow balance. Our escrow accounts are governed by a separate escrow/impound agreement.

However, I agree with Randy, if your escrows are limited by your note/contract then you have to abide by the contract unless you can get the customer to modify the contract.

We figured it out. Thanks for the advice concerning the escrow addendum! This is what happens when auditors start trying to test compliance issues!!

Thanks again