We just had FDIC examiners at our bank. The lead examiner told me we are not doing our escrows right. The problem is when we close and semi-annual taxes are do within 60 days we have to collect at closing for that 6 month payment. For escrow I am using 1/12 of total year. Examiner is saying I should only be doing 1/12th of the 6 months I am paying out. This makes no sense to me at all because then next years escrow analysis will be 6 months short. I know that taxes are always due may 15 and october 15th of each year, so why is it not correct to escrow based on that? She says my trail balance should be zero and the customer will just have to make up the 6 months of deficiency..

Enter a real life example in this Escrow Worksheet From Bankers Compliance to verify that you are collecting the correct amount. If the figures match what your bank is collecting, ask the examiner (very respectfully) to assist you in determining which part of 3500.17 you are violating.

I did just that and used the numbers off the loan she wrote us up on...My numbers show an extra $612 on the trail balance and she says it needs to be zero. The initial escrow account disclosure statement is the same as mine as is the initial deposit etc...to me annual taxes and annual insurance is just that. Examiner says it is annual disbursements on my projected coming year (in this case, I only disburse one 6 month tax payment in my disclsoure year so she says I take 1/12th of the 6 month disbursement). If I do that my trail balance is zero, but I don't want to be the one asking for another $50 per month for the coming year plus a $612 deficiency because I have 2 six month tax disbursements in the next analysis. I don't understand how that is more compliant.

Your examiner is right. Your escrow account analysis cannot taken into account amounts that won't be paid out in the next 12 months. HUD provided some guidance on this and calls it "payment shock". Here's a link.