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#1139708 - 03/04/09 04:39 PM Escrow Question
IRBF Offline
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Joined: Sep 2007
Posts: 18
I wanted to throw this question out there to ensure my thinking is correct. We recently did a review of escrow statements and discovered that some loans only had one tax payment on the escrow statement. This is because the seller ends up paying for one of the two tax payments that are due the first year. When this happens we are still treating it like any other loan and requirng a cushion based on two tax payments being made by our borrower. We are also requiring monthly payments that assume two tax payments are made in the first 12 months. The result is that the escrow balance increases throughout the year and does not match the initial deposit.

Based on reading the regulation I think this creates a regulatory violation for an excessive cushioin and monthly payment (payments into escrow exceed the outflows for the first 12 months). Even though the customer would potentially have a shortage in the second year if we didn't do it this way, the first escrow statement is still incorrect.

Anyone disagree w/ this thinking?
Thanks

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Lending Compliance
#1139801 - 03/04/09 05:27 PM Re: Escrow Question IRBF
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Your initial and annual escrow analysis is to be based on the items that you expect to pay out within the computation year, and your cushion can only be based on 1/6 of that amount.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1148569 - 03/20/09 02:09 PM Re: Escrow Question Dan Persfull
ImGoinNuts Offline
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Joined: Sep 2006
Posts: 166
Speaking from experience, you will be cited for a violation if you do this. However, some customers would rather pay additional into their escrow so they can avoid a huge increase the next year. If the customer chooses to do this, we have them sign a voluntary escrow payment disclosure. The examiners have been fine with this.
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Views expressed are my own and not those of my employer.

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#1149887 - 03/23/09 07:44 PM Re: Escrow Question ImGoinNuts
Tillie Offline
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Tillie
Joined: Apr 2003
Posts: 266
Could you send a sample of your voluntary escrow payment disclosure?

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#1154572 - 03/31/09 03:51 PM Re: Escrow Question Tillie
ImGoinNuts Offline
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Joined: Sep 2006
Posts: 166
Tillie - I PM'd you if you'll send me your e-mail address, I'll send the disclosure to you.
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Views expressed are my own and not those of my employer.

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