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Escrow Analysis Audit

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Question: 
I am currently performing an audit on escrow analysis. I am having difficulty in one area and would appreciate any assistance you may provide. Section 3500.17(d)(1)(B) states "...add to the first monthly balance an amount just sufficient to bring the lowest monthly trial blanche to zero, and adjust all other monthly balances accordingly." When I view Appendix E for an example, I am confused because the balances they end with under aggregate analysis is not zero, which I feel would be appropriate. However, they end with a balance of $780 (NOTE: we do not apply a cushion). How does this affect the surplus refund of $50 or more at the end of the computation year? Is this surplus on top of this adjusted balance to eliminate any negative balances or is the surplus referencing the ending balance?
Answer: 

If you are reserving no cushion then your lowest balance should get to zero. That is not necessarily the ending balance, as it depends on when payments are made from the account.

If the payments are less than anticipated, you could have an overage and that amount may be refunded. That is where your $50 comes in.

First published on BankersOnline.com 7/21/03

First published on 07/21/2003

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