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Guidelines on Escrow Cushions for Portfolio Loans

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Our Bank has always used a one month escrow cushion for portfolio loans. We may start using two months for new loans. When the time comes to re-analyze annually all our loans, is it compliant to assume a one month cushion on older loans and two months on newer loans? Do you recommend uniform treatment?

Whether or not you can apply such a practice to existing loans may be subject to the loan contract. If the contract escrow provision only provides for a one-month cushion, you'll have to consult with legal counsel familiar with state contract law to determine if you can unilaterally change the provision, and what kind of notice you'll need in order to do so.

First published on 4/2/12

First published on 04/02/2012

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