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RESPA Not Deducting the Escrow Balance on Payoff

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Question: 
Can you point me to the section of RESPA that refers to not deducting the escrow balance on a payoff?
Answer: 

This is an "applied logic" issue. The first thing to understand is that RESPA basically indicates escrow money is not yours. You are a trustee of the borrower's funds.

When a loan is paid off that contains an escrow, RESPA requires you to send a Short Year Statement to the borrower.If a borrower pays off a mortgage loan during the escrow account computation year, the servicer shall submit a short year statement to the borrower within 60 days after receiving the pay-off fund. [1024.17(i)(4)(iii)] Typically, the escrow balance would be mailed to the borrower with the short year statement information.

Whenever there is a surplus of funds in an escrow account, you are required to refund the balance to the customer, not apply the surplus to the loan balance - even when the borrower is past due.

First published on BankersOnline.com 1/23/12

First published on 01/23/2012

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