Mortgage Servicing Escrow Accts General 4 – What charges may the servicer require a borrower to deposit into an escrow account?

Compliance > Regulation X and Z - Servicing
Q:   What charges may the servicer require a borrower to deposit into an escrow account?
 
A:   (UPDATED 6/2/2021): The servicer may impose charges at settlement or upon creation of the escrow account. For example, upon creation of the escrow account, the servicer may charge the borrower an amount sufficient to pay the charges for the mortgaged property, such as taxes and insurance, that are attributable to the period from the date payment(s) for those charges were last paid until the initial payment date of the mortgage. 12 CFR § 1024.17(c)(1)(i).
 
The servicer may also impose charges during the life of the escrow account. During the life of the escrow account, the servicer may collect from the borrower a monthly sum equal to one-twelfth of the total annual escrow payments that the servicer reasonably anticipates paying from the account. 12 CFR § 1024.17(c)(1)(ii). In addition, the servicer may add an amount to maintain a cushion no greater than one-sixth of the estimated total annual payments from the account upon creation or during future escrow account analyses. 12 CFR § 1024.17(c)(1)(ii).
 
 
This Q&A was contained in the CFPB’s Mortgage Servicing FAQs – version 3, as of June 2, 2021 (which may be updated from time to time).  This may be found on the CFPB’s website here:  https://files.consumerfinance.gov/f/documents/cfpb_mortgage-servicing_frequently-asked-questions.pdf
 

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