Mortgage Servicing Escrow Accts Deficiencies Shortages Surpluses 7 – What can the servicer do if the escrow account analysis shows a deficiency?

Compliance > Regulation X and Z - Servicing
Q:   What can the servicer do if the escrow account analysis shows a deficiency?
 
A:   (UPDATED 6/2/2021): If the escrow account analysis shows a deficiency, the servicer may require the borrower to pay additional monthly deposits to the account to eliminate the deficiency. How much the servicer may require depends on the amount of the deficiency.
 
If the deficiency is less than one month’s escrow account payment, then the servicer:
  • May allow the deficiency to exist and do nothing to change it;
  • May require the borrower to repay the deficiency within 30 days; or
  • May require the borrower to repay the deficiency in 2 or more equal monthly payments12 CFR § 1024.17(f)(4)(i).
 
If the deficiency is greater than or equal to one month’s escrow payment, then the servicer:
  • May allow the deficiency to exist and do nothing to change it; or
  • May require the borrower to repay the deficiency in two or more equal monthly payments.
12 CFR § 1024.17(f)(4)(ii).
 
These provisions regarding deficiencies apply if the borrower is current at the time of the escrow account analysis, which means that the servicer receives the borrower’s payments within 30 days of the payment due date. 12 CFR § 1024.17(f)(4)(iii).
 
If the servicer does not receive the borrower’s payment within 30 days of the payment due date, then the servicer may recover the deficiency pursuant to the terms of the loan documents.12 CFR § 1024.17(f)(4)(iii).
 
 
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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