Mortgage Servicing Escrow Accts Deficiencies Shortages Surpluses 10 – If a charge will terminate during the escrow account computation year and disbursements…will no longer need to be made, how does the servicer factor this into the escrow…analysis?

Compliance > Regulation X and Z - Servicing
Q:   If a charge will terminate during the escrow account computation year and disbursements related to that charge will no longer need to be made, how does the servicer factor this into the escrow account analysis?
 
A:   (UPDATED 6/2/2021): For the escrow account analysis, the servicer estimates the amount of items to be disbursed. If the servicer knows the charge for an escrow item in the next computation year, then the servicer must use that amount in estimating disbursement amounts. 12 CFR § 1024.17(c)(7). Thus, if the servicer knows that a charge will terminate in the next computation year, it must use that information for the escrow account analysis and adjust the charges to the borrower, as applicable.
 
For example, if a borrower is current at the time of the escrow analysis and the servicer’s system reflects that charges for private mortgage insurance (PMI) will terminate during the next computation year pursuant to the Homeowners Protection Act, then the servicer must consider the PMI termination date for the escrow account analysis and adjust the charges to the borrower, as applicable. However, if the borrower is not current at the time of the escrow account analysis and the servicer’s system reflects that the charges for PMI will not terminate during the next computation year, then the servicer must also consider the extension of the termination date and adjust the charges to the borrower, as applicable.
 
 
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
 

Add Feedback