CFPB Issues Frequently Asked Questions on Mortgage Services | Sheppard Mullin Richter & Hampton LLP

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CFPB recently released new FAQs regarding the Mortgage Loans Policy and Rules X and Z regarding the management and analysis of escrow accounts.

We put it into practice: Here are some key takeaways:

  • An initial escrow is the first disclosure statement a service organization makes to a borrower in relation to the borrower’s escrow. It should include: (i) the amount of the monthly mortgage payment; (ii) a portion of the monthly payment credited to the escrow account; (iii) the itemized expected payments payable from the escrow account; (iv) expected dates of disbursement of funds; (v) the amount that the maintenance staff chooses as compensation; and (vi) a trial current account balance.
  • Service providers must send an annual escrow account statement to the borrower within 30 days of the end of the escrow account year and review the escrow account prior to sending the annual escrow account statement to the borrower.
  • The annual escrow statement must include, among other things, an account history showing the activity in the escrow account during the previous year of the computation of the escrow account, and a forecast of the activity in the account for the next year of the computation of the escrow account.
  • If there is a deficit that is equal to or greater than one month of payment on the escrow account, the service staff can accept an unsolicited lump sum payment to close the deficit. However, the service staff cannot require or provide the option for a lump sum on an annual escrow statement. An annual escrow statement can only reflect that the service organization accepts a deficit or that the service organization requires the borrower to pay the deficit in two or more equal monthly installments.

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