Who Regulates Mortgage Escrow Accounts?

When it comes to mortgage escrow accounts, there are certain regulations that must be followed. An escrow account is a type of account that a lender establishes in connection with a federally related mortgage loan. The limits for these accounts are calculated based on monthly payments and disbursements within a calendar year. If the payment period is biweekly or any other period, the requirements will be modified accordingly.

There are public guidance documents available that provide examples of biweekly accounting and a 3-year accounting cycle that can be used in accordance with the regulations. In addition, there is a model disclosure format that encourages, but is not required, originators and administrators to provide to consumers when they anticipate a substantial increase in escrow account disbursements after the first year of the loan. This disclosure may be combined with or included in the initial escrow statement required by Regulation Z. This regulation also requires creditors to establish a security deposit account for an HPML secured by a first lien on a main home to help ensure that the borrower sets aside funds to pay property taxes, homeowners insurance premiums and other insurance related to mortgages required by the creditor.

The final rule extends the time during which a mandatory escrow account must be maintained from one year to five years. Section 10 of the Real Estate Settlement Procedures Act (RESPA) provides protection to borrowers with deposit accounts by limiting the amount of money a lender can require them to keep in an escrow account to pay taxes, insurance against risks and other property-related charges. RESPA also requires lenders to submit initial and annual escrow statements. Nothing in § 1024.41 should be interpreted as creating the right of a borrower to enforce the terms of any agreement between a servicing entity and the owner or assignee of a mortgage loan, including with respect to evaluating or offering any loss mitigation option, or to remove any rights that may exist in accordance with applicable law.

Loan agreements governed by New York law require plaintiffs to deposit money into escrow accounts. Pre-accumulation is a practice used by some management entities to require borrowers to deposit funds necessary for the disbursement and maintenance of a cushion into the escrow account before the disbursement date.If the servicing entity does not receive payment from the borrower within 30 days of the payment due date, they may retain the surplus in the escrow account in accordance with the terms of the mortgage loan documents related to the federal government. The use of HUD-1 or HUD-1A is exempt for indefinite lines of credit (home equity plans) covered by the Truth in Loans Act and Regulation Z. There are public guidance documents available that establish an acceptable format and methodology for transmitting this information.Any installment sale contract, land contract, or deed contract on a residential property that would otherwise qualify is considered a mortgage loan related to the federal government if it is financed in whole or in part with proceeds from a loan made by any mortgage loan manufacturer specified in paragraphs (ii) (A) to (D) of this definition.

Aggregate (or) compound analysis, also known as aggregated analysis, is an accounting method used by managing entities to perform an analysis of escrow accounts by calculating the sufficiency of funds in the account as a whole.(IV) The total amount paid from the escrow account during the same period in respect of taxes, insurance premiums and other charges (as identified separately); If terms of any federally related mortgage loan require borrowers to make payments to an escrow account, servicing entities must pay disbursements in a timely manner before or on deadline, as long as payment is not more than 30 days late. Discretionary payments are not part of an escrow account unless lender requires payment or managing entity decides to place it in escrow account.For each escrow account, managing entity must perform an analysis at end of calculation year to determine monthly payments for next calculation year, subject to limitations set out in paragraph (c) (ii) of this section. Borrowers must resume compliance with paragraph (b) if they make any partial or periodic mortgage loan payments after initiation of bankruptcy case.That servicing entity has not received documents or information not under borrower's control and that servicing entity requires to determine what loss mitigation options it will offer on behalf of owner or transferee of mortgage; Filing date of initial escrow statement for an escrow account established after liquidation.