Compliance Question of the Week

Can the credit union require a borrower who has a less-than-stellar credit history to triple the amount of money that goes into the escrow account?    

Section 17 of RESPA sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance and other charges related to the property.

During the course of the loan, RESPA prohibits a lender from charging excessive amounts for the escrow account.  Each month, the lender may require a borrower to pay into the escrow account no more than 1/12 of the total of all disbursements payable during the year, plus an amount necessary to pay for any shortage in the account.  In addition, the lender may require a cushion, not to exceed an amount equal to 1/6 of the total disbursements for the year.

The lender must perform an escrow-account analysis once during the year and notify the borrower of any shortage.  Any excess of $50 or more must be returned to the borrower.

Related Links:

12 CFR 1024.17


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Posted in Compliance News.