Information on Escrow Accounts for Consumers
About Escrow Account Cushions
Does RESPA require lenders to maintain
a cushion? NO. The RESPA statute and regulations do not
require the lender to maintain a cushion. However, since
1976 the RESPA statute has allowed lenders to maintain
a cushion equal to one-sixth of the total amount of items
paid out of the account, or approximately two months of
escrow payments. If state law or mortgage documents allow
for a lesser amount, the lesser amount prevails.
The new accounting method generally requires borrowers
to maintain lesser amount in the account than the single-item
method predominately used by lenders. However, many lenders
have recently increased the escrow account cushion to
the maximum allowed by law.
The recent regulations require lenders to reduce the size
of the cushion in some accounts. Unfortunately, to avoid
customer disapproval, some lenders may be giving their
customers the impression that the HUD regulations require
them to make this increase. This is a false impression.
The lender, not HUD, has chosen to increase the cushion.
Can HUD require lenders to pay interest on escrow accounts?
NO. In 1992 and 1993, legislation was introduced in Congress
that would have required lenders to pay interest on escrow
account balances, but it never passed. Some states do
require interest to be paid on escrow account funds, but
many do not.
RESPA
and Escrow Accounts in General
What
is covered under RESPA
About
Escrow Account Cushions
Figuring
Escrow Accounts
Variations
in Escrow Accounts and Payments
Disbursement
Date:
Dealing with Your Lender or Insurance Company: Taxes,
Insurance, Force-Placement, Escrow and RESPA
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