Posted by sue_pa on 5/21/07 12:23pm
Msg #191107

escrow pad

Does anyone know what this is used for- $500 in this case? Nothing to do with taxes & insurance as he is paying those himself. It appears to be one of those funky CA items that has been erroneously used over here as we aren't an 'escrow' state. Borrower called to ask about it when we closed several weeks ago and wasn't given an answer that made any sense to him but it showed up again today. This is an investment property and should be disbursing today . I've got my own 'theory' but want to know if anyone really knows the intent of this fee.

Reply by PAW on 5/21/07 12:41pm
Msg #191111

My educated guess is that since this is a CA loan, and CA is an escrow state, that the pad is simply to account for any increases in payoffs, fees, interest that may result when the final settlement figures are made. Most of us expect the HUD at the table to be the final one, but not California. They don't prepare the final HUD until all the numbers are in and the disbursements cut. Then the borrower finds out what the actual settlement costs are.

Reply by Tess on 5/21/07 12:42pm
Msg #191112

Sue,

Looked it up on the web and this is what came up.

. Why is a "refundable pad" listed on my estimated closing statement?

The amount of funds requested from a Buyer for closing is based on the most current information available to the Escrow Officer at the time the file is figured. If the closing date changes or fees are revised, the Escrow Officer must have sufficient funds in the escrow to make adjustments and to pay all the closing costs. A "refundable pad" or "buffer" is used in making these final adjustments, and all unused money is refunded to the Buyer at close of escrow.

Reply by Joe Ewing on 5/21/07 12:51pm
Msg #191115

A Timeshare...

Refundable to the Borrower. In CA put there to cover unplanned for fees that may crop up in the final escrow process. (For example) "excessive" notary signing agent fees

Reply by sue_pa on 5/21/07 3:51pm
Msg #191166

thanks all - that's what I thought it would be - even though we had the final HUD and the loan should disburse today - CA people having no idea what they're doing on the east coast !! Sorry Joe (smiley needed here)

Reply by closerchris on 5/21/07 4:46pm
Msg #191169

There's very good reasons to continue to use an escrow pad/cushion, even here on the east coast. When I was an EO, I would use one when I was awaiting final payoff figures, but was working off of an estimate in order to close. Most borrowers are okay with it as long as you explain to them exactly why you're doing it, and that they'll be refunded the balance at time of disbursal.

Reply by sue_pa on 5/22/07 7:53am
Msg #191263

'most' borrowers are nuts if they're okay with this. In this instance, there were no 'estimates', the loan was disbursing same day. If you're waiting for updated payoffs, which is a very poor excuse to me, then estimate the payoff figure on the HUD, don't throw in a general catch-all amount that can be used for anything someone wants it to be used for.