Posted by pat/WA on 10/12/10 1:55pm
Msg #356437

I have not seen this before

When the borrower skips one month payment the escrow payment for the skipped month must be paid to the mortgage banker. (i.e when borrower signs in October but doesn't make a payment until December) It cannot be rolled into the loan.

Any comments on this? The mortgage company says it is a new law.

Reply by MichiganAl on 10/12/10 2:05pm
Msg #356442

Balderdash n/m

Reply by pat/WA on 10/12/10 2:32pm
Msg #356454

Re: Balderdash

That was my thought. But who am I to argue with the lender. The borrowers have to pay almost $500 directly to the lender for their November escrow. The first loan payment is due 1 December.

Reply by PAW on 10/12/10 2:37pm
Msg #356455

Huh? This doesn't make any sense.

If you close on a loan in October, the first payment will be due on December 1st. Remember, when making payments on the loan, you are paying the interest in arrears. It appears that the borrower is skipping a payment, but in fact, they are not. On the HUD, will be the interest on the loan for the current month, since there would not be a payment in November to capture the accrued interest. Then, when the December payment is made, it consists of the interest that has accrued from Nov 1 to Nov 30, plus principal plus escrow for taxes and insurance (if any) plus PMI/MIP premium, if any.

When the escrow for taxes and insurance is calculated, whatever is necessary to have at least a 2 month payment buffer in the account, is added as an item of the closing cost. I don't know of any new laws that says that any amount shown on the HUD cannot be rolled into the loan. As long as there is enough equity in the property to allow for cash to be returned to the borrower, the borrower can apply the funds to 'cash due' at signing, such as the escrow account initial payment.

Reply by pat/WA on 10/12/10 2:42pm
Msg #356456

I totally agree with you. But this is what the lender told the borrowers and I don't believe I can argue with them.

Reply by Stoli on 10/12/10 2:50pm
Msg #356458

Paw, if the borrower adds the impound amount to the amount

short to close, isn't that the same as NOT rolling the impound fees into the loan? What did I miss?

Reply by PAW on 10/12/10 5:35pm
Msg #356482

Re: Paw, if the borrower adds the impound amount to the amount

True, if the borrower needs funds to close. The escrow initial amount (line 1001 on the HUD-1 and #9 on the GFE) becomes part of the settlement amount (line 1400 on the HUD-1) the borrower needs to close (line 120). Whether or not there's enough paid in (200 section) determines whether or not the borrower needs to bring funds to the table to close.

I've never heard of holding out the initial deposit (line 1001) or any of the escrow funds required (lines 1002-1007) to be paid directly to the lender outside of closing (POCB), unless required by the lender for some unknown to us reason.

Reply by Deborah Breedlove on 10/12/10 4:49pm
Msg #356476

It could just be the LO's way of explaining why the borrower is short to close and has to come up with $500 at closing. The escrows are funded on the HUD according to the number of payments the BO will actually make before the taxes and insurance are due. It's not that they are making an escrow payment, like a loan payment, but they have to pay enough at closing to cover everything. It could be rolled into the loan, but they could have reached the limit on LTV, and the LO is taking the easy way out with this explanation. Just a thought.

Reply by Susan Fischer on 10/12/10 8:03pm
Msg #356516

Oy ve. Way TMI, for me. n/m

Reply by C. Rivera Chicago Notary Services on 10/13/10 11:07am
Msg #356567

agree, unneccessary info w/respect to performing nsa duties. n/m