QUESTION
Under RESPA, lenders are allowed to
charge a cushion for maintaining an escrow account up to two months. Are there
state laws that would be more restrictive? For example, are there states that
will not allow any cushion at all or allow only up to one month cushion?
ANSWER
During the course of the loan,
Section 10 of 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 borrowers of any
shortage. Any excess of $50 or more must be returned to the borrower.)
However, state law may impose more
restrictive limits on the amount of cushion a lender may establish and
maintain. As of today’s date, the chart below shows those states with
express escrow cushion requirements:
Brennan Holland
Director/Legal & Regulatory Compliance
Lenders Compliance Group
