QUESTION
We recently
went through a risk assessment in our servicing division. The risk assessment
was done by a risk management firm like yours. There was a defect found in the
way we transfer the escrow account from our servicing to a new servicer. I don’t
know how we missed it, but now we expect to face a regulatory audit. What are
the basic requirements for the escrow account if our loan servicing is transferred
to a new servicer?
ANSWER
I would be
remiss if I didn’t begin this response with a plug for own risk assessment
reviews. There really is no firm like Lenders Compliance Group in the country, a
pioneer in risk management, with the widest range of knowledge and expertise,
and the widest range of cost-effective, compliance-related services. Check us out!
There is not
much detail to go on in your inquiry. The question itself is broad. But I think
several requirements are fundamentally mandated to comply with applicable
regulations for escrow account transfers. Here are a few “IFs” to keep in mind.
Where loan
servicing transfer is concerned, the transferor servicer must submit a short
year annual escrow account statement to the borrower within sixty days after
the effective date of the servicing transfer. [24 CFR § 3500.17(i)(4)]
IF:
The transferee servicer changes the monthly
payment amount,
o it must provide the borrower with an initial
escrow statement within sixty days of the date of the servicing transfer.
The transferee servicer provides an initial
escrow account statement upon the transfer of servicing,
o the transferee servicer must use the effective
date of the transfer of servicing to establish the new escrow account computation
year.
The transferee servicer retains the monthly
escrow payment used by the transferor servicer,
o the transferee servicer may continue to use the
escrow account computation year established by the transferor servicer, or may
use a short-year annual escrow account statement to establish a new escrow
account computation year.
The transferee servicer must treat any surplus,
shortage or deficiency in the escrow account pursuant to the standard rules for
surpluses, shortages and deficiencies. [24 CFR § 3500.17(e)]
Managing Director
Lenders Compliance Group
