Examiners are here and I am in desperate need of assistance!!

We have a customer that closed 10/15/01 (first payment 12/1/01) with taxes due 12/1/01. We paid the taxes on the HUD and escrowed one month for the taxes due again in 6/02. The examiner raised the issue that we did not list the 12/1/01 tax payment on the initial escrow analyis statement. He showed us the portion of Respa which defines the escrow acct computation year beginning with the borrower's initial payment date. No problem, I understand that.

Here's where I'm confused. If you pay it on the HUD (because it is truly paid from closing), how would it be shown on the escrow statement? The software program would calculate the 7 months worth of escrow to pay the taxes and the lump sum that the closing agent would be paying from closing. Then the customer is bringing more to the closing than he needs to.

Is there some kind of exception in Respa to account for this situation? I know we are not the only ones out there doing this. As a matter of fact, the bank I came from did it the same way and we never had an issue.

Any guidance will be GREATLY APPRECIATED.

Software aside, you could show the first escrow payment on 12-1 along with the disbursement.

I know this isn't available everywhere, but were they paid early because of a discount?

If the full years/periods payment was made in conjunction with the closing, you could argue that the statement was done with this in mind. If you had to collect that December payment to have all that was due, it should be shown.

It's the bank's policy to pay taxes/homeowners insurance if they are due within 60 days or less. We tried the argument that you mentioned with no luck.

They are not making a huge issue of this. I understand that the customer has to see the full year's anticipated disbursements but I don't think this would be accurate because we are not disbursing the taxes in December, we are disbursing them in October at closing.

Again, I have seen this disclosed this way by many different companies. I didn't think we were too off the mark.

Shelley said: "It's the bank's policy to pay taxes/homeowners insurance if they are due within 60 days or less." Section 3500.17(d)(1)(A) [aggregate analysis] says you can't pay taxes/insurance before it is due unless it is to take advantage ofa discount (as Andy pointed out). It sounds like your policy is in violation of this requirement.

Does your initial analysis show a disbursement in the last month for next year's taxes due 12/1? This is the way we do it and we have never been questioned. Even though we would pay it 12/1, in this case the last month on the initial analysis would be 11/1. We would manually display it as an 11/1 disbursement. I can see that you could run into a problem if you don't show a disbursement at all during the year on the initial analysis, but if you show a disbursement sometime during that first year you are within the escrow computation year and should be fine.

I would have responded around lunchtime but David's last post gave me HEART FAILURE and I had to recover. I'm not even thinking about that issue. (I did find out that is because of our investor requirements. I love it when investors make bank policy.)

Lori:
We would have been OK if we carried it out to 12/1/02 disbursement but we didn't. (We did reflect the 6/02 disbursement.) I'm not disagreeing w/ the examiner, I'm just trying to get a feel how someone else would handle it. My only issue w/ the examiner is paying on the HUD and showing it as the first disbursement causes as a software issue. Plus I'm sure the investor will take issue as well.

Thanks for everyone's help. Now the real challenge, getting everyone to change their mentality!