According to the below text a servicer is not required to submit an escrow account analysis to the borrower if they are more than 30 days overdue when they conduct the escrow account analysis. Does this mean an analysis still has to be conducted on the loan, but we just aren't required to mail the analysis to the borrower or send any surplus to them until they have brought their loan current?

There have been questions about this with some thinking it means an analysis is not ran at all, but if a borrower remains perpetually over 30 days past due and an analysis is never run the payment would never adjust for the increased taxes and insurance each year. Of course, if it can't be sent to the borrower, they wouldn't be notified their payment was changing.


No annual statements in the case of default, foreclosure, or bankruptcy. This paragraph (i)(2) contains an exemption from the provisions of § 1024.17(i)(1). If at the time the servicer conducts the escrow account analysis the borrower is more than 30 days overdue, then the servicer is exempt from the requirements of submitting an annual escrow account statement to the borrower under § 1024.17(i).

My understanding is that even though you're not required to run/send an escrow analysis on those loans, you're still allowed to--as long as the analysis conforms to the regulations.

(2) No annual statements in the case of default, foreclosure, or bankruptcy. This paragraph (i)(2) contains an exemption from the provisions of § 1024.17(i)(1). If at the time the servicer conducts the escrow account analysis the borrower is more than 30 days overdue, then the servicer is exempt from the requirements of submitting an annual escrow account statement to the borrower under § 1024.17(i).

The exemption is from sending them the annual statement. There is no exemption from doing the analysis.

This is what i find confusing. If the notice isn't sent, how is the change in the escrow payment explained?

Example:
Borrower is due July 2024. They're making monthly payments, but always 2 months behind.
Analysis is scheduled to run mid-Sept 2024 with new payment set to start Nov 2024.
Analysis runs for Sept 2024.
It gets to Oct, but the borrower is due for Aug. They still receive a Nov 2024 mortgage statement that includes the new escrow payment, but they never received the annual statement informing them of the changes.


Not running an annual statement would just result in an ever-increasing shortage/delinquency as the insurance and taxes more than likely increase. Not sending an annual statement means a change in the borrower's escrows without notifying them as to why it occurred.  

The only part that makes sense is not being required to send out a surplus until they're current because an analysis is based on projected payments being made which hasn't been made yet if a borrower is past due.