Can we get rid of escrow cushions?

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Question:

Management is thinking about reducing the escrow cushion on mortgage loans, as a short-term way to lower mortgage payments in this rising rate environment. Can we do that?

Answer:

It depends. If these are loans you are servicing for secondary market investors, you’ll need to first ask your investor. They likely have mandatory cushion requirements. Next, consult state law, which often mandate maximum cushion amounts, and may or may not address minimum or non-existent cushions. Federally, you ARE permitted to omit the cushion, as RESPA does not require a creditor to keep any cushion. That said, cushions exist for good reason, and any temporary relief this year might be met with greater pain next!

Learn all about “Escrow Compliance – Be the One Who Understands It All!” on July 13, 2023!
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Learn more about Rebekah Leonard’s,

Escrow Compliance – Be the One Who Understands It All! webinar.