Answer:
If there will be “payment shock” (likely on construction loans), the borrower can voluntarily put more money in their escrow account to offset this. If they do this, you must still abide by the surplus rules when you do the annual analysis. We don’t recommend doing this the first year following a construction loan if taxes are paid in arrears, as it could be two or three years before the taxes actually increase. So, if you collect additional voluntary money in the first year, you will likely have to pay it all back to the borrower when the annual analysis rolls around. You can change the escrow payment amount later when you know what the new tax bill will be.
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Learn more about David Dickinson’s webinar Escrows: All you need to know
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