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We are preparing to charge off a delinquent loan. However, it has an escrow account with an excess balance. Taxes have been paid and insurance will not be due again until the middle of next year. Some believe that we cannot cancel the escrow, while others state we can. Others want to use the excess balance to apply towards the delinquent loan amount. It would appear that we cannot use the funds for anything or than intended or they must be returned to the consumer.
What options do we have?
“It would appear that we cannot use the funds for anything or than intended or they must be returned to the consumer.”
I agree with that statement. Reg X doesn’t say that the funds can be applied to the balance. It does say the servicer may retain the surplus in the escrow account pursuant to the terms of the federally related mortgage loan documents. Check your note/contract to determine if any other action is permitted.
Reg X 1024.17(f)(2) discusses surpluses.
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