Escrow Management for Single-Family Residential Property: Phase 1 Report
May 1991 (59 pages)
June 30, 1991
This report on phase 1 of a study of escrow management for single-family residential property addresses the dynamics of the mortgage servicing industry, the interests of the parties affected by escrow issues, and model escrow balances based on a range of scenarios defined by variations in escrow practices used throughout the servicing industry. A chapter discusses the size and structure of the mortgage servicing industry, the role of servicing transfers, and components of mortgage servicing cost. Mortgage "servicing" consists of the loan management done by a lender after a mortgage is originated. Another chapter describes escrow account methods, discusses the regulatory history of escrow management, and summarizes the varying perspective held by parties affected by escrow policy and practices. A chapter on factors that affect the level of escrow balances considers escrow account method, escrow reserves, accrual dates, escrow estimation, disbursement frequency, disbursement relationships, taxing authority practices, delinquent payments, and the treatment of escrow shortages/deficiencies. A chapter then presents the results of a series of models run to calculate escrow balances under a number of different practices regarding escrow-determination factors. One of the 11 findings of the study is that there are both regulatory and business considerations that must be addressed in reconciling the controversies and confusion surrounding escrow management. 11 figures are provided.