ࡱ> M 3bjbj== WWp/FlT """@#\#\ 97 $$$$$)))6666666E9 e;6)()))6*$$6***)j$$6*)6**.11$$ a "*11 70971;*;1*  Standard Solutions, Inc. Escrow Accounts and Aggregate Escrow Calculations Banks frequently prefer to be in charge of paying a borrowers tax and insurance bills, so the property is not in danger of being uninsured or taken by the tax authorities. An escrow account is a bank account the mortgage lender keeps to pay these bills. Part of the monthly mortgage payment is deposited into this account; however, these monthly payments dont add up fast enough to cover tax bills which are usually due a few months after the initial mortgage payment. In order to have enough money in the escrow account to pay the bills, the attorney is allowed to collect additional money at the closing. This is shown on the 1000 lines of the HUD. In English: The bank doesnt want your house to burn down without adequate hazard insurance, and they dont trust you to pay the bills on time. They make you keep money in an escrow account, from which they pay your bills for you. In 1997, the Department of Housing and Urban Development (HUD) established guidelines to determine exactly how much money the attorney is allowed to collect at closing to establish the escrow account. They are allowed to collect enough money so the account balance is never below zero, plus two additional months worth of payments. This amount is calculated through Aggregate Escrow Accounting. This calculation is not too complicated once you understand it, but there are several steps involved, and most of the clients and lenders still dont understand it. TERMS: Monthly Payment: The monthly payment amount is 1/12 of the amounts of the items being escrowed. This may include taxes, hazard insurance, mortgage insurance and/or flood insurance, among other things. The terms of the loan determine what items are being escrowed. Aggregate Adjustment (Line 1008) If too much money is being collected on lines 1001-1007, the lender gives a credit on line 1008. This is usually a negative number, or may be zero. Most lenders do not allow a positive number on line 1008. Initial Payment The total amount the lender is allowed to collect at closing to deposit in the escrow account. The initial payment is the total of lines 1001-1008. Cushion: Additional money the lender is allowed to keep in the escrow account, to ensure the account balance will not go below zero if taxes or other rates are increased. This is usually equal to two months worth of monthly escrow payments. Some loans allow only 1 month of cushion, and some allow 0. By law, the cushion cannot equal more than 2 months of escrow payments. Waive: The lender does not require the borrower to escrow money for a particular item. If an escrow item is marked as waived on the disclosure screen, it will not be included in the escrow calculations. CALCULATED MANUALLY Aggregate Escrow Calculation (1) Month(2) Payment into Escrow Account(3) Payment from Escrow Account(4) Initial Balance(5) Low Point (6) Secondary Balance Initial Balance + low point( $150.00) (7) Final Balance Secondary balance + Cushion amt ($300.00) November (INITIAL PAYMENT)**$450.00January150.00150.00300.00600.00February150.00(tax) 300.000.00150.00450.00March150.00150.00300.00600.00April150.00300.00450.00750.00May150.00(tax) 300.00150.00300.00600.00June150.00300.00450.00750.00July150.00450.00600.00900.00August150.00(tax) 300.00300.00450.001050.00September150.00450.00600.00750.00October150.00600.00750.00900.00November150.00(tax) 300.00 (ins) 600.00-150.00-150.000.001050.00December150.000.00150.00900.00January150.00150.00300.00300.00 450.00 (8)** 450.00 = 150.00 + 300.00 (9) -50.00 = 450.00 - 100.00 - 400.00  Initial Payment = Low Point + Cushion 1008 Adjustment = Initial Payment -(1001-1002-1003-1004-1005-1006-1007) The calculation, step by step: Make a column for each month, starting with the month of the first payment date. In this sample, the closing date is 11/9/99, so the first payment month is January. List the amount paid into the escrow account each month. List the amounts paid out of the escrow account in the months they are due. Calculate the initial balance for the entire year. The initial balance is the amount in the account at the end of each month. Add the monthly escrow payment to the prior monthly balance, then subtract the bill amounts, if any. Ex: In January, $0.00 (prior bal.) + $150.00 (paid into acct)-$0.00(paid out of acct). January Balance=$150.00 In February, $150.00 (prior bal)+$150.00 (paid into acct)-$300.00 (paid out of acct) February Balance=0.00 Examine the initial balance column, to determine when the account reaches the lowest balance. In this sample, the low balance of -$150.00 occurs in November. The low balance may occur in any of the months. Which month it occurs in depends on when the bills are due. The lender is allowed to collect the low point amount at closing, so there is always enough money in the account to pay the bills. In step 6, calculate the secondary balance by adding the low point amount to the initial balance. Ex: In January, $150.00 (initial balance) + $150.00 (low point amount) January secondary balance=$300.00 In February, $0.00 (initial balance)+$150.00 (low point amount) February secondary balance=$150.00 7) Depending on the terms of the loan, the lender may also collect an additional cushion, usually one or two months worth of escrow payments. To determine the final balance, add the cushion amount to the Secondary Balance column. Ex: In January, $300 (secondary balance) + $300.00 (cushion) January final balance=$600.00 In February, $150.00 (secondary balance) + $300.00 (cushion) February final balance=$450.00 Calculate the Initial Payment. This is the total amount the lender is allowed to collect at closing to establish the escrow account. The initial payment= the low point + the cushion amount. Ex. $150.00 (low point) + $300.00 (cushion) = $450.00 (Initial Payment) Calculate the Aggregate Adjustment. In step 8, we calculated the initial payment amount. This is the total amount the lender is allowed to collect at closing to establish the escrow account. By law, the lender is not allowed to collect more than this amount. The aggregate adjustment (shown on line 1008 of the settlement statement) is the amount the lender must credit the borrower at closing, so they dont collect more than the initial payment amount. Ex: on the settlement statement, the lender is collecting: Hazard Insurance: 2 months @ $50.00 = $100.00 Taxes: 4 months @ $100.00=$400.00 Total Collected: $500.00 Initial Payment: $450.00 1008 Aggregate Adjustment -$50.00 According to the HUD, the lender is collecting $500.00 to establish the escrow account. But, according to the aggregate calculation method, the lender is only allowed to collect the initial payment amount of $450.00. So, on line 1008, we must add an aggregate adjustment of -$50.00, to make the total collected amount equal to the initial payment amount. The lines 1001-1008 should always total the initial payment amount. In the above example, if more months of taxes are escrowed, there will be a larger adjustment on line 1008, so the total amount collected still equals the initial payment amount. Ex: on the settlement statement, the lender is collecting: Hazard Insurance: 2 months @ $50.00 = $100.00 Taxes: 5 months @ $100.00=$500.00 Total Collected: $600.00 Initial Payment: $450.00 1008 Aggregate Adjustment -$150.00 Fortunately, Standard Conveyancer can produce the aggregate escrow statement and aggregate adjustment with little effort. The following data MUST be entered for SC to calculate the aggregate correctly: SC ScreenInfo RequiredScheduleClosing Date First Payment DateInsurance ScreenDue dates for items being escrowed Annual amounts of items being escrowed Escrow Items not marked as waivedProperty ScreenProperty city and tax period (annual, semiannual, quarterly)Financial Screen (If taxes are escrowed)Annual tax amount Tax paid through date Tax next due date If the next tax payment is being paid at closing, check off pay taxes to make the next tax due date advance one period.City Tax Info Screen (City button on Property or Escrow screen)Correct tax period All tax period due dates and amounts Tax dates must occur after the initial payment dateHUD Pg 2Number of months of items being escrowedAutomatic CalculationEscrow HUD 1 Escrow Adjustment 1008 Escrow Tax Due Dates (If this autocalc is off, all tax dates must be entered manually on the city tax info screen.)Escrow DisclosureInitial and Cushion calculations turned on If the client wants bills paid from the account the month prior to when theyre due, add the number of mail days in the days. Field. If you add a 5, taxes due November 1st will be paid from the account on October 27th. Or, if you add 1 month, theyll be paid October 1st. The type field is for the payment type. All items should be A for annual, except for PMI, which may be M for monthly. If PMI is paid from the account on a monthly basis, the next due date for PMI should be the same as the first payment date. PREPARED BY SC INITIAL ESCROW ACCOUNT DISCLOSURE STATEMENTPRIVATE  FILE/LOAN #: ___________ /___________ NAME(S): Bob Borrower Barb Borrower PROPERTY: 1233 Main Street Malden, Massachusetts 02148 Your monthly mortgage payment for the coming year will be $4,537.27 of which $4,387.27 will be for principal and interest and $150.00 will go into your escrow account. This is an estimate of activity in your escrow account during the coming year based on payments anticipated to be made from your escrow account. Date of Closing: November 9, 1999 Date of First Payment: January 20, 2000 Payments to Payments from Month Escrow Acct Escrow Acct Description Balance November $450.00 $0.00 Initial Payment $450.00 January $150.00 $0.00 Payment $600.00 February $150.00 $300.00 City Tax (1003) $450.00 March $150.00 $0.00 Payment $600.00 April $150.00 $0.00 Payment $750.00 May $150.00 $300.00 City Tax (1003) $600.00 June $150.00 $0.00 Payment $750.00 July $150.00 $0.00 Payment $900.00 August $150.00 $0.00 Payment $1,050.00 August $0.00 $300.00 City Tax (1003) $750.00 September $150.00 $0.00 Payment $900.00 October $150.00 $0.00 Payment $1,050.00 November $150.00 $300.00 City Tax (1003) $900.00 November $0.00 $600.00 Hazard Insurance (1001) $300.00 December $150.00 $0.00 Payment $450.00 (Please keep this statement for comparision with the actual activity in your account at the end of the escrow accounting computation year.) Cushion selected by servicer: $300.00 Borrower(s) Bob Borrower  Barb Borrower Once all of the required data is entered, print an aggregate escrow statement (InitEscA). Examine the document. Verify that the cushion amount printed at the bottom is correct. Verify that all escrow items are being paid in the correct months. Verify that the final balance equals the cushion amount during one of the months. Verify that the Initial Payment amount equals the total of HUD lines 1001 through 1008. If these things are all correct, you can assume that the aggregate statement is correct. Common Problems Aggregate statement prints multiple tax months at the beginning of the statement The tax due dates are not correct. Check the city tax button. Make sure all tax periods are listed, and are in the future. Aggregate adjustment is 0 and shouldnt be The client is probably missing a due date (usually hazard insurance). If a due date is not entered, SC will try to collect all money the first month. Copyright 1999-2001 Standard Solutions, Inc. 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Foster C:\WINDOWS\Desktop\aggregate.doc Ken Foster7C:\Standard Conveyancer\Training&Handouts\aggregate.docG gez N vZI' C NH YVp hh^h`)hh^h`) hh^h`OJQJo(hh^h`) hh^h`OJQJo(hh^h`)hh^h`o()GNHvZI'gezYVpCN* + 5 U u . / K L M N O P Z [ c j k r s z     % , - 2 9 : A B I P Q V ] ^ e f m t u | "*27?@IPQVW^efnuv}~#$.<=Ffgx4 5 ^ !!T!!!!!! """"$$p///@/@@UnknownGz Times New Roman5Symbol3& z ArialCFComic Sans MS5& z!TahomaO1CourierCourier NewK"Univers Condensed?5 z Courier New"1h/:(l& DUF'SY0d02Aggregate Escrow Calculations Michael Chiu Ken FosterOh+'0 $ @ L X dpxAggregate Escrow CalculationsMiggr Michael Chiurowich Normal.dotu Ken Fosteru5n Microsoft Word 9.0l@@a@5"@XQ'՜.+,0  hp   Teradyne S0 Aggregate Escrow Calculations Title  !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIKLMNOPQSTUVWXYZ[\]^_`abcdefghijklmnoqrstuvwyz{|}~Root Entry FfaData J1TableR;WordDocumentSummaryInformation(pDocumentSummaryInformation8xCompObjjObjectPoolfafa  FMicrosoft Word Document MSWordDocWord.Document.89q