CMB Loan Administration and Servicing 2 — Questions and Answers
Question 1: Under RESPA (Regulation X), what is the maximum cushion a servicer may hold in a borrower's escrow account?
- One-twelfth of estimated annual disbursements
- One-sixth of estimated annual disbursements (Correct answer)
- One-quarter of estimated annual disbursements
- One-half of estimated annual disbursements
Correct answer: One-sixth of estimated annual disbursements
Regulation X caps the escrow cushion at one-sixth (about two months) of the estimated total annual disbursements.
Question 2: How often must a servicer generally perform an escrow account analysis under Regulation X?
- Monthly
- Quarterly
- At least once every 12 months (Correct answer)
- Only when the borrower requests one
Correct answer: At least once every 12 months
Servicers must analyze escrow accounts at the end of each computation year, i.e., at least annually.
Question 3: An escrow analysis shows a surplus of $85 on a loan that is current. What must the servicer do?
- Apply it to principal automatically
- Retain it as an additional cushion
- Refund it to the borrower within 30 days of the analysis (Correct answer)
- Credit it against next year's payments only
Correct answer: Refund it to the borrower within 30 days of the analysis
Surpluses of $50 or more must be refunded within 30 days of the analysis if the borrower is current.
Question 4: If an escrow shortage equals or exceeds one month's escrow payment, how may the servicer collect it?
- Demand a lump sum within 30 days
- Spread repayment in equal monthly amounts over at least 12 months (Correct answer)
- Add it to the loan balance as deferred principal
- Collect it only at payoff
Correct answer: Spread repayment in equal monthly amounts over at least 12 months
For larger shortages, Regulation X allows recovery only in equal installments over at least 12 months.
Question 5: Which servicers are generally exempt from the Regulation Z periodic statement requirement for closed-end mortgages?
- Servicers of FHA loans only
- Small servicers servicing 5,000 or fewer loans that they or affiliates own or originated (Correct answer)
- Any servicer with fewer than 50,000 loans
- Servicers of loans with escrow accounts
Correct answer: Small servicers servicing 5,000 or fewer loans that they or affiliates own or originated
The small servicer exemption covers servicers of 5,000 or fewer mortgage loans they or their affiliates own or originated.
Question 6: When must a servicer credit a full periodic payment received from a borrower?
- Within 5 business days
- As of the date of receipt (Correct answer)
- At the end of the billing cycle
- On the next scheduled due date
Correct answer: As of the date of receipt
Regulation Z requires periodic payments to be credited as of the date of receipt, except when a delay causes no charge or negative reporting.
Question 7: Within what time frame must a servicer provide an accurate payoff statement after receiving a written request?
- 3 business days
- 7 business days (Correct answer)
- 15 calendar days
- 30 calendar days
Correct answer: 7 business days
Regulation Z requires an accurate payoff statement within a reasonable time, no more than 7 business days after a written request.
