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Are there HUD restrictions on how much escrow a mortgage

company can ask for? I...
Are there HUD restrictions on how much escrow a mortgage company can ask for? I found a rule under Additional Collections that says it can be no more than one-sixteenth of total annual requirements, but I am uncertain as to the circumstances the rule is for.
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Answered in 5 hours by:
9/28/2017
Lucy, Esq.
Lucy, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 30,589
Experience: JA Mentor
Verified

Hi,

I'm Lucy, and I'd be happy to answer your questions today.

A mortgage company is allowed to ask for one-sixth of annual escrow requirements, which works out to a two-month cushion. That means, when you buy a house, they can ask you to pay two months worth of insurance and taxes and other escrow amounts upfront, to start the escrow up with a two month balance. They do this in case the estimates are wrong and you wind up owing more than anticipated over the course of the year. They also have to refund if you wind up overpaying and having more than a two month cushion available at the end of each year.

They're also allowed to charge for any taxes and insurance that will come do between the settlement date and your first payment date, which is usually less than one month's (because most mortgages close mid-month). They are not entitled to two years worth of escrow. That's ridiculous. See 24 Code of Federal Regulations, Section 3500.17(c). The section you're looking for starts on the third page of the PDF file, which says 267 at the bottom.

If you have any questions or concerns about my response, please reply WITHOUT RATING. It's important that you are 100% satisfied with my courtesy and professionalism. Otherwise, please rate my service positively so I am paid for the time I spend answering questions. If you are on a mobile device, you may need to scroll to the right. There is no charge for follow-up questions. Thank you.

Lucy, Esq.
Lucy, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 30,589
Experience: JA Mentor
Verified
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Customer reply replied 1 month ago
Thank you for your prompt and thorough response. You helped give my husband and I a leg to stand on when dealing with the mortgage company, and we were able to get the problem fixed. I appreciate you taking the time to help those of us who need quick, cheap answers.

You're very welcome. Have a good day.

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Lucy, Esq.
Lucy, Esq.
Lucy, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 30,589
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DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

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