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Questions about Escrow Account Rules

What is an escrow account?

When related to real estate matters, an escrow account is an account that is created to hold funds to cover the homeowners/renter’s liabilities in regard to insurance, property taxes, maintenance, etc. Under the terms of the Real Estate Settlement Procedures Act (RESPA) a lender may require a borrower to establish such an account.

Some of the top escrow account-related questions answered by Experts are listed below.

Can a bank require an escrow account to be opened after the mortgage is given?

The bank may be entitled to do so if such authority is granted to them in the loan documents. If this authority does exist it is usually found in the deed of trust section for escrow or on the note. If no such authorization is given to the lender, the borrower may seek an injunction against the opening of the escrow account with his or her permission.

Once I deposit funds in an escrow account, do I have any right to those funds?

If there has been no breach of the agreement by either party, in the case of a traditional property sale escrow the funds may only be released only after both parties sign a separate agreement for the release of the funds from the account.

How do I get back the monies In an escrow account if the seller breaches the agreement?

If the seller is in breach of the agreement to sell, the seller’s signature or a court order is required for the funds to be returned to the buyer. If the buyer breaches the agreement and the terms of the contract state that the funds may be treated as liquidated damages, the buyer’s signature is required before funds are released to the seller.

My property purchase fell through because of a delay in mortgage approval. No denial letter was issued. Without it the lender won’t respond at all to my request to return the earnest money I deposited in an escrow account. What’s the best way to get at least some of the earnest money deposit back?

In such a case, you have a few options. You could: (1) File a complaint with the Federal Reserve Consumer Help at the following link: http://www.federalreserveconsumerhelp.gov/ (2) Hire a civil litigation attorney to write to the bank threatening legal action and, if necessary, to sue for release of the funds. (3) If these do not produce results, you could contact the local media and tell them about the trouble between you and the bank. Banks do not want bad publicity, and they may want to work with you to resolve the problem to avoid being seen publicly in a negative light.

If members feel an HOA is not representing them can they put their dues into an escrow account?

As long as you are part of the HOA, and unless it approves the payments into an escrow account, you must continue to pay dues to them failing which you will be in arrears of your fees and other payments.

I was not delinquent on my property taxes and my insurance premiums were paid but the mortgage company forced an escrow on my account. Can they do this?

If your mortgage documents provide for an escrow the requirement is valid unless the lender agrees to its removal. If your credit history is good and you have established substantial equity in your house, lenders may be willing to be flexible in this regard, but in the current market scenario lenders tend to be rigid in enforcing mortgage conditions. However, if your documents do not require an escrow, the lender cannot unilaterally impose this requirement on you.

The real estate escrow account is meant to both protect the lender from defaults on the part of the homeowner or renter as well as to assist the borrower by reserving funds to meet his financial obligations and liabilities. Escrow account law is a complex issue and obtaining the advice of experts prior to opening the account or to resolve problems in its operation can often protect the borrower from financial loss and legal problems.
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