Question:

Can you list some escrow account rules?

Answer:

Escrow account rules are set by the Real Estate Settlement Procedures Act (RESPA) and by the state law.

Basic Escrow Account Rules

The Real Estate Settlement Procedures Act (RESPA) does not require the use of an escrow account. The rules are set by the lenders - they decide whether to demand an escrow account for a mortgage program. However, escrow accounts may contain limited funds, as per RESPA.

Escrow cushion limits are set by RESPA, too, but according to RESPA rules, a cushion is not required. Even more, the RESPA cushion limits are equal to 2 months of escrow payment. If state law or the loan allows for less cushion amount, the lesser amount needs to be applied.

Some lenders make the impression that HUD rules require that escrow funds be increased to the lawful limit but this is a false impression made to appease customers.

Also, some states may demand that interest is paid on the escrow funds, but some may not.

If you are being charged beyond the escrow cushion limits imposed by RESPA, you may express your concern in a written statement and demand explanation by the lender. According to the rules, the lender has to give an explanation, or you could file a complaint.

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