The Mortgage Bankers Association and Housing Policy Council wrote to the Consumer Financial Protection Bureau, requesting the bureau revise 12 C.F.R. Section 1024.17 to allow servicers to include, in annual escrow statements, an option for the borrowers to repay in lump sum any escrow shortages or deficiencies that are more than one month’s escrow payment. It also requests the bureau provide reliable guidance to servicers confirming they can communicate to borrowers lump sum payment is an option without violating Regulation X.
In the letter, they noted that in its latest Supervisory Highlights, the bureau stated some servicers sent borrowers annual escrow statements listing two options borrowers could choose for repayment. They could make equal monthly payments over a 12-month period or a lump sum payment.
“Because lump sum repayment was not enumerated in 12 C.F.R. § 1024.17(f)(3)(ii) or (f)(4)(ii), the bureau deemed inclusion of this option as a violation of Regulation X,” the associations wrote. “Since the issuance of the Supervisory Highlights, the CFPB has informally indicated that borrowers should be allowed to repay escrow shortages in a lump sum and that servicers may accept a lump sum repayment, thus acknowledging that this method of repayment is indeed an option, which aligns with long-standing interpretation and understanding of these provisions. It is counterintuitive therefore to prevent servicers from informing their borrowers of this option on the escrow statement.”
They wrote it is important to include information either on or with the annual escrow statement that calculates such a shortage to avoid borrower confusion and for tracking and proper allocation of borrower payments.
“We believe that the best long-term solution is to address the underlying regulation to explicitly allow servicers to include a lump sum repayment option on the escrow account statement so borrowers understand their options and choose the option that best fits their needs,” the associations wrote. “Such clarification would confirm long-standing interpretation and understanding of these provisions, prior to the bureau’s statements in the Supervisory Highlights. In addition to avoiding an increase in the monthly payment amount, there are other benefits to borrowers for repaying the amount in full, particularly in states that require payment of statutory interest on escrow. Given that many borrowers have historically preferred and utilized this method of repayment, the bureau should not prohibit a servicer from informing its customers of all available repayment options. We therefore respectfully request the bureau amend 12 C.F.R. § 1024.17(f)(3)(ii) and (f)(4)(ii) to permit a servicer to offer borrowers the option—at their discretion—of repayment of an escrow shortage or deficiency in lump sum on the annual escrow statement.”
“We recognize that a regulatory change will take time,” they continued. “Servicers are responding to the bureau’s Supervisory Highlights and need advisory guidance in the interim. We therefore respectfully request the Bureau clarify in writing that a servicer can accept a lump sum repayment from a borrower and that such communications can include written, verbal (inbound or outbound calls), online educational material, and online account pages.”