How do I itemize the escrow charges into separate taxes and insurance?

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wtech_josh
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How do I itemize the escrow charges into separate taxes and insurance?

Post by wtech_josh » Fri Oct 02, 2020 11:39 am

Is it possible to have more than 1 escrow charge per payment? I would like to itemize the charges.
I noticed if I enter a property tax charge for example of $500.00 and an insurance charge of $150 with the same start date (10/1/2020) and the same end date 10/1/2023 the program only picks up one of the entries.

wtech_josh
Site Admin
Posts: 48
Joined: Tue Jul 30, 2019 7:17 pm

Re: How do I itemize the escrow charges into separate taxes and insurance?

Post by wtech_josh » Fri Oct 02, 2020 12:22 pm

No, there isn't a split at the time funds are put into the escrow account. The allocation of funds for various purposes happens when you disburse funds from the Escrow account. That's when we actually know how much is being paid to taxes or insurance.

Some lenders get pushed into escrow unexpectedly, and choose to take payment retroactively for taxes and insurance. Usually, the borrower fails to make their tax payment and the lender saves them from a lien. Now the lender is trying to recoup the expense, but usually they'll want to be building up a reserve so they're not totally out-of-pocket when they have to pay the tax bill again the following year.

The best way to handle this in Moneylender is to set up the taxes paid, and the expected tax payment for the following year in the Escrow Disbursements, and then let the charge calculator tell you what the charge should be for the year. Then decrease the estimated charge by around 25%. This will, in a year's time, reimburse you for the payment of the previous year's taxes and get you half way to a fully funded account by the time the current year's taxes are due.

When doing the escrow analysis for the following year, the Moneylender's Escrow Charge Calculator will recommend a number similar to what you're already collecting. By the end of the second year, you'll have a fully funded escrow account. The escrow charge will drop the year after by about 35% and stay at that lower amount for the remainder of the loan (fluctuating slightly when taxes or premiums change).

Escrow accounts are governed by very specific laws to grant protections to the lender while also protecting the borrower from abusive practices. A loan has an escrow account that is funded by regular deposits from the borrower, and authorized disbursements are paid and strictly accounted. Just charging a property tax fee per-payment doesn't satisfy the legal requirements for maintaining an escrow account on behalf of a borrower.

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