Update Escrow Account Settings

Introduction

LoanPro allows you to create up to 25 escrow buckets within your company account. Each escrow bucket has its own group of settings that determine how it will behave in relation to the loan. The escrow settings can be defaulted company-wide when an escrow bucket is created. This article will cover updating the escrow settings within a loan account.

How To

To update the escrow settings for a specific escrow bucket, navigate to Settings > Loan > Escrow Buckets. (Alternatively, you can change escrow bucket settings on the fly within a loan account by navigating to Loan Settings > Escrow. But here, we'll focus on the updating settings via the tenant Settings tab.)

To edit the settings of an escrow bucket, click the edit icon located on the right.

Setup Configurations

Below, we'll explain each of the configuration options.

Interest Bearing

The option to make an escrow bucket interest bearing will only be shown if escrow was set up in the Escrow Calculator section of the Account Setup > Setup Terms Area. Interest will accrue on the total outstanding escrow balance for a given escrow bucket.

Add to Loan Amount in Disclosures

If this option is set to ‘Yes’, the total of the monthly adjustment amounts for this bucket will be included in the Truth In Lending (TIL) disclosures by being incorporated into the amount financed. If this bucket is not set to be interest bearing, interest will not accrue on this balance and the effect will be to reduced the quoted APR.

Include in APR

This option lets you choose whether to include escrow in the calculation of APR. Including escrow will always increase APR.

Include in Schedule

This option lets you choose to include the escrow in the payment schedule. This does not affect the transactions report, but it will change the payment amount in the payment schedule shown in the Loan Setup. It will also affect the payment schedule variable output used in custom forms, billing statements, etc.

Payoff

This selection determines how much escrow will be included in payoff. The following options are available:

Full – All escrow that was scheduled to come due over the life of the loan as originally scheduled will be included in payoff.

None – No escrow will be included in payoff.

Standard – Only escrow that has come due to this point will be included in payoff.

Standard + 1 Period – Escrow that has come due plus one payment period worth of escrow will be included in payoff.

Daily Straight Line – Escrow will be prorated daily, and the daily amount of escrow through the payoff date will be included in payoff.

Payment Application

This selection determines how much escrow will come due for this bucket with each payment. The following options are available:

Standard – Only the amount of escrow from the escrow adjustment that applies to the current payment period will come due.

Next – The amount of escrow from the escrow adjustment that applies to the current payment period and the following period will come due.

Next/Standard – If the loan is current, it will work like the standard setting. If the loan is past due, it will work like the Next setting.

Pro-rate – The escrow amount from the escrow adjustment that applies to the current payment period will be prorated daily, and the daily escrow amount including today’s will be due.

The following diagram depicts how these options are applied:

Analysis Configurations

If you set 'Escrow Analysis Enabled' to "Yes", you will with have further configuration options. Here is a breakdown of the escrow analysis options.

Cushion

This option allows you to select the escrow analysis cushion type. The following options are available:

Fixed Amount – Allows you to set the cushion as a static amount to be used every time an analysis occurs.

Percentage – Allows you to set the cushion as a percentage of annual disbursements.

Next Escrow Analysis Date

This is the date on which the next escrow analysis will occur.

Escrow Computation Year Start Date

This is the date that will be used in the computations of the escrow analysis. This will usually be the first payment date on an account.

Fixed Amount/Escrow Payments

This field will either be a 'Fixed Amount' or 'Percentage' depending on the setting for Cushion. This field allows you to determine the amount of the escrow analysis cushion. For 'Fixed Amount', you will be able to enter a fixed amount here. For Percentage, you will be able to select the amount of yearly escrow payments that will add up to make the cushion amount. For example, if there are 12 escrow payments scheduled to be made in a year, entering 6 as the Escrow Payments amount will give you a percentage of 50, because the cushion amount is then 50% of expected annual disbursements.

For more information on how to use Escrow Analysis see our Escrow Analysis Overview article.
Deficiency Settings

An escrow deficiency occurs when the bucket amount falls below $0.00.

Here, you can configure what will happen if a deficiency occurs. You can set the amount to collect as a fixed amount or a percentage, the value of the amount, and how many days the borrower will have to make a payment to cover the amount.

Deficiency Actions

The deficiency actions section is dynamic in that its values will change when you change the values in the Deficiency Settings section. In this section, you can set actions for what the system will require in the instance of a deficiency.

Shortage Settings

This section allows you to select your criteria for an account shortage. An escrow shortage occurs when the bucket amount falls below the cushion amount but is still greater than $0.00. The options in this section are similar to the options available in the deficiency section.

Shortage Actions

The shortage actions section is dynamic in that its values will change when you change the values in the Shortage Settings section. In this section, you can set actions for what the system will require in the instance of a shortage.

Surplus Settings

This section allows you to select your criteria for an allowed account surplus. A surplus occurs when it is found that the amount of money in this escrow account at its lowest point will still exceed the selected cushion amount. However, this section allows you to customize the account allowable surplus settings. Here, you can offer a refund to the borrower if a surplus occurs.

Surplus Actions

The surplus actions section is dynamic in that its values will change when you change the values in the Surplus Settings section. In this section, you can set actions for what the system will require in the instance of a surplus.

Once you have finalized your configuration decisions, click 'Save' to update the escrow bucket.


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