A conventional borrower with 22% equity asks to waive escrows on a loan that is not higher-priced. The lender charges 0.25 points for the waiver. Assuming no other federal or state escrow requirement applies and the investor permits it, may the lender offer this priced escrow waiver?
Correct Answer
B) Potentially permissible under the stated assumptions, subject to lawful pricing and disclosure requirements
B. A priced waiver can be offered under the stated assumptions. The question excludes mandatory escrow requirements and supplies investor permission. CFPB’s Closing Disclosure guidance expressly contemplates lender escrow-waiver fees. That does not independently certify any particular fee or transaction as compliant. Scope and exceptions: The quoted quarter-point fee is a scenario input, not a regulatory standard. Equity of 22% does not guarantee a waiver. Applicable law, disclosures, investor conditions and lender policy still require review; keeping a fee in-house is not a universal defense to a fee violation. Source: Escrow waiver fee: details to check — https://www.consumerfinance.gov/owning-a-home/closing-disclosure/
Why This Is the Correct Answer
B. A priced waiver can be offered under the stated assumptions. The question excludes mandatory escrow requirements and supplies investor permission. CFPB’s Closing Disclosure guidance expressly contemplates lender escrow-waiver fees. That does not independently certify any particular fee or transaction as compliant. Scope and exceptions: The quoted quarter-point fee is a scenario input, not a regulatory standard. Equity of 22% does not guarantee a waiver. Applicable law, disclosures, investor conditions and lender policy still require review; keeping a fee in-house is not a universal defense to a fee violation.
Why the Other Options Are Wrong
Option A: Impermissible, because charging for a waiver is a kickback under RESPA
Charging a waiver fee alone does not establish a referral kickback.
Option C: Permissible only where the borrower pays taxes through the servicer
Paying taxes through the servicer describes escrow rather than its waiver.
Option D: Impermissible: federal law requires escrow on every first-lien mortgage
There is no universal escrow requirement for every first mortgage.
Exam Tip
Separate whether escrow is mandatory from whether a particular waiver fee is compliant.
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