An escrow analysis shows a $310 shortage when the monthly escrow payment is $600. The borrower is current. If the servicer chooses the equal-monthly-installment repayment option under Regulation X, what is its minimum repayment period?
Correct Answer
A) At least 12 months
A. The equal-monthly-installment option requires at least 12 months. The $310 shortage is less than the $600 monthly escrow payment. The question selects installments rather than the separate 30-day repayment alternative. Scope and exceptions: The servicer may also leave this shortage outstanding. These alternatives do not give the borrower an unconditional right to choose. A shortage below a target balance is not the same as a negative-balance deficiency, which has different repayment rules. Source: Section 1024.17(b), (f)(3)(i) and (f)(4) — https://www.consumerfinance.gov/rules-policy/regulations/1024/17/
Why This Is the Correct Answer
A. The equal-monthly-installment option requires at least 12 months. The $310 shortage is less than the $600 monthly escrow payment. The question selects installments rather than the separate 30-day repayment alternative. Scope and exceptions: The servicer may also leave this shortage outstanding. These alternatives do not give the borrower an unconditional right to choose. A shortage below a target balance is not the same as a negative-balance deficiency, which has different repayment rules.
Why the Other Options Are Wrong
Option B: The entire remaining loan term
The remaining mortgage term is not the required repayment period.
Option C: Exactly 30 days
Thirty-day repayment is a different permitted alternative.
Option D: At least 24 months
Twenty-four months can satisfy the rule, but is not its minimum.
Exam Tip
Identify shortage versus deficiency, then the size and chosen repayment option.
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