An NMLS filing review raises a question about escrow-account analysis and shortage treatment. Which action should the quality-control reviewer recommend?
Correct Answer
D) Analyze escrow payments before changing the shortage treatment
Why this is correct: The governing concept is that RESPA (Real Estate Settlement Procedures Act) and Regulation X require servicers to conduct an annual escrow account analysis. This analysis determines if there is a shortage, surplus, or deficiency. As the original explanation states, escrow rules address these calculations. The correct action is to perform the required analysis before making any change to how a shortage is treated (e.g., whether the borrower pays it in a lump sum or over time), ensuring the change is based on accurate figures. Why the other choices are wrong: "Change the payment without reviewing escrow-account figures" is wrong because it violates the requirement to base changes on the actual analysis. "Use borrower preference instead of escrow-analysis requirements" is wrong because while borrowers may have options for repaying a shortage, the servicer must first complete the analysis to define the shortage amount. "Wait for a regulator request before correcting the escrow treatment" is wrong because it constitutes an unreasonable delay; escrow accounting errors should be proactively corrected. Exam tip: The escrow analysis is an annual requirement. Any change to a payment due to a shortage must be preceded by this analysis.
Why This Is the Correct Answer
The correct response is "Analyze escrow payments before changing the shortage treatment" because Escrow rules address taxes, insurance, cushion limits, statements, and HPML escrow duties.
Why the Other Options Are Wrong
Option A: Change the payment without reviewing escrow-account figures.
Change the payment without reviewing escrow-account figures. is not correct because it does not apply the rule tested by this file scenario.
Option B: Use borrower preference instead of escrow-analysis requirements.
Use borrower preference instead of escrow-analysis requirements. is not correct because it does not apply the rule tested by this file scenario.
Option C: Wait for a regulator request before correcting the escrow treatment.
Wait for a regulator request before correcting the escrow treatment. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
escrow-account analysis and shortage treatment: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to escrow-account analysis and shortage treatment; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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