During a disclosure desk review, the branch manager encounters an RESPA Escrow Requirements issue. Which response should resolve the issue before the file moves forward?
Correct Answer
B) Apply RESPA escrow-account rules to the account
Why this is correct: RESPA regulates escrow accounts for certain mortgage loans. Its rules cover how much can be collected (limiting the cushion), require initial and annual statements, and mandate escrow accounts for High-Priced Mortgage Loans (HPMLs). Applying these specific RESPA rules to the escrow account is the correct way to resolve the issue. Why the other choices are wrong: "Change the payment without reviewing escrow-account figures." is wrong because it would lead to an arbitrary, likely incorrect adjustment instead of a calculation based on RESPA rules. "Apply the credit underwriting timing rule even though the file is testing RESPA Escrow Requirements." is wrong because it applies a rule from a different regulatory area (underwriting) to an escrow issue. "Wait for a regulator request before correcting the escrow treatment." is wrong because proactive compliance is required; waiting for a regulator to find the error is not defensible. Exam tip: RESPA escrow rules limit the cushion to 1/6 of the annual disbursements. Remember this for cushion calculation questions.
Why This Is the Correct Answer
The correct response is "Apply RESPA escrow-account rules to the account" 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 C: Apply the credit underwriting timing rule even though the file is testing RESPA Escrow Requirements.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option D: 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
More Mortgage Knowledge Questions
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A borrower has a 30-year fixed-rate mortgage with monthly principal and interest of $1,450. Property taxes increase, and taxes are paid through escrow. What can happen to the total monthly payment?
A loan has an outstanding principal balance of $240,000 and a 6% annual interest rate. Using simple monthly accrual, how much interest accrues for one month?
An annual escrow analysis for a current borrower shows a $780 shortage. One month's escrow payment is $600. The servicer elects to require repayment over the shortest installment period permitted by Regulation X for this shortage. What schedule is permitted?
What does an amortization schedule show for each scheduled payment?
A monthly principal-and-interest payment is $1,800, of which $1,250 is interest. How much principal is paid that month?
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