A CRMLA-licensed mortgage servicer collects escrow payments from borrowers. What is the servicer's primary obligation regarding these escrow funds?
Correct Answer
A) Maintain escrow funds in a trust account and make timely payments for taxes and insurance
CRMLA servicers must hold escrow funds in a trust account and ensure timely payment of property taxes, insurance premiums, and other escrowed obligations. Commingling escrow funds with operating funds is strictly prohibited.
Why This Is the Correct Answer
CRMLA servicers must hold escrow funds in a trust account and ensure timely payment of property taxes, insurance premiums, and other escrowed obligations. Commingling escrow funds with operating funds is strictly prohibited.
Why the Other Options Are Wrong
Option B: Invest the escrow funds in high-yield accounts to maximize returns for the borrower
Servicers are not required to invest escrow funds in high-yield accounts. The priority is safety and availability of funds, not maximizing returns.
Option C: Transfer all escrow funds to the original lender on a monthly basis
Escrow funds are not transferred to the original lender. The servicer retains custody and responsibility for proper disbursement.
Option D: Commingle escrow funds with the servicer's operating account for efficiency
Commingling escrow funds with operating funds is strictly prohibited. This is a serious violation of fiduciary duty and CRMLA regulations.
Memory Technique
CA -> ca-crmla-lenders-servicers-bonds-net-worth-servicing
Exam Tip
CRMLA questions usually turn on lender versus servicer authority, branch authority, $250,000 net worth, surety bond coverage, servicing duties, DFPI oversight, and exemptions for regulated depository institutions.
Common Mistakes to Avoid
- -Using a national baseline answer when California has agency-specific DFPI or DRE requirements
- -Confusing CFL, CRMLA, covered-loan, usury, servicing, and DRE endorsement rules
- -Relying on legacy California state-exam or education assumptions instead of current NMLS source pages
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