During the annual escrow analysis on Priya's loan, the servicer wants to maintain an escrow cushion equal to three months of projected tax and insurance disbursements. Under RESPA, what is the maximum cushion the servicer may generally maintain?
Correct Answer
C) Two months of projected annual disbursements
Under RESPA's escrow-account rule, the servicer may generally maintain a cushion no greater than one-sixth of the estimated total annual payments from the account. One-sixth of a year is two months, so a three-month cushion would be too high.
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Related Topics & Key Terms
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Related Concepts
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
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