Saturday, May 24, 2008

More on Waiver of Escrow



A couple of considerations before you decide to waive escrow:

1. Escrow Waiver Fee -
There will or will not be a fee associated with the waiver of escrow - depending on your contract. In our case, there was supposedly an escrow waiver fee of $800. However looking at our Settlement Statement, there was no item pertaining or even remotely related to the escrow waiver fee.

Anyway, I wanted to point out that this was our first time to learn about being able to do a waiver of escrow that we were so excited about the possibilities. Thus, we did not have the present-mindedness to see if we can negotiate waiving (redundant?) the escrow waiver fee. The good thing is that it seems that we were not charged an escrow waiver fee at all!

2. Your Responsibilities (if you do a waiver of escrow)-
Obviously, aside from paying the non-escrowed items directly and in a timely manner, the lender may require you to provide them with:
- evidence of your payment of the non-escrowed items
- evidence that your insurance is still in force and at the required coverage levels

3. Escrow Reestablishment by Lender -
The lender could re-establish an escrow if these happens:
- you do not pay any of the non-escrowed items in a timely manner
- you do not provide evidences of payment of the non-escrowed items.
- you are in default under the terms of your loan document
Again, depending on your lender's contract, there could be more stipulations on when they can re-establish an escrow account for you.

I am curious though if it is myself who gets tired of managing the non-escrowed items - if and how I can ask the lender to reestablish an escrow account for us? How much would they charge to reestablish an escrow account?

Something that I could dig on more later. But if you know the answer, let us know!

Meanwhile, do the above considerations frighten you against managing the non-escrowed items on your own? Or do they confirm your decision not to manage them yourself? Share your thoughts!

5 ADD YOUR COMMENT!:

emilie May 25, 2008 at 3:12 AM  

Rela, what in the world is escrow? :) ..ok.ok, I'll definitely check wikipedia. :)

Rela Pantaleon-Manigsaca May 26, 2008 at 12:46 AM  

Hi Emilie,

Thanks for the question - reminds me that I need to write more clearly for the broader "audience". Hehehe...

Anyway, yes formal definition will be in Wiki or Webster. But in the context of this waiver of escrow article, it's a process done by a neutral entity that keeps your property taxes, home insurance, etc money for you until it is time to pay these annual responsibilities.

In the Philippines, we don't use escrows. We do the payment of the property taxes and home insurance (which is actually optional!) by ourselves.

Anonymous,  December 12, 2008 at 2:34 PM  

Some states require lenders to hold escrows, others allow you to waive escrows, however there is almost always a fee. You probably were charged somewhere for it (possibly it was rolled into the mortgage), or somebody made a mistake. How much you're charged for waiving escrows varies, but is usually a small percentage of the loan, such as .25%. I'm sure you could set up escrows if you chose to waive them previously by contacting the servicer of your loan. Usually just going to whatever bank/lender services your loan and dialing their customer service hotline will get you to who you need to talk to.

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