The borrower is purchasing a home but intends to allow the seller to remain in the home until he (the seller) completes construction on his new home.
The loan will have an escrow account established for ins. & taxes.
The borrower is obtaining renters insurance, which has a higher premium, once the seller moves out he will obtain homeowners insurance. The cost will be significantly lower. The borrow wants the bank to reduce their monthly escrow payment to reflect the lower insurance cost.
Question: How can we do this? Short year analysis/statement or just adjust totals without analysis and statement?
You can do the short year analysis. Keep in mind this will change your computation year.
1024.17(b): Escrow account computation year is a 12-month period that a servicer establishes for the escrow account beginning with the borrower’s initial payment date. The term includes each 12-month period thereafter, unless a servicer chooses to issue a short year statement under the conditions stated in §1024.17(i)(4).
1024.17(i)(4)(i): Effect of short year statement. The short year statement shall end the “escrow account computation year” for the escrow account and establish the beginning date of the new escrow account computation year. The servicer shall deliver the short year statement to the borrower within 60 days from the end of the short year.