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RESPA & Escrow Account

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Mark Cappel
UpdatedMay 28, 2010
Is a mortgage escrow account for taxes and insurance required under RESPA?

I currently have a home mortgage with Chase. When I refinanced a few years ago I agreed to include an escrow account within the mortgage. Since then, I have tried twice to change this agreement and pay my insurance company and taxes directly once yearly. Chase has told me that I can not do this unless I refinance. The representative said this situation is a part of the RESPA law. I have excellent credit, a good amount of savings, and owe approximately 60K on my home. Was the representative correct about(this)law? Thank you.

No, the Chase customer service representative (CRS) was incorrect about RESPA and escrow accounts, but his or her misinformation is irrelevant for the purposes of your question.

First, some background information about the Real Estate Settlement Procedures Act (RESPA), which took effect January 1, 2010. The U.S. Department of Housing and Urban Development (HUD) describes RESPA on its Web site thusly: "RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD."

According to the RESPA FAQs About Escrow Accounts for Consumers, an escrow account is not required under RESPA. Therefore, that portion of what the CSR told you was an incorrect statement of law.

However, the mortgagee is allowed to require an escrow account as a condition of you, the mortgagor, doing business with it. That is allowed under RESPA. Therefore, the CSR telling you that you need to refinance to lift the escrow account requirement is probably true, if that is a condition of your mortgage.

You may want to consider refinancing. See the resource Refinance Rates to learn more about refinancing your mortgage.

I hope this information helps you Find. Learn & Save.