B&C Escrow Rate Called Low

Servicers of subprime mortgage loans face a perplexing conundrum: only about a quarter of the loans include escrow accounts to ensure payment of insurance premiums and property taxes, yet subprime borrowers are the least likely to save money to make such payments.Speaking at a panel discussion at the MBA National Mortgage Servicing Conference in Orlando, Fla., several B&C servicers said they believe the escrow rate for insurance and tax payments should be higher. Nigel Brazier, senior vice president for business development and strategic initiatives at Select Portfolio Servicing, said only about 25% of the loans in his company's subprime portfolio have escrow accounts. He said that is typical for the subprime industry. Some in the industry believe that failing to escrow can lead to higher delinquency and default rates among subprime borrowers. Mr. Brazier said investors are "starting to realize" that they should perhaps be concerned about the low rate of escrowing in the nonprime sector. And Fabiola Camperi, a senior vice president at Option One Mortgage, said her company has been trying to promote escrowing in its portfolio. "We have seen our ratio of escrow loans increase significantly," to more than 50%, she said.