The Federal Housing Administration appears to be in process of a changing a March directive that made it more difficult to process refinancings.
In March, FHA instructed lenders to stop a long-standing practice of using excess escrow funds to pay down the borrower’s outstanding loan balance.
FHA said the borrower’s excess escrow funds must be refunded directly to the borrower. This has caused a lot of “grief for servicers,” one housing official said, requesting his name not be used.
Recently, correspondent lenders started telling their customers to stop using excess escrow funds to
“This is silly,” one mortgage broker said. “Why won’t you use the $3,500 that you have in your escrow account to pay the mortgage down?”
During the summer, FHA indicated to industry officials that they may reverse the escrow account policy – but lenders are still waiting for the agency to issue a Mortgagee Letter to clarify its position.
“We are working on a change to our current policy, which we hope to publish soon,” a FHA spokesman told NMN on Friday.
