In my previous blog, “A Different Kind of Escrow”, I discussed how loan proceeds may be held in a short term escrow account if construction/improvements cannot move forward due to inclement weather. The context of the blog was to emphasize that those monies are not subject to RESPA’s escrow rules found in 3500.17 (i.e. initial deposits on GFE, account analysis, the 900 section of the HUD Settlement Statement, etc.)
It also stated, “The escrow funds are not considered “settlement charges” and therefore, should not be disclosed on the GFE or the Settlement Statement.” I felt it necessary to clarify this sentence a little further. As stated before, the funds for these types of escrows would not go on the GFE. However, they should appear on the first page of the HUD-1 Settlement Statement (in the 100 or 400 series), depending on who is funding the account (i.e. borrower/seller) or the type of transaction (i.e. home improvement/purchase). Please note that HUD 1-A Settlement Statements do not have a 100 series and therefore a HUD-1 would need to be utilized for non-purchase transactions.
Published
2011/01/21