Per ML 2013-29, for FHA-insured refinance mortgages with case numbers assigned on or after November 1, 2013, the lender must obtain the borrower’s written permission before unused borrower funds from an escrow account on an existing mortgage can be applied to the newly originated loan instead of giving the money directly to the borrower.
New “FHA Authorization to Apply Unused Escrow Funds” has been created to fulfill this new FHA documentation requirement. Checkbox options included on the document allow the borrower to authorize use of the unused escrow funds in the following ways:
- Toward reducing the payoff amount for the existing mortgage for which the escrow account is maintained (this practice is also known as “netting escrows”).
- Toward paying closing costs on your new loan.
- Toward buying down the interest rate on your new loan.
- Toward establishing an escrow account for your new loan.
- Other (specify): ___________
New document trigger “Authorization to Apply Unused Escrow Funds” has been created and will default to “Yes” for FHA refinance closing packages when the FHA Case Number Assignment Date is on or after 11/01/2013. The “Authorization to Apply Unused Escrow Funds” field will also be prompted for in ConformX under the same scenario, so users can choose to not print the related document by setting the field to “No”.
This document will be available on November 2, 2013. If you have any questions or concerns about this new document, please contact Client Support at 1.800.497.3584.
October 29, 2013