Escrow: Loan Processing

Lending Lending Escrow: Loan Processing

1. Introduction

Escrow accounts in the FLEX system facilitate the automatic transfer of a defined escrow amount into a dedicated escrow share when a member makes a loan payment. This process streamlines the management of funds for property taxes, insurance, and other escrow-related expenses.

2. Prerequisites

Before utilizing escrow in loan processing, the following configurations are necessary:

  • Escrow Share Type Configuration:
    • A share type must be created with the Group Code set to “Escrow Share Account.”
    • Refer to FLEX Academy’s “Type Configuration” documentation for detailed instructions on creating new share types.
  • Loan Type Configuration for Escrow:
    • Loan types must be configured to allow an escrow on a suffix. This option is typically found under the Miscellaneous tab in “Type Configuration.”
  • Escrow Share Account Opening:
    • The Escrow Share Type must be opened through “Open New Share Accounts” prior to adding an escrow amount via Loan Processing.
    • For comprehensive instructions on Loan Processing, consult FLEX Academy’s “Loan Application” and/or “Loan Set-up and Disbursement” documentation.

3. Estimating and Entering Escrow Amount (Loan Application)

The escrow amount can be estimated and entered on the Payment Info tab within the Loan Application.

  1. Access Payment Info Tab: In the Loan Application, navigate to the “Payment Info” tab.
  2. Click Estimate: Click the Estimate button next to the “Escrow Amount” field. This will open the “Escrow Loan Application Statement” screen.

3.1. Escrow Loan Application Statement Screen

This screen allows you to set reserves and enter withdrawals for calculating an escrow estimate. Defaults for Statement Reserves, Shortages/Overages, and Payment Information are configured in “Escrow Configuration” but can be modified here.

  • Reserves:
    • # Tax Reserve Months: Number of months for tax reserves.
    • Tax Payment Codes: Codes for tax payments.
    • # Insurance Reserve Months: Number of months for insurance reserves.
    • Insurance Payment Codes: Codes for insurance payments.
    • # Other Reserve Months: Number of months for other reserves.
    • Other Payment Codes: Codes for other payments.
  • Dates:
    • Effective Date of Payment Change: Date when the payment change is effective.
  • Shortages/Overages:
    • Shortages Less than 1 Escrow Payment: Defines how shortages less than one escrow payment are handled (e.g., “R-Repay over next 12 months”).
    • Shortages > 1 Escrow Payment: Defines how shortages greater than one escrow payment are handled (e.g., “R-Repay over next 12 months”).
    • Overages under $50.00: Defines how overages under a specified amount are handled (e.g., “R-Refund”).
  • Payment Information:
    • Exclude Escrow Codes: Codes to exclude from escrow calculations.
  • Enter Withdrawals: Click this button to enter future escrow withdrawals, which are crucial for accurate escrow amount estimation, especially for the first statement run. After the first statement, FLEX uses Escrow history for calculations.

3.2. Escrow Withdrawal Estimates Screen

This screen allows you to manage estimated future escrow withdrawals.

  • Add: Click to create a new estimate.
  • Edit: Highlight an existing estimate and click to modify it.
  • Delete: Highlight an existing estimate and click to remove it.
  • Estimates List: Displays existing estimates with Sequence, Escrow Code, Month, Year, Withdrawal, Usage, and Description.

3.3. Edit Estimate Details Screen

When adding or editing an estimate, you will provide the following details:

  • Month: Select the month the item is due.
  • Year: Enter the year the item is due.
  • Escrow Code: Select the appropriate Escrow Code for the item. Escrow codes are defined in “Escrow Configuration.”
  • Estimated Amount: Enter the estimated amount due for the item.
  • Description: Enter a description for the item.
  • Escrow Usage: Select the usage code for the item:
    • A – Add: Adds the listed amount to the history for escrow calculations (used for new loans without history).
    • R – Replace: Replaces an amount if a withdrawal increases. If multiple records have the same code, only the first code is replaced.
    • S – Short: Used for amounts already paid out that need to be included in the escrow statement’s projections when the loan is less than one year open and running escrow statements.

3.4. Finalizing the Escrow Estimate

  1. Once all estimate withdrawals are entered, click Estimate on the “Escrow Loan Application Statement” screen.
  2. The “Escrow Estimate” will be calculated and displayed on the “Payment Info” tab of the Loan Application.
  3. Enter the calculated Escrow Amount into the designated field to continue.

Note: Estimate withdrawals can also be entered in “Loan Set-up and Disbursement,” which is also where the escrow share suffix is entered.

4. Viewing and Editing Escrow in Loan Maintenance

Once the loan has been funded, the escrow amount can be viewed and edited in “Loan Maintenance.”

  1. Access Loan Maintenance: Navigate to the “Loan Maintenance” screen for the relevant loan.
  2. Escrow Account Information: The “Escrow Account Information” section will display the Escrow Amount and Escrow Suffix.
  3. Edit: You can edit the escrow amount and suffix from this screen.

5. Escrow Payment Processing

When a loan payment is made:

  • The defined escrow amount will be automatically deducted from the payment.
  • This amount will then be transferred into the designated escrow share.

6. Escrow Share History

An additional escrow tab is available in the history of the escrow share, providing a detailed breakdown of escrow transactions. This tab contains:

  • History for years.
  • Escrow codes.
  • Year-to-Date (YTD) Totals.
  • Number of Transactions.

6.1. Correcting Escrow Codes

  • If an escrow code was entered incorrectly, it can be changed in Transaction Detail or Escrow Processing.

7. Confidentiality Notice

This document is published by Computer Marketing Corporation/FLEX and is intended solely for its contracted clients. It may contain information that is privileged, confidential, or otherwise protected from disclosure. Dissemination, distribution, or copying of this document and any accompanying attached information by someone other than the intended recipient(s), or an employee or agent acting on behalf of the intended recipient, is strictly prohibited.