Escrow Configuration

Shares and Certificates Shares/Certificates Escrow Configuration

This document provides a comprehensive guide to configuring escrow settings within the FLEX system. Escrow Configuration allows users to manage escrow codes and statement defaults, ensuring accurate escrow account management and statement generation.

1. Accessing Escrow Configuration

The Escrow Configuration module is located within the Loans section of the FLEX Main Menu.

  • Navigation Path: Loans > Escrow > Escrow Configuration

2. Escrow Configuration Interface

The Escrow Configuration screen is divided into two primary tabs:

  • Codes Tab: Used for managing individual escrow codes.
  • Statement Defaults Tab: Used for setting system-wide defaults for escrow statements, reserves, and shortage/overage handling.

2.1. Codes Tab

The Codes tab displays all existing escrow codes. From this tab, you can add, edit, or delete escrow codes.

2.1.1. Escrow Codes Section

This section lists all configured escrow codes with the following columns:

  • Code: A one-digit identifier for the escrow transaction.
  • Deposit/Withdrawal: Indicates whether the code represents a deposit (‘D’) or a withdrawal (‘W’) to the escrow account.
  • Description: A brief explanation of the escrow code’s purpose.

2.1.2. Actions

  • Add: Click to create a new escrow code.
  • Edit: Highlight an existing code and click to modify its details.
  • Delete: Highlight an existing code and click to remove it.
  • Refresh: Click to update the list of escrow codes.

2.1.3. Adding/Editing an Escrow Code (Details Section)

When adding or editing an escrow code, the following fields are available:

  • Escrow Code:
    • Purpose: Enter a unique one-digit code for the transaction.
    • Note: Codes ‘D’, ‘V’, and ‘X’ are mandatory FLEX system codes and are automatically used for loan payments, dividend postings to escrow, and escrow transaction reversals, respectively.
  • Deposit/Withdrawal:
    • Purpose: Select ‘D’ for a deposit or ‘W’ for a withdrawal.
    • Recommendation: FLEX recommends adding specific codes for corrections and reversals (e.g., for incorrect payments or refunds of tax/insurance payments). These codes can later be excluded from future escrow payment calculations.
  • Description:
    • Purpose: Provide a clear and concise description of the escrow code.

2.2. Statement Defaults Tab

The Statement Defaults tab allows configuration of various parameters that influence escrow statement generation and account analysis.

2.2.1. Reserves

This section defines the reserve amounts to be retained in escrow accounts.

  • # Tax Reserve Months:
    • Purpose: Specifies the number of months’ worth of tax payments to retain as reserves.
    • Calculation: FLEX calculates the tax reserve by dividing the total tax amounts by 12 and then multiplying by this specified number of months.
  • Tax Payment Codes:
    • Purpose: Identifies the escrow codes that represent tax payments made from the escrow share. These codes are also used in the reserve calculation.
  • # Insurance Reserve Months:
    • Purpose: Specifies the number of months’ worth of insurance payments to retain as reserves.
    • Calculation: FLEX calculates the insurance reserve by dividing the total insurance amounts by 12 and then multiplying by this specified number of months.
  • Insurance Payment Codes:
    • Purpose: Identifies the escrow codes that represent insurance payments made from the escrow share. These codes are also used in the reserve calculation.
  • # Other Reserve Months:
    • Purpose: Specifies the number of months’ worth of other (non-tax/insurance) payments to retain as reserves.
  • Other Payment Codes:
    • Purpose: Identifies the escrow codes that represent payments from the escrow share that are not categorized as tax or insurance. These codes are also used in the reserve calculation.

2.2.2. Printing

This section controls the display of account numbers on escrow statements.

  • Mask Account Number:
    • Purpose: Determines if the account number should be masked on printed escrow statements.
  • # of Digits to Print:
    • Purpose: If account masking is enabled, specifies the number of visible digits. All other digits will be replaced with ‘X’.

2.2.3. Dates

This section defines the escrow cycle and payment change effective dates.

  • From Statement Date:
    • Purpose: Sets the start date for the escrow cycle.
    • Constraint: Must be the first day of the month.
  • To Statement Date:
    • Purpose: Sets the end date for the escrow cycle.
    • Constraint: Cannot exceed a period of more than one year from the From Statement Date.
  • Effective Date of Payment Change:
    • Purpose: Indicates the date on which any calculated payment changes will become effective.
    • Example: For a calendar year escrow cycle (1/1/2019 to 12/31/2019), the Effective Date of Payment Change would typically be 1/1/2020.

2.2.4. Shortages/Overages

This section defines how the system handles projected shortages and overages in escrow accounts.

  • Shortages Less than 1 Escrow Payment:
    • Context: Applies when the projected lowest monthly balance is less than the total reserve amount, resulting in a shortage that is less than one month’s escrow payment.
    • Options:
      • I – Ignore: The shortage is allowed to exist, and the payment is not changed. The member is not required to make up the shortage.
      • P – Full payment within 30 days: Requires payment of the full shortage amount within 30 days of the statement date. The regular payment is not affected.
      • R – Repay over the next 12 months: The borrower repays the shortage in equal monthly installments over a 12-month period. The shortage amount is divided by 12 and added to the calculated escrow payment.
  • Shortages Greater than or Equal to 1 Escrow Payment:
    • Context: Applies when the projected lowest monthly balance is less than the total reserve amount, resulting in a shortage that is equal to or greater than one month’s escrow payment.
    • Options:
      • I – Ignore: The shortage is allowed to exist, and the payment is not changed. The member is not required to make up the shortage.
      • R – Repay over the next 12 months: The borrower repays the shortage in equal monthly installments over a 12-month period. The shortage amount is divided by 12 and added to the calculated escrow payment.
  • Overages Under $50.00:
    • Context: Applies when the projected lowest monthly balance is more than the total reserve amount, resulting in an overage.
    • Options:
      • R – Refund: The overage is refunded to the member within 30 days of the escrow statement. This requires a manual transfer.
      • C – Credit to next year’s payments: The overage is divided by the number of payments in the year and subtracted from the calculated escrow payment for the next year.
    • Note: Overages exceeding $50.00 must be refunded within 30 days.

2.2.5. Payment Information

  • Exclude Escrow Codes:
    • Purpose: Enter any escrow codes that should be excluded from the escrow calculation.
    • Recommendation: Limit exclusion to codes that do not affect the account balance (e.g., manual reversals).
    • Caution: Not excluding appropriate codes can lead to incorrect ending balances and inaccurate next year’s payment calculations on statements.
    • Note: To prevent system reversals from appearing on the statement, ‘X’ should be added as an excluded code.