Showing posts from December, 2018

Handling Escrow on Your Loans – 3 of 3

Special Situations Check out part 1 – The Rules for Lenders and part 2 – How to do Escrow in Moneylender Now that we know how to determine the periodic escrow amount and what the allowed amounts are, let’s talk about some situations that commonly come up over the life of a loan in the real world. Pre-Funding the Escrow Account on a New Loan Loans are originated at all times of the year, and property taxes and insurance premiums can be due at various times of the year, too.   Sometimes the loan is opened and the property taxes are due almost immediately.   When this happens, it is common and appropriate to require a deposit to the escrow account as part of the loan closing.   Although a lawyer or escrow company will usually figure out the numbers, you can easily determine a reasonable deposit amount yourself. Taking the amount to be paid in the future as the “expense”, the deposit amount is the expense minus 1/12 th of the expense for each month from when the loan

Handling Escrow on Your Loans – 2 of 3

How to do Escrow in Moneylender Check out part 1 of this Series – The Rules for Lenders Moneylender can happily determine the correct amount to add to each P&I payment so your escrow balance conforms to the regulations.   Moneylender already knows the payment schedule and can determine how many payments will post to the loan in each month.   You will need to tell Moneylender when you expect to disburse money from the escrow account, and how much you expect those disbursements to be.   For tax reporting purposes, Moneylender also needs you to categorize the disbursements into Property Tax, Property Insurance, Mortgage Insurance or Other. To do this, you select the loan, visit the settings tab on the right and click Escrow Account.   From here we see all the pertinent information including the escrow balance, upcoming disbursals, and the current and future escrow charges.   Click Manage Disbursements to add, change or confirm the money you have or will be paying out of

Handling Escrow on Your Loans – 1 of 3

The Rules for Lenders Tracking escrow on mortgage loans is a big deal, and an important part of servicing loans properly .  There are a lot of moving parts to doing it correctly.  What are the rules, how do you track the information about payments you’ve made and will make in the future, how do you decide how much to charge each month so the amount you have in the escrow account is reasonable and legal, what about sending the correct documentation to the borrower and the IRS?  Making a mistake can call into question the validity of your calculations, expose you to fees or penalties, or even put your collateral in jeopardy. The United States government enacted the Real Estate Settlement Procedures Act (RESPA) in the mid 1970’s to help consumers understand the costs of getting a loan as well as regulate practices that were padding extra fees onto new home loans.   The law also limited how much money lenders could require from their borrowers to keep in an Escrow account.

Setting a Precedent

Disclaimer: I am not an attorney, none of the ideas here should be considered legal advice. I had a call from a customer a few weeks back where they wanted payments not to pay fees, but rather to pay interest and principal first.   The borrower was paying only the principal and interest payment, and was consistently late.   The customer was thinking that at some point the fees would eventually get paid through some kind of supplemental payment or maybe sit there until payoff.   They said they had seen that banks will do it that way, having a payment affect the principal and interest first and then pay the late fee. I brought up a few reasons why we should let Moneylender apply the payment to the fees first, then interest then principal. Banks will almost always foreclose on a first mortgage after 90 days.   I have plenty of customers that service their loans with Moneylender Professional that will start foreclosure within days of hitting a 90-day delinquency.   Legally

The Farmer Who Could Understand Animals

I am a huge fan of the book The Richest Man in Babylon .   I buy half a dozen copies at a time and give them to my friends when the subject of money comes up.    I’ve participated in and run book studies.   It’s such a simple and pointed book that is as fun to read as it is instructional.   There’s one part of the book that I retell to people often, and it applies quite well to any lenders that might make lenient repayment terms with borrowers that are getting behind. I’ll tell the story here (although the version printed in the book is much better).   In the book, this parable is told from a seasoned moneylender to a spear maker.   The spear maker had recently been given a gift of 50 gold pieces from the king as a reward for presenting a new design for the spears of the royal guard.   The spear maker was beseeched by his family and friends for loans day and night.   Unsure what to do, and not wanting to lose his gold and good fortune, he asked the moneylender for advice… T

For Lenders Preparing to Close Out 2018

With the calendar year coming to an end, now is the time to get your books in order and make sure you can accurately account for your lending and leasing activities for the year.   For those that service their loans and leases with Moneylender Professional , we have a few tips to make sure your records are ready for year-end accounting and reporting. Don’t Print 1098s until 2019.   Moneylender 3 uses the template system to provide 1098 forms for customers in the USA.   The tags for these templates use total from the previous calendar year.   That means you can’t get 2018 totals until 2019.   You can use Moneylender’s emailing capabilities to email the Substitute 1098 forms directly to your borrowers straight out of Moneylender.   You can print the substitute forms for anyone without a valid email address. For the official IRS forms, order them from the IRS, and you can print the Data-Only flavors of the 1098 templates directly onto the official forms.   Be sure to check