Under RESPA, what must happen if an escrow account has an overage of more than $50?

Under the Real Estate Settlement Procedures Act (RESPA), if an escrow account holds an overage of more than $50, the lender is required to refund the excess amount to the borrower within 30 days. This requirement exists to ensure that borrowers are not unnecessarily holding large amounts of money in escrow due to overpayment, which could instead be returned to them for their use.

The regulation emphasizes that escrow accounts, which are typically used to cover property taxes and insurance premiums, should only hold as much as necessary to meet upcoming obligations. If there is an overage, it is considered the borrower’s money, and therefore, timely refunding it promotes transparency and fairness in the lending process.

This requirement prevents the lender from retaining borrowers’ funds beyond what is required for managing the escrow account efficiently, ensuring borrowers have access to their funds without undue delay.