The Finch Formerly Known As Gold

31 January 2008

We're just holding it for safekeeping

Rep. Ken Luttrell (D-Ponca City) has come up with a measure to require mortgage holders to pay interest on escrow accounts.

Mike McCarville's précis:

House Bill 2594, by Luttrell, would require lenders to pay a portion of the interest earnings to the consumer whose money is funding the account. Under the bill, each lender holding funds in an escrow account would be required to pay the borrower dividends or interest at least once per quarter, calculated at a rate equal to at least 50 percent of the one-year Treasury Note rate or "rate of a comparable instrument." The lender could not deduct any charge for service from the interest or dividend payment. At least once a year, lenders would be required to provide mortgagors a financial statement showing the interest credited on the escrow account.

Immediate thought: How would they calculate the interest? Average daily balance? I know that my escrow account is fairly meager this time of year, grows substantially through the spring and summer, and is depleted in the autumn as the insurance and tax bills fall due.

So I went to look at the bill itself [link goes to RTF file] and found that yeah, that's pretty much what they have in mind:

The interest shall be computed on the daily balances in the account from the date of receipt to the date of disbursement and shall be credited to the account as of the last business day of each quarter of a calendar or fiscal year. If the account is closed or discontinued before the last business day of a quarter of a calendar or fiscal year, interest shall be computed and credited as of the day the account is closed or discontinued.

I won't make a ton of money off this deal should it pass — seldom does my escrow account exceed $2000 — but I like the idea. Now I'm waiting for someone to complain that this will make mortgages harder to obtain, and that (you knew this was coming) women and minorities will be hardest hit.

Posted at 6:09 PM to Common Cents , Soonerland


Seems like a good idea to me. They get to hold (use) the money, they should pay for it.

When I closed a business location a few years back, I got a nice deposit+interest check from the electric company. (Turns out the previous owner had never asked for the deposit back after the first year. Found money!)

Posted by: Old Grouch at 12:04 PM on 1 February 2008

"This will make mortgages harder to obtain and women and minorities will be hardest hit." There. I said it. Happy now?

I'll say it before every lender/escrow holding company doing business in Oklahoma says it. Or their association/organization says it. (And if they didn't have a association before this- they will by Monday.)

Shall I continue? "The cost of the interest and the processing of the payments will drive up the cost of business significantly, making Oklahoma a less profitable market for us. We might have to rethink our presence in the state."

"Driving up the cost of business significantly", is of course, a complete load of bull plop, but they will get their way.

Do they need a spokesperson? Would they mind if I did it from my home out of state?

Posted by: Air at 8:06 AM on 2 February 2008

But why agree to keep an escrow account at all?

When I had my first mortgage, after 2 first years of payments (and being charged penalties by my mortgage company for "insufficient amount of money" on my escrow account - they had rule of having, at any given time, 2 times what the next property tax payment will require), I fought (and won) an approval of paying my property taxes myself. Was on time ever since.

Posted by: Tatyana at 9:51 AM on 2 February 2008