United Wholesale Mortgage, one of the country’s highest-volume lenders, is allowing borrowers an escrow-free option with their mortgage, at no extra charge. Even borrowers with less-than-perfect credit histories or who made small down payments may be eligible to bypass having an escrow account with the bank.
Escrow accounts are typically required with banks for conventional home mortgages. They require borrowers to deposit money in advance for a later payment on local property taxes and hazard insurance premiums.
Typically, lenders grant only a select few mortgage borrowers a waiver from having an escrow account with the bank. That is typically reserved for those with excellent credit scores or those who made a large down payment on a home.
But United Wholesale Mortgage is opening up the waivers to borrowers even with poor credit. The bank is allowing conventional loan borrowers with FICO credit scores of even 640 and those who made down payments as low as 5 percent to avoid escrow accounts. By waiving escrow accounts, the lender says a borrower could potentially save $3,625 on a $300,000 mortgage in closing fees related to the escrow.
Mat Ishbia, president and CEO of UWM, told The Washington Post that those qualifying for the escrow waivers “are all high-quality borrowers that are approved through automated engines at Fannie Mae and Freddie Mac, and verified by our underwriters.”
But some in the housing industry are concerned. Critics worry whether homeowners without the forced savings of an escrow account will be ready to make a big large lump-sum tax or insurance bill when it comes due.
“Sounds like we are back in 2008 again,” David I. Ginsburg, president of Loanech, a national authority on escrow account audits, told The Washington Post. “When the next slowdown occurs, these borrowers will have problems, and we know what that will look like.”
Source:
“Major Lender Allows Borrowers to Go Without Escrow Accounts,” The Washington Post (Aug. 1, 2018)
