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B&C Servicers Want to See More Loans Being Escrowed.
Orlando, FL -- Servicers of subprime mortgage loans face a perplexing conundrum. Only about a quarter of the loans include escrow accounts to ensure payment of insurance premiums and property taxes, yet subprime borrowers are the least likely to save money to pay semi-annual or annual bills for taxes and insurance.
Speaking during a panel discussion at the MBA National Mortgage Servicing Conference here, a number of B&C servicers said they believe that the escrow rate for insurance and tax payments should be higher.
Nigel Brazier, senior vice president for business development and strategic initiatives at Select Portfolio Servicing, said that only about 25% of the loans in his company's subprime portfolio have escrow accounts. He said that is typical for the subprime industry, where the investors who ultimately buy loans typically do not require escrowing for insurance and taxes. SPS does not originate loans.
While escrow accounts would force subprime borrowers to bring more money to the closing table, some in the industry believe that failing to escrow can lead to higher delinquency and default rates among B&C credit quality borrowers.
Mr. Brazier said he thinks investors are "starting to realize" that they perhaps should be concerned about the low rate of escrowing in the nonprime sector of the business.
And Fabiola Camperi, a senior vice president at Option One Mortgage, said ...
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