Question

If a lender provides an escrow account, The Real Estate Settlement Procedures Act regulates the lender's escrow account activities. One of the provisions tells lenders they can keep a cushion of 1/6th of the disbursements for a given year. They are to perform an escrow analysis every year. Amounts over the 1/6th cushion must be rebated to the borrower if they are over:

1) -25
2) -50
3) -100
4) -250

Answer 1

The Real Estate Settlement Procedures Act mandates lenders to rebate any amount over the 1/6th cushion in an escrow account to the borrower if it exceeds $50 (option 2).

Step-by-step explanation:

The Real Estate Settlement Procedures Act (RESPA) regulates lender's escrow account activities, including how much of a cushion a lender can keep in the escrow account. The provision allows a lender to maintain a cushion of 1/6th of the total disbursements for a given year, and they're required to perform an escrow analysis annually.

According to RESPA, any amount in the escrow account over the 1/6th cushion must be returned to the borrower if it exceeds a certain threshold. The correct threshold amount that must be rebated to the borrower if the escrow account exceeds the 1/6th cushion is $50 (Option 2).