Refinancing harp loan and lender wants to apply escrow balance to principal, but I want it refunded to me. Can they do that?

Usually, it is very hard to get a lender to net the escrow balance from the payoff. If it is your current lender/servicer, they may have the right to do so since the HARP guidelines require that you receive no more than $250 proceeds from the closing. We do not count the escrow as part of that cash out limit, but I have heard of lenders that do. Also, you may have to bring cash to close if they do not net the escrow out. We try to net the escrows on all internal refis, as the clients do not want the loan amount any higher than necessary. I am licensed in Tenn. Call me if you have more questions.

Your current lender is an idiot.. The $250 max cash back to borrower does not apply to escrow funds.. escrow funds are your monies put into a savings account with the lender in advance of anticipated fees such as the taxes and home owners insurance, and it was paid by your monthly... if the lender was giving you cash back from BORROWED funds, then the maximum would be $250... But escrow funds are not borrowed, they are savings.. Now whether they can do it or not.. They can.. if it's their policy, they can require it.. or they could use it to fund your new escrow account, but it's up to them... I know one thing for sure.. if you use any other lender than your existing lender, you would have received the escrow refund without a problem.. and it would not be breaking the "maximum $250 cash back" rule.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Escrow funds are your money paid in every month to satisfy taxes and insurance at the end of the year and therefore do not fall into the $250 max cash back rule. Unless it is your current lender doing the refi then you would get that money back. If it is your existing lender then they can roll the escrow funds over without closing out your old account and they then do not have to give you the escrow funds back.

Yes they can and this does not make them an idiot as some would suggest. This usually happens if you are refinancing with the bank that is currently servicing your old loan. HARP rules require that the borrower net not more than $250 cash back. If they (the bank) have control over your escrows and allow you to receive them back, then it could be construed that they are netting you more than the allowable $250. Since Fannie and Freddie still require Reps and Warrants (kind of a guarantee that allows Fannie and Freddie to shove a file back to the originating lender), it is not surprising that they are taking the conservative approach. You on the other hand do not have to accept this. If you want the escrows back, use a local Mortgage Banker/Broker instead of your current bank. You'll probably get a better deal too. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ Licensed in California and Arizona ~ www.LoansA2z.com 888-889-9950

Netting the escrows would result in you potentially getting more cash back. All they need to do is reduce the loan amount so you do not get more than $250 cash back. Call me if you have any more trouble with them or just want to vent. :) 614-310-7520

If you refinance using a different lender you won't have that issue because the current lender isn't likely to apply the escrow to the payoff figure given to a different lender. I handle mortgages in Tennessee and would be pleased to offer you some options.

if you go through a lender that is not your current servicer, you will not have the same issue.

If you refinance through someone other than your current lender you can get a refund.

Obviously there are several different answers here & I think the best answer for you is that fact that every lender is different. They all have different overlays with their Investors.I am here in Murfreesboro, TN, who is the lender you're going through?

Wells Fargo, huh, That's your problem. I have yet to have them beat me on rate/fees. It is true that they can make the process a little easier, because they already have a lot of your information, but you can usually save a couple thousand dollars in fees by using a local Mortgage Banker/Broker instead. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ Licensed in California and Arizona ~ www.LoansA2z.com 888-889-9950