Settlement providers acting in a fiduciary capacity have a responsibility and obligation to make sure all funds are accurately collected and disbursed in a timely manner. Amounts reflected on the trial balances should only be there while the file is active. Any funds that remain after closing should be quickly disbursed or refunded.
A regular review of the trial balance should be conducted to ensure that only funds for files that remain active are being held. If the file has closed and funds remain, those files should be looked at closely to verify that all payment obligations have been met. If all items have been paid and there are funds remaining, they need to be refunded. Under no circumstances may excess escrow funds be taken into the general operating account. If the initial depositor cannot be located, state escheatment laws should be followed.
Particular attention should be given to ledgers that reflect a negative balance. The reason for the shortage must be identified and quickly corrected. Were sufficient funds collected? Was a payment made for too much? Regardless of the cause, the ledger must be made whole, either by obtaining a refund, collecting additional funds or funding the escrow from the operating account.
Balances on the trial balance should not be there forever, and a regular review of the trial balance will help ensure that escrow funds are being handled correctly and timely.
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