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Escrow Impound Accounts Explained

1/21/2016

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An Impound Account, also known as an Escrow Impound Account, is an account set up and managed by mortgage lenders to pay property taxes and insurance on behalf of the home buyer.  Accounts are set up with the lender during escrow to ensure that the home buyer's property taxes and insurance are paid on time and in full.  After escrow collects the initial deposit for the Impound Account and after the transaction is closed, the escrow company is no longer involved.

How It Works: Each month, an amount equal to about 1/12 of the total sum of the annual property taxes and insurance due is collected from the buyer, along with their mortgage payment, and placed in the account.  When the time comes to pay the annual property taxes and insurance, the lender makes the payment from the funds in the account on the behalf of the buyer.


Setting up an Account: Accounts are set up by the mortgage lender during escrow. Escrow collects an Escrow Impound Deposit, typically a deposit of 2-6 months worth of taxes and insurance.  This deposit ensures there are sufficient funds to make the payments when they are due.

Common Questions Regarding an Escrow Impound Account:

Is it mandatory to have an Escrow Impound Account? No. The buyer may elect to pay property taxes on their own, and there is usually a small fee when waiving the account.  Based on the type of loan, the lender may require the buyer to have one. For any loan where the borrower is putting less than 20% down payment impounds will be required by the lender.

Is it a good idea to have an Escrow Impound Account? Since property taxes and home insurance bills only come about twice a year, many homeowners have a hard time saving for them. This is one less thing to worry about, as the lender makes the payments for the buyer.
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MARKET REPORT !!!!!!

1/21/2016

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 US and Europe stock indexes better this morning, US interest rates opened lower. Nothing significant about the stock markets being better, just starting the day taking a breath. Stocks will continue lower in this very bearish run; still expecting the DJIA to drop 20% at least frm the recent highs last year.
 
Two reports at 8:30 this morning. Weekly jobless claims expected to have declined 9K were up 10K to 293K, the highest claims in the last six months. The 4 week average increased to 285K frm 278.50K. January Philadelphia Fed business index, expected -4.0 frm -5.9 originally reported for Dec at -5.9; as reported the index was at -3.5 but Dec was revised to -10.2. The new orders index is improving, at minus 1.4 for the best reading since September. And shipments, for the first time also since September, are positive, at a strong 9.6. The six-month outlook, down 5 points to 19.1 for the softest level since 2012, the decline in inventory build is defensive and intentional.
 
ECB’s Mario Draghi this morning commenting that inflation is way down the line; he said there is no end to what the ECB will do to improve the outlook.  Blowing in the wind; as we have noted recently central banks regardless of what they will or could do are becoming more impotent every day in the context of driving economic growth. Draghi said the bank needs to review its policy stance at its next meeting. The ECB left its key interest rates unchanged, but Draghi hinted the bank will review its stimulus at the March ECB meeting. The inflation rate in Europe was expected to pick up from the 0.2% recorded in December and average 1% this year, rising further in 2017. But Mr. Draghi said it is now possible that prices will start to fall again over coming months.
 
At 9:30 the DJIA opened +18, NASDAQ -2, S&P +1 after trading higher in the pre-market futures this morning. The 10 yr  note yield at 9:30 -1 bp at 1.97%. FNMA 30 yr 3.5 coupon +11bps frm yesterday’s close and +9 bps frm 9:30 yesterday.
 
Corporate earnings and forward guidance generally have been missing their targets; US economic outlook weakening from what we look at and expect. The advance Q4 GDP will be reported a week frm tomorrow, estimates are being revised lower but economists are likely to overestimate growth again.
 
Crude oil Feb contract expired yesterday, now March is month markets will track; the oil price below looks like oil increased, the price over $28.00 but actually prices have slipped a little.
 
As the clock ticks so far this morning the equity market is losing the early morning highs; the stocks have only lost about half of their valuations frm what we anticipate. Traders will sell into every attempt to rally, although the technicals are now in oversold levels. In this kind of sentiment swing though technicals take somewhat of a back seat.

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Market Commentary

1/11/2016

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Mortgage rates fell last week as China’s equity market spiraled downward. The Chinese shut down their stock exchanges on two separate days last week as circuit breakers kicked in which shut trading down after a 7% drop. After last week China will certainly be a central focus for the upcoming week.

The early portion of this week will likely be highlighted by events in China as the markets try to determine if a global slowdown in growth is the headline of 2016. There are plenty of releases out of China this week, including new yuan loans figures and trade data for December. Later in the week domestic economic data will get more attention. The highlight in the coming week will be Friday’s release of December retail sales and industrial production figures. There are several FOMC members in action at the back end of the week, with notably voting members, Bullard and Dudley, speaking on Thursday and Friday, respectively.
 

 Economic Calendar for the week of 01/11/2016 to 01/15/2016:
 

Monday: Labor Market Conditions Index Change
Tuesday: NFIB Small Business Optimism and JOLTS Job Openings
Wednesday: MBA Mortgage Applications, Monthly Budget Statement and U.S. Federal Reserve Releases Beige Book
Thursday: Initial Jobless Claims, Continuing Claims and Import Price Index
Friday: Retail Sales, PPI, Industrial Production, Capacity Utilization, University of Michigan Sentiment and Small Business Inventories
 

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