Discretionary Items

Related Topics

Discretionary items are any borrower’s discretionary payments such as credit life or disability insurance made as part of the monthly mortgage payment. (Review Regulatory Information Bulletin Publication #95-06 and the Real Estate Settlement Procedures Act, Section 3500.17.)

Portico will process discretionary items based on how your credit union processes escrow accounts. Discretionary escrow items are identified by the value D in the CURRENT and NEXT PERIOD CALC OPT fields. Review the information in this section carefully to determine any action you may need to take.

Credit Unions Not Receiving the 465 and 466 Reports

If your credit union does not plan to have Portico recalculate escrow accounts, BUT will use the New Loans - Escrow Information tab, Loans - Escrow Info tab, and Loan Escrow Item dialog box for discretionary items, but will not disburse regular escrow payments from the escrow share account, you must:

  • Select D from the Calculation Option drop- down list in the Current Period and Next Period group boxes on the Loan Escrow Item dialog box for each of the escrow items.
  • Set up the 465 Report Rules to provide the defaults for the information on the Loans - Escrow Info tab and Loan Escrow Item dialog box, but do not schedule the report to run. You will need to verify that the Next Date field on the 465 Report Rules specifies 999999.

Most of the fields on the 465 Report Rules will not apply to your credit union as they are used for recalculation. Also, you will not receive the 466 Report as it is only produced when the system produces the 465 Report.

Credit Unions Receiving the 465 and 466 Reports

If your credit union plans to have Portico recalculate escrow accounts, AND has regular escrow items as well as discretionary items deposited to the escrow share types, the system will use the information appearing in the Next Period group box for escrow recalculation and will show the discretionary item amount in the payment breakdown on the annual disclosure statement. For example, the monthly payment is $970, of which $700 is principle and interest, $200 will be deposited to the member’s escrow share account, and $70 will be for discretionary items. You must complete the following steps:

  1. Verify that a valid date appears in the Next Date field on the 465 Report Rules.
  2. Select D from the Calculation Option drop- down list in the Current Period and Next Period group boxes on the Loan Escrow Item dialog box for each of the discretionary items. This ensures that the discretionary items will be so noted on the annual disclosure.
  3. Enter the amount for the next analysis period in the Total Amount field in the Next Period group box on the Loan Escrow Item dialog box. (The system will only check the information in the Next Period group box when it recalculates the discretionary items.)