An outstanding check / wire are funds disbursed from your Escrow / Trust account according to the HUD-1 statement for a particular file (in your software system) that has not cleared from the bank statement. These specific disbursements will show up on the Outstanding Check / Wire Report of your reconciliation.
For example: A deal has funded and disbursed pursuant to the HUD-1 statement. After sending the mortgage payoff overnight, the assumption is made that the deal is closed and no additional follow-up is needed. In fact, the mortgage payoff was never received by the lender and therefore subsequent per diem interest has accrued that you may be responsible for.
The Outstanding Check / Wire report will identify the disbursement, from a particular file, that has not cleared. Research would be required as to why this transaction has not cleared.
The Outstanding Checks / Wires Report is a part of the Adjusted Bank Balance that makes up the second part of a “3-way” reconciliation. This report is generated after reconciling the account and printing the designated reconciliation from your software program.
!!!Note: Not all software systems use the name “Outstanding Checks Report.” This report maybe called other names such as “Outstanding Disbursements Report.”
Information and Follow-up:
I highly recommend title agents to review the Outstanding Checks / Wires Report after reconciling the account to reveal files that need follow-up in effort to avoid monetary loss.
In addition, title agents should review:
• Review all outstanding checks for lienable items (i.e. Mortgage payoff, taxes, insurance, etc.)
• All checks over 90 days old should be reviewed as to their status.
• All follow-up should be documented and copied to the file.
!!!NOTE: If you have a large outstanding check / wire report, there may be some items that are more important than others.
Use the guide below as a cheat sheet to follow up with items that are still outstanding as it could cost you in the future:
1. Checks payable to a mortgage company (lender payoff) – 5 days old or greater
2. Checks payable to a local City or County for taxes – 15 days old or greater
3. Checks payable to the Recording or Comptroller’s office – 15 days old or greater
4. Checks payable to a hazard insurance company (State Farm, etc.) – 30 days old or greater
5. Checks payable to your underwriter – 60 days old or greater
6. Checks payable to the IRS – 15 days old or greater
7. Checks payable to Clerk of the Court for Judgments – 15 days old or greater
8. Checks payable to homeowners associations or condo associations – 90 days old or greater
9. Checks payable to contractors, remodelers, roofers or any other construction services – 180 days old or greater
10. Checks payable to any water utility company – 180 days old or greater
Finally, if you have an outstanding check that is several years old issued to a person or entity that you cannot find and you have done your due diligence in documenting the closing file that you have made multiple attempts to contact them – you may be subject to your State’s escheatment law. Please check with your State’s law regarding escheating unclaimed funds. Failure to do so could cause fines and penalties.
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