Press Release: The Hidden Revenue Potential of Idle Escrow Account Balances
Higher – and fluctuating – interest rates haven’t exactly been kind to those in real estate or to buyers and sellers, but there could be one little positive for title and settlement companies across the country. Generes & Associates, a leading provider of title and settlement service solutions based in New Orleans, reveals an untapped source of revenue for agents. By leveraging idle escrow account balances, they can generate additional passive income.
“In today’s unpredictable real estate market, it’s important for title and settlement agents of all sizes to use every available tool at their disposal to maximize revenue,” said Eric Generes, President and Chief Operation Officer at Generes & Associates. “Many settlement agents are missing out on the income potential of their escrow accounts. Understanding how banks handle these balances can help agents benefit financially.”
Banks are required to maintain a minimum dollar amount of liquidity. Any excess liquidity is calculated each night. This excess liquidity, including settlement companies’ escrow balances, is loaned to banks facing liquidity shortages. This means the interest earned on these balances goes to the banks, not the settlement agents. As the interbank rate, the interest rate charged on these daily bank-to-bank loans, recently reached its highest level in nearly two decades at 5.48%, banks are bolstering their own liquidity while settlement agents are missing out.
While some states prohibit earning interest on escrow accounts, there are still opportunities for settlement agents to benefit. In states allowing interest earnings, agents can utilize sweep accounts, which are interest-bearing overnight investment accounts. By opening a sweep account, agents can earn interest on their escrow account balances. The bank transfers the collected balance to an overnight investment account in the agent’s name, earning interest at or near the interbank rate. Daily reinvestment ensures a steady revenue stream.
“Sweep accounts have proven to be a lucrative option for settlement agents with average daily escrow balances,” Generes said. “While not free money nor a 100% return on investment, it does potentially provide a simple, steady and unexplored revenue stream that can help a firm’s bottom line. Despite associated costs, the potential returns make it a worthwhile opportunity.”
Title agents should consult their bankers to explore sweep account options, ensuring that the funds remain within the U.S. banking system and are invested in federally insured deposit accounts.
For agents in states where earning interest on escrow accounts is prohibited, there are alternative ways to increase returns. Agents can negotiate with their bank to have them cover or directly pay for escrow-related expenses, offsetting costs. Here’s why that’s important.
“Assigning expenses to the bank is a strategic approach for agents operating in prohibited states,” Generes said. “Negotiating with the bank for coverage of fees such as positive pay service, escrow account reconciliation, check printing, remote deposit service, and wire transfers can maximize returns by having the bank absorb those costs or directly pay an outside entity for services received.”
Title agents are encouraged to discuss expense coverage options with their bankers to maximize revenue. Generes & Associates is currently offering a free analysis of escrow accounts and revenue potential upon request at 1-800-318-2781.
About Generes & Associates
Generes & Associates has been providing software, training, support, and back-office services to title companies since 1993. With a focus on user-friendly technology and a personalized approach, Generes & Associates works with hundreds of title and escrow clients nationwide, helping them meet their business goals in a cost-effective manner.
