The aggregate method essentially takes all escrow items and adds them together. The total is prorated over twelve (12) months.
A running balance is projected including amounts deposited into and disbursements made from the escrow account.
- The escrow account must, at one point during the twelve (12) month period, reach a zero balance or if a cushion exists, the "allowable low point balance".
- RESPA allows lenders to maintain a cushion equal to one-sixth of the total amount of items paid out of the account, or approximately two months of escrow payments.
- If state law or mortgage documents allow for a lesser amount, the lesser amount prevails.
The 12 month timeframe used in the analysis is also known as the ‘Calculation Period”.
The computation begins with the first payment and ends twelve (12) months later.
The escrow analysis determines if enough funds are being collected to pay future real estate tax and insurance bills.
An escrow overage or surplus of $50 or more must be refunded to the borrower, unless the loan is delinquent.
Escrow shortages are spread for a period of twelve (12) months, and customers have the option of paying the shortage in full.