Escrow

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How does an Escrow Account Work?
Real estate taxes and insurance premiums must be paid regularly.  Typically, payments are due once, twice or quarterly each year.   Failure to pay these bills on time may cost money in tax penalties or result in cancellation of insurance ...
Escrow Cushion
Escrow account cushions are maintained to help offset increases in tax and/or insurance disbursements.  The   cushion is allowed by state and/or federal legislation and by the terms of the loan document.  A two-month cushio...
Escrow Analysis
An escrow analysis is an evaluation of a mortgagor’s escrow account.  The analysis projects the next year’s deposits and disbursements to determine the monthly escrow deposit and if there is an overage or a shortage in the accou...
Aggregate Accounting Method
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 accou...
RESPA Escrow Disclosure Requirements
The Initial Escrow Statement  itemizes the estimated taxes, insurance premiums and other escrow items anticipated to be paid from the escrow account during the first twelve (12) months of the loan.  It lists the escrow payment amount and...
Escrow Computation
By reviewing the most recent payments of each escrowed item (taxes, insurance, etc.), a monthly escrow deposit is determined.  The monthly escrow deposit is calculated by dividing the tax and insurance payments by twelve.  W...
Escrow Shortage Possible Reasons
Increase on escrow disbursements Previous taxes were assessed on unimproved property (new construction)  Tax payee(s) not disclosed/discovered at closing  Taxes were not paid for the previous year(s)  Taxes were paid m...
Escrow Overage Possible Reasons
Decreases on Escrow Disbursements Taxes were paid yearly and converted to payments of two to four times a year  Changes to the (hazard) insurance policy causing the premium to decrease  Changing the carrier (or company) of the...
Annual Escrow Analysis Disclosure Statement
RESPA guidelines require us to provide the borrower with a written payment change notification forty-five (45) days in advance of the payment change date.  The escrow overage must be mailed within 45 days of the analysis taking place. ...
Escrow Shortage Options
When an escrow account is analyzed and a shortage is determined; the shortage is automatically prorated for the next twelve (12) monthly mortgage payments, beginning with the effective date of the analysis.  If the mortgagor chooses to pay ...