If your mortgage has an escrow account, the Federal Real Estate Settlement Procedures Act requires your lender to analyze it at least once per year. In the analysis, your lender examines the upcoming year's tax and homeowners insurance bills, as well as flood and private mortgage insurance bills if required, to see if it is collecting enough to cover them. If it isn't, your payment will be increased. However, if your account has too much money, you will get a refund check. Your annual escrow analysis statement lets you know what, exactly, is going on with your account.
Review the escrow statement's general components. Usually, you will find a summary of your loan, a description of your escrow account's spending over the previous year, and a projection of the coming year's spending.
Analyze the past year's data on your statement to ensure that your lender paid your property insurance and property taxes properly. Compare the amounts that it paid with your prior year's bills for homeowners insurance and property taxes.
Audit your balance. Total all of your payments into the escrow account over the last year and add them to the starting balance in your account at the beginning of the year. Subtract all of the payments that your escrow made from that amount to find what your current balance should be. If the current escrow account balance on your statement isn't the same as what you figured out, contact your lender for an explanation.
Compare the projections for the coming year with your new property tax and property insurance bills. If the amount that your lender projects having to pay is different from the amounts on your bills, contact your lender.
Send a check for any deficiency to your lender. Deficiencies happen when your monthly escrow payments aren't enough to cover your bills. If your escrow account statement doesn't have a coupon with mailing instructions, its notes should contain information on where you send the extra money. Choosing not to pay the deficiency in a lump sum will result in your monthly payment going up to cover the past year's shortfall, which will be reflected on your escrow analysis statement. Your escrow analysis statement will also reflect an increase to your mortgage payment to account for projected increases in these bills going forward and to avoid another shortfall the following year.
- Cornell Law School. "Escrow." Accessed March 15, 2020.
- Los Angeles County Consumer and Business Affairs. "Escrow." Accessed March 15, 2020.
- Consumer Financial Protection Bureau. "What Is an Escrow or Impound Account?" Accessed March 15, 2020.
- The People's Law Library of Maryland. "Rent Escrow: When the Landlord Fails to Make Repairs." Accessed March 15, 2020.
- California Department of Business Oversight. "Online Escrow Fraud Questions and Answers." Accessed March 15, 2020.
- Consumer Financial Protection Bureau. "Mortgages Key Terms." Accessed March 15, 2020.
- FindLaw. "Connecticut Security Deposit Laws." Accessed March 15, 2020.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.