An escrow analysis is an important part of managing your mortgage. Every year, usually around February, mortgage servicers perform an escrow analysis to ensure that your escrow account is properly funded. This analysis will tell you if you have a shortage and if your monthly payments will increase next year due to an increase in your taxes or in the insurance rate. But what exactly is an escrow analysis and how often is it performed?An escrow account is regulated by the Federal Government and mortgage servicers can only collect a certain amount of reserves.
This means that your monthly payment may change annually. Some items in the escrow account may be billed for periods of more than one year. For example, service providers may need to collect flood insurance or water purification guarantee funds for payment every three years. In such cases, the managing entity shall estimate the borrower's payments for a full disbursement cycle. For a flood insurance premium payable every 3 years, the managing entity will collect payments that reflect 36 equal monthly amounts.
However, for two out of three years, the account balance may not reach its low monthly balance because the lowest point will be in a three-year cycle, compared to an annual one. The annual status of the escrow account will explain this situation (see the example in the Public Guidance Document entitled “Annual Declaration of Disclosure of Escrow Accounts: example, available in accordance with § 1024).Your lender or servicing entity performs escrow analyses at least once a year. How exactly does the escrow analysis work?ServiSolutions analyzes all escrow accounts annually. An escrow is an additional balance in the escrow account that ensures that there is enough money in the account to cover the costs of the property.
The managing entity must use the analysis of the escrow account to determine if there is a surplus, deficit or deficiency and must make any adjustments to the account in accordance with paragraph (f) of this section. You'll pay this amount to the servicer, which will take the principal and interest as payment on your mortgage and then deposit the rest into your escrow account. After each escrow analysis, we'll mail you an escrow account disclosure statement. Increases or decreases in your annual tax or insurance bills may cause your monthly mortgage amount to change. If the bills paid from your escrow account before the escrow analysis were higher than expected, your account may have a deficit. If they were lower than expected, your account may have a surplus. When performing the escrow account analysis, the managing entity must estimate the disbursement amounts in accordance with paragraph (c) () (of this section).
Tax and insurance payments do not go directly to your lender or loan servicer, but will collect a portion of these payments each month and will keep them in a third-party escrow account until those bills are due, at which point the servicing entity will pay these bills on your behalf with the money from your escrow account. For each escrow account, the managing entity must perform an analysis of the escrow account at the end of the escrow account calculation year to determine the monthly payments of the borrower's escrow account for the next calculation year, subject to the limitations of the paragraph (c) (ii) of this section. When preparing the statement of account, the managing entity may assume that the scheduled payments and disbursements will be made during the last 2 months of the escrow account calculation year. Except as provided in paragraph (k) (iii) of this section, with respect to a borrower whose mortgage payment is due more than 30 days late, but who has established an escrow account for the payment of risk insurance, as defined in § 1024.31, a managing entity...