What is Escrow?

1. What is an “escrow” account?

An escrow account is an account maintained by your mortgage servicer for the payment of bills such as property taxes and homeowner’s insurance. Depending upon certain criteria, you may be required to have an escrow account.

A portion of each monthly payment goes into your escrow account for property taxes and insurance premiums. When those bills are due, we use the funds in your escrow account to pay them.

•   Part of the payment goes to pay your principal and interest.
•   The other part of the payment goes into your escrow account for property taxes and insurance premiums (like homeowner’s insurance, mortgage insurance, or flood insurance).

When those bills are due, we use the funds in your escrow account to pay them.

2. What items are typically paid from an escrow account?

Items paid from your escrow account include, but are not limited to:

•   Property taxes
•   Homeowner’s insurance
•   Mortgage insurance (if required)
•    Flood insurance (if required)

It doesn’t pay:

• Homeowners Association (HOA) bills
•  Special or added tax assessments
•    Interim or supplemental secure tax bills (CA residents)
•    Water and other utility bills
•    Per Capita tax bills (PA residents)

3. Where can I find information about my escrow account?

You can find information about your escrow account by logging into your online mortgage account and selecting the “Escrow Information” option located on the left-hand side of your screen.

You can review your escrow account disclosure statement under the “Document Center” option on the left side of your screen to see previous escrow account activity and projected future activity including any changes to your monthly mortgage payment.

4. How often is my escrow account reviewed?

Property taxes and insurance premiums change over time. We review your escrow account each year, based on the escrow analysis schedule for your state, to make sure you’ll have enough funds to cover your bills. To help with any unexpected increases, you need to keep a minimum balance in your account at all times.

If a significant change to your escrow payment has occurred and the normally scheduled escrow analysis will not occur within the next 60 days, you can request an escrow analysis at that time.

5. How do I read my Escrow Statement?

An Escrow Analysis Statement is generated and sent to the mailing address on file when the analysis is performed.

Please refer to the attached Sample Escrow Analysis Statement for a detailed explanation of each field listed on your statement.

6. What do I need to know if I have been notified of an escrow shortage?

A shortage occurs when payments to property taxes and/or homeowner’s insurance obligations cause your escrow account balance to drop below the required amount. The required balance is based on your escrow cushion requirement, which is typically equal to two monthly escrow deposits unless otherwise required by state law. The shortage amount will appear on your Escrow Account Disclosure Statement.

Escrow shortages frequently occur due to increases in either taxes or insurance premiums. However, a shortage can also result if unexpected bills were paid on your behalf. Such items may include lender-placed insurance, midterm policy substitutions or delinquent taxes.

You can pay your shortage in one of two ways:

•   Pay it in full. Send a check for the full amount of the shortage, along with your shortage slip, and we will deposit it in your escrow account.
•   Pay it over 12 months. You will pay the shortage in 12 equal installments as part  of your monthly mortgage payment.

7. What do I need to know if I have been notified of an escrow surplus?

If your escrow account is projected to have more than the minimum balance required, you have a surplus.

The amount of the surplus will be refunded to you in 30 days, as long as your loan is paid current at the time of the analysis. The check may be attached to the bottom of your statement or we will mail it to you under separate cover. We cannot directly apply an escrow account surplus to future payments.

If your loan is past due at the time it is determined that a surplus exists, a refund will not be sent to you. Once your loan is brought current and if the surplus still exists, the amount of the surplus will be refunded to you.