In the our latest blog post, we wanted to take the time to review some frequently asked questions about an escrow account. While you may already know the basics, there are several complex questions that you may not know the answers.
What is an escrow account?
An escrow account allows us to pay the required insurance and/or taxes on your property for you. You pay a portion of your taxes and/or insurance premiums as part of your monthly mortgage payment. Then, when taxes and/or premiums are due, we will pay them on your behalf with the money in your escrow.
What is an escrow analysis?
Each year, a review of your account is conducted to ensure the escrow portion of your total monthly payment covers your property taxes and insurance premiums, while also maintaining the minimum balance your account requires. Changes to your property taxes and insurance premiums may cause your monthly payment to change. With CorTrust Mortgage Servicing, we send our customers their most recent analysis, which will indicate their new payment along with any applicable escrow shortage or surplus.
Why are my tax and/or insurance amounts projected?
If we have not received a notice of change for a customer’s escrow bill, we must project it. For example, if a customer’s annual insurance renewal has not been issued, we must use the prior year’s amount for the projection as that is the most recently available data.
What is an escrow shortage or surplus?
A shortage occurs when the escrow account balance at its projected lowest point for the next 12 months is below the required minimum balance. This required minimum is to ensure you have enough available funds to pay your escrow bill when it comes due.
If your taxes and/or insurance costs were lower than expected, your account may have a surplus. If the surplus is $50 or more, a payment is made to you, with checks being mailed within 30 days from the postmark on the mailing. However, if you are delinquent on your mortgage payments, the surplus may be retained to ensure there are adequate funds to cover the upcoming escrow expenses.
How could I have a shortage?
If the funds in your escrow amount are projected to be below your minimum balance at the lowest point in the 12-month period, you have a shortage. This can happen for several reasons:
- Your property taxes and/or insurance premiums increased.
- Your taxes were reassessed.
- Your insurance provider(s) changed.
- The due date of your property taxes and/or insurance premiums changed.
- you made fewer escrow payments into your account than expected.
- Your starting escrow balance for the 12-month period was lower than expected due to higher payouts the prior year.
If you have questions about an increase in your property taxes and/or insurance premiums, please contact your local taxing authority or insurance agent.
What are my options for handling my escrow shortage?
You have two options with an escrow shortage:
- Pay the full shortage. Please note, if your tax and/or insurance expenses have increased, your monthly mortgage payment may still go up, even if you pay all of the shortage. Send any shortage payments to the following address with a note that the funds are intended to be deposited into your escrow account: CorTrust Bank Mortgage Loan Servicing PO Box 949 Sioux Falls, SD 57101
- Make no payment and we will spread the shortage amount evenly across next year’s payment.
If I pay my escrow shortage, will my monthly payment remain the same?
Your payment amount will decrease by the shortage, however your payment may still go up, even if you pay the entire shortage, if your taxes and/or insurance increases. This is because your minimum escrow payment is based on the projected total to be paid out for the coming year.
When can I make my shortage payment?
- You can pay all of your shortage as soon as your analysis is complete through the next month.
- After you make your shortage payment, you will receive a statement 10-14 days later showing the shortage payment and your new monthly payment amount.
My escrow payment went down, so my monthly payment is lower. When can I start paying the lower amount?
You’ll need to continue making the higher payment until the effective date on your escrow analysis.