Get Consumer Disclosure For Voluntary Escrow Account Payments

Why am I getting an Escrow Analysis? Every year, we review your escrow account to make sure there's enough money in it to cover your taxes and/or insurance. We send you an escrow analysis so you'll know the amount of taxes and/or insurance we paid for you in the past 12 months with funds from your escrow account.

A lender typically forces escrow upon a borrower if he fails to pay taxes on time. The lender may pay the tax arrears on behalf of the borrower, then charge the borrower for the arrears plus the amount needed to establish escrow, which can amount to several months worth, depending on the time of year established.

What is the maximum amount the lender may require as a cushion? Section 10 of RESPA establishes the maximum cushion allowed at 1/6 of the total amount of the escrow items to be paid annually.

Yearly Escrow Analysis To ensure that the cushion in your escrow account isn't ever too large, RESPA requires lenders to perform an analysis of your escrow account at least once each year. During this analysis, the lender projects the balance of the account for 12 months into the future.

The annual Escrow Disclosure Statement is a review and recalculation of the escrow account based on actual amounts paid into the escrow account and actual amounts disbursed from the escrow account. Over time, taxes and insurance premiums change, so your escrow account must reflect that change.

Federal regulation of escrow accounts The basic federal government legislation that regulates escrow accounts is the Real Estate Settlement Procedures Act of 1974 (RESPA), as amended.

When an escrow account is required The only loan programs that require an escrow account are the USDA and the FHA loan programs. Conventional and VA loans don't mandate escrow accounts, but most lenders will advise you to have one if you are making less than a 20% down payment.

Generally, when you take out a conventional loan your lender will require an escrow account if you borrow more than 80% of the value of the property.

A lender typically forces escrow upon a borrower if he fails to pay taxes on time. The lender may pay the tax arrears on behalf of the borrower, then charge the borrower for the arrears plus the amount needed to establish escrow, which can amount to several months worth, depending on the time of year established.