Escrow Shortage?!?

JeccaNovember 2, 2005

We just got our Escrow Analysis and I'm hoping someone can help me understand what's going on. Our account was short $1575. That seems like an enormous amount to me, especially since the last few years it's only been short like $400. Anyway, the only thing that changed from last year to this year is that our homeowners insurance went up by $800. That's a whole separate issue I have to deal with. In the meantime, I can't get anyone to explain to me how an increase in payments due of $800 results in a shortage of $1575. The mortgage company keeps telling me that it's because our homeowners payment is due in December and our taxes are due in February, so by the end of Feb our account will be below the "cushion" amount. Fine. I get that. What I don't get what happened LAST YEAR to get us to the point where we're so short THIS YEAR. Can someone out there explain to me how this works and whether my mortgage company is somehow at fault?

-Jessica.

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spewey

Your property taxes may have risen as well, contributing to the shortfall.

What happened is that your insurance went up this year, so next year there won't be enough of a cushion to legally meet their escrow requirements next year. Hence, the adjustment.

You can usually pay the shortage up front, or do nothing and pay higher monthly amounts (in addition to the higher amount it is going to go up anyway, in your case $140 or so a month).

    Bookmark   November 2, 2005 at 9:58PM
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Jecca

Thanks for the response. Actually, our property taxes stayed the same. That's why I'm so confused. I could see being short the $800 that our insurance was increased. But even without that increase, we would still have been short almost $800. What happened there? Is my mortgage company somehow to blame for this huge miscalculation?

-Jessica.

    Bookmark   November 2, 2005 at 10:04PM
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kathyg_in_mi

Here's how I understand it. Your escrow was short by $800. SO, they have to add in enough of a raise in your escrow payment next year the $800 that it was short (paying off last years shortage).
NOW, since you were short by $800 they must raise your escrow by $800 for the next year so you won't be short by that amount again.
That is why they raise the next 12 payments by the $1,575. BUT remember, once the last years shortage is paid off your escrow payment for the following year should drop by $800 because the shortage has been paid.
It just sounds confusing, but really isn't.
IF you pay last years shortage of $800 your payment would only go up by the future $800. The amount that your insurance went up.
I sure hope you can understand all of this. I remember when it happened to us and I went --- "Say what?"
Good luck, Kathy G in MI

    Bookmark   November 5, 2005 at 9:08PM
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Jecca

I hadn't thought of it that way, Kathy. $800 for last year and $800 for the coming year. Ok, that's reasonable. Still high, but...

I bit the bullet and wrote the check. I'm still mad, but what choice do I have. I checked back on the last two years of escrow shortages (the first year we owned the house we got money back, imagine that!) and they were $400 and $300. And this year it jumped to $1575. Argh!

-Jess.

    Bookmark   November 5, 2005 at 9:32PM
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houseful

The same thing happened to us! We had the option of writing the check or doubling the monthly escrow. We opted to double the monthly escrow for a few months. The reason is after paying our mortgage on time every month, they said we could take over our own escrow payments. We had to wait until our anniversary date, but it worked out for us. We now pay $350 less every month, our monthly insurance premium increased but it was minimal, and we have two payments a year for taxes which we can manage by putting some aside each month.

Find out if it is an option for you to take over your own escrow. It's nice having the control and NO surprises!

    Bookmark   November 7, 2005 at 9:07AM
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quasifish

We had a shortfall a few years ago and the escrow amount we were charged went up about twice as much as I thought it would. In our case, we were low, but not in the red. The mortgage company required not only the actual increased amount, but also an additional amount to pad escrow and another additional amount as anticipated increases (based on having a big increase one year). The following year, they cut the increase back to half.

    Bookmark   November 19, 2005 at 3:02PM
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deblw

hello, I too have this happening now and have looked into it am finding that this is happening everywhere to lots of people. Seems it borders on fraud as new payments are so high people can;t afford to pay and get foreclosed on but some how there are loop holes for mortgage and escrow companies. Biggest thing i have found is a refund check that is sent by escrow company than a new statement showing shortage! Has scam written all over it! Just another way they are legally able to foreclose on home!? I ahve even been told my company will not send written confirmations concerning conversations I have had with mistakes and shortages, will only give verbal confirmation and add to my computer file so i am sending letters of confirmation of phone conversations return receipt. would like to compile all people who are involved in this shortage scam and return of funds check!

    Bookmark   May 6, 2011 at 7:10PM
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tanya_malinov_yahoo_com

I have the same thing..i really want to know who is responsible for all this mess i have to go through???? my additional taxation was not disclosed to me and no i have a shortage of $3900 or to loose my home! who is responsible, who can we sue???

    Bookmark   May 9, 2011 at 9:29PM
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barbcollins

"my additional taxation was not disclosed to me"

Your county/taxing district doesn't send you an annual property tax bill?

When I get mine I look to see if it has gone up or down, and wait to see what they do to my payment to compensate.
I think I would notice if they under estimated my taxes by over $300/month.

This is the first year I may be happy when I get our tax bills. All of the assessments have dropped, so that taxes should go down.

    Bookmark   May 10, 2011 at 7:23AM
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