How Do You Deal With A Mortgage Escrow Shortage?
An escrow shortage occurs when at some point your mortgage escrow account will not contain the required cushion after distributions are made throughout the year. Section 10 of the Real Estate Settlement Procedures Act (RESPA) gives lenders authorization to require up to a two month cushion of escrow payments in a consumers escrow account at all times. Lenders create an analysis of your escrow account at least once per year. If they determine that you will fall short of your escrow cushion, they will send you a separate bill for the full amount and inform you of the option to spread the payments throughout the year. The first thing you should do is understand how an escrow account is calculated and determine if the escrow shortage amount you have been informed about is correct. Write down all the distributions to be made out of your escrow account for taxes, insurance and Private Mortgage Insurance (PMI). Add all the distributions together and divide your answer by twelve. This is your
