Overview

An escrow analysis is the routine check mortgage servicers perform—usually annually—to compare what’s in your escrow account against upcoming property tax and insurance bills. Because the escrow portion of your monthly mortgage payment funds those bills, an unexpected tax reassessment, higher homeowners‑insurance premium, or an earlier‑than‑expected bill can trigger a mid‑year payment change.

Why it happens (common triggers)

  • Property tax reassessments or increases in mill rates at the county level. (Local tax offices set these; increases flow directly into escrow needs.)
  • Homeowners or flood insurance renewals with higher premiums.
  • Missed or delayed disbursements that create a temporary shortage.
  • Errors in prior estimates or changes after a loan servicing transfer.

What servicers calculate

Servicers estimate the next 12 months of disbursements, compare that total to your current escrow balance, and apply federal cushion rules (RESPA allows a cushion up to 1/6 of annual disbursements — roughly two months). If there’s a shortage, they’ll propose either a lump‑sum repayment or an increase spread over upcoming monthly payments; surpluses may be refunded or used to lower future payments. Servicers must send an annual escrow statement explaining changes (Consumer Financial Protection Bureau — consumerfinance.gov).

A simple example

If your annual property tax rises from $2,400 to $2,880 (+$480) and your escrow balance doesn’t cover that change, your servicer will recompute the monthly escrow payment. Example: $480 extra ÷ 12 = $40 per month increase, plus any amortized payback for an immediate shortage.

In my practice I’ve seen clients surprised when county reassessments doubled their tax bill. Having a modest emergency cushion or reviewing tax notices yearly reduces shock.

What you can do (practical steps)

  1. Review your annual escrow statement closely — it must show projected payments, current balance, shortage or surplus, and the calculation used (CFPB: consumerfinance.gov).
  2. Ask for the escrow analysis breakdown or amortization schedule. Lenders must provide the math on request.
  3. If you have a shortage, choose whether to pay it in full or ask to spread repayment (many servicers allow amortization over 12 months).
  4. Dispute obvious errors in disbursements (for example, your insurer billed an old premium). Submit documentation and keep written records.
  5. If you’re eligible, consider an escrow waiver to pay taxes/insurance yourself — it can lower the monthly mortgage payment but often requires lender approval and sometimes fees.

When to escalate

If the servicer won’t correct an apparent error, file a complaint with the Consumer Financial Protection Bureau (https://www.consumerfinance.gov/) and your state attorney general or state banking regulator. Also check local tax assessor records yourself so you can verify any reassessment.

Related reading

Common misconceptions

  • “My mortgage payment won’t change.” False. The principal and interest portion stays the same on a fixed‑rate loan, but the escrow portion can change to reflect bills.
  • “A servicer can demand unlimited cushion.” No — federal rules cap the cushion (see RESPA guidance summarized by the CFPB).

Quick checklist before you accept a change

  • Verify the tax/insurance bill amounts with the issuer.
  • Request the escrow computation in writing.
  • Ask whether the servicer will amortize a shortage and over what period.
  • Consider setting aside 1–2 months’ worth of expected escrow to smooth mid‑year shocks.

Professional disclaimer

This article is educational and not personalized financial or legal advice. Rules and state laws can vary; consult your mortgage servicer, a certified housing counselor, or a licensed financial advisor for guidance tailored to your situation. For federal rules and consumer protections on escrow accounts see the Consumer Financial Protection Bureau (https://www.consumerfinance.gov/).