An escrow balance disclosure functions like a bank statement for your mortgage escrow account. It provides a clear accounting of the funds collected and disbursed by your mortgage servicer to cover property taxes and homeowner’s insurance premiums.
What Is an Escrow Account?
An escrow account is a special account managed by your mortgage lender or servicer. Each month, along with your mortgage principal and interest, you pay an additional amount into this account. These funds are held to pay your property taxes and homeowner’s insurance when they come due, preventing large lump-sum payments and helping you budget more easily.
Key Details in an Escrow Balance Disclosure
The disclosure includes:
- Starting Balance: The amount in your escrow account at the start of the reporting period.
- Deposits: Monthly escrow payments you have made.
- Disbursements: Payments made from the escrow account for taxes, insurance, and possibly other property-related costs.
- Ending Balance: Funds remaining in the account after all payments.
- Escrow Analysis: A projection of next year’s escrow needs based on expected taxes and insurance premiums, indicating whether your monthly escrow payment will change.
Why This Disclosure Matters
This statement ensures transparency, so you know exactly how your escrow funds are managed. It helps you:
- Verify that your property taxes and insurance premiums are paid timely to correct entities.
- Understand and prepare for changes in your monthly escrow payment due to adjustments in taxes or insurance.
- Detect errors, such as missed payments or overcharges.
- Recognize surpluses, which may result in refunds, or deficiencies, which may require additional payments.
When Will You Receive It?
Under the Real Estate Settlement Procedures Act (RESPA) and Regulation X, your mortgage servicer must send you an escrow account statement at least annually, within 30 days after completing your escrow computation year.
Tips for Reviewing Your Escrow Balance Disclosure
- Review all deposits and payments carefully.
- Compare payments listed with your property tax bills and insurance invoices.
- Pay close attention to any notes about payment changes or escrow shortfalls.
- Contact your mortgage servicer promptly if you identify discrepancies or have questions.
For further details, you can visit the Consumer Financial Protection Bureau’s guide on escrow accounts.
Relevant internal resources for additional reading include our articles on Quarterly Escrow Analysis and Mortgage Servicing. Understanding your escrow balance disclosure is essential for effective mortgage management and avoiding surprises in property-related expenses.
