Why escrows matter

Escrow accounts protect both borrower and lender by ensuring property taxes, homeowners insurance, and sometimes HOA fees or mortgage insurance are paid on time. Servicers collect an estimated monthly amount as part of your mortgage payment, deposit it into the escrow account, and make the bill payments when they are due (CFPB: What is an escrow account?).

How servicers calculate your monthly escrow payment

  • The servicer estimates the upcoming 12‑month cost for each covered item (taxes, insurance, etc.).
  • That total is divided by 12 and added to your monthly principal-and-interest payment.
  • RESPA rules let servicers keep a small “cushion” (generally up to two months’ worth of escrow payments) to cover timing differences and small increases; specifics are explained by CFPB guidance.

Key consumer protections and deadlines

  • Annual escrow analysis: Servicers must perform an annual review and provide an escrow statement showing projected payments, any shortage or surplus, and how your monthly payment will change (CFPB).
  • Surplus refunds: If the analysis shows a surplus of $50 or more, federal rules generally require the servicer to refund it to you or apply it as you request. Shortages must be disclosed and can typically be cured by a lump-sum payment or spread over the next 12 months.

Common escrow account issues and how to monitor them

  1. Review the annual escrow statement carefully — compare the servicer’s estimated tax and insurance amounts with the actual bills you receive.
  2. Track property tax and insurance notices at the county and insurer level so you can spot increases early.
  3. Keep records (receipts, paid bills) and save copies of servicer statements.
  4. If the servicer’s figures look wrong, ask for an escrow account history and documentation of payments the servicer claims to have made.

Options when you see a shortage or a surprise increase

  • Pay the shortage in one lump sum to avoid a higher monthly payment.
  • Opt to have the servicer spread the shortage over 12 months — this increases your monthly escrow portion but avoids a big one-time payment.
  • Dispute any incorrect charges with your servicer and escalate to the servicer’s loss‑mitigation or compliance team if necessary. If unresolved, file a complaint with the Consumer Financial Protection Bureau (consumerfinance.gov).

Escrow waivers, eligibility, and tradeoffs

Some lenders offer escrow waivers that let qualified borrowers pay taxes and insurance themselves. Waivers can reduce your monthly mortgage payment but transfer the bill‑payment responsibility to you and may come with fees or a higher interest rate. Learn more about the tradeoffs in our guide on escrow waivers.

Helpful internal resources

Practical tips from my practice

  • Check your escrow statement as soon as you receive it and reconcile it to tax and insurance bills.
  • If you expect a large tax reassessment (e.g., after a remodel or reassessment year), notify your servicer early so they can adjust the projection.
  • Maintain a small personal reserve outside escrow for unexpected increases — it’s often cheaper than emergency borrowing.

When to get professional help

If your servicer won’t correct clear errors, your escrow history or payments are missing, or you’re facing repeated shortages despite paying on time, consult a HUD‑approved housing counselor or a mortgage professional. You can also file a complaint with the CFPB.

Disclaimer

This content is educational and not personalized financial advice. For decisions about your mortgage or escrow account, consult your loan servicer or a qualified mortgage advisor. Authoritative sources include the Consumer Financial Protection Bureau (https://www.consumerfinance.gov/ask-cfpb/what-is-an-escrow-account-en-117/).