Escrow FAQ

An escrow account is an account that a servicer establishes on behalf of a borrower to pay taxes, insurance premiums (including flood insurance), or other charges with respect to a mortgage loan, including charges that the borrower and servicer have voluntarily agreed that the servicer should collect and pay.

At Stockton, before closing, your mortgage lender would’ve sat with you and gone over your payment information, including the amount set aside for your escrow.

Escrow analysis is a review conducted by a lender/mortgage servicer to ensure that the funds in a borrower’s escrow account are sufficient to cover property taxes, homeowners’ insurance, and other related expenses. This analysis helps determine if adjustments to monthly payments are needed to maintain the correct balance in the account.

If after closing your loan at Stockton Mortgage, your mortgage is sold, another lender would be responsible for conducting escrow analysis at least once annually.

Before closing your loan at Stockton, we conduct an escrow account analysis.

Whether Stockton Mortgage continues to service your loan, or your loan is serviced elsewhere, mortgage servicers are required by federal law to conduct an escrow analysis at least once in a 12-month period.

An escrow analysis is informed by the following key information:

• Property Taxes: The current property tax amount due, which can change annually based on local government assessments, tax rate changes, or property reassessments.
• Homeowners Insurance: The premium for your homeowner’s insurance, which may vary due to changes in coverage, provider, or market rates.
• Flood Insurance: You may be required to carry flood insurance if your home is in a flood zone. Flood insurance premiums can vary due to changes in coverage, provider, or market rates
• Private Mortgage Insurance (PMI) (if applicable): The cost of PMI, which may adjust annually or be removed if you reach the required equity.
• Escrow Account Balance: The current balance in your escrow account, which includes the funds collected to cover taxes, insurance, and any shortage or surplus from previous years.
• Cushion Requirement (if applicable): Some lenders may require a cushion amount to ensure there are sufficient funds in case of unexpected increases in taxes or insurance. This cushion is often specified by state regulations and typically equals one to two months’ worth of escrow payments.

The analysis compares the expected payments with the actual funds in the escrow account to determine if there is a shortage, surplus, or if the monthly payment needs to be adjusted to cover future expenses accurately.

An escrow overage means that there is more money in your escrow account than needed to cover upcoming property taxes, homeowners’ insurance, or other related expenses. This can happen if costs were lower than estimated. When there is an overage, the lender typically issues a refund or credits it to your account.

Correcting an escrow shortage will generally increase your monthly mortgage payment. This happens because the lender servicing your loan needs to collect enough money to cover future property taxes or insurance costs, as well as make up for the shortage in the account.

Lump-Sum Payment Option: You can choose to pay the full escrow shortage amount in a single lump sum. If you do this, your monthly mortgage payment will only increase to cover the adjusted escrow contributions for the next year based on future estimates.

Spread Over Monthly Payments: If you prefer not to pay the shortage in one lump sum, your lender may allow you to spread the shortage over 12 months (or another agreed upon period). This option will increase your monthly mortgage payment by adding a portion of the shortage to your monthly escrow contributions, making your overall monthly payment higher until the shortage is fully repaid.

Yes. While your escrow will be reviewed annually to account for changes to taxes & insurance, homeowners can request an escrow analysis at any time. You can request the lender who is servicing your loan to perform what is called an “off-cycle” analysis.