My escrow readjusted - by 350%!

[project15]

We bought a house a year ago. Flood insurance was no longer necessary by the state, so the bank stopped collecting escrow on that. They adjusted my escrow collection extremely poorly and did not collect nearly enough for that year. I knew it was happening and realized that the payment would eventually adjust and make up for the negative amount.

Well, my escrow adjusted for this year and it went up significantly. Here's the numbers

Loan: $142,000
Taxes: $5,000 /yr
Ins: $600 /yr
Negative escrow amount: -$1600

My previous payment was $1096
Amount previously going into escrow: $250
My new payment is $1740
Amount now going into escrow: $900

So by my calculation, over the next year, I will be paying $10800 into escrow.

Ugh. This sucks. I can "afford" the payment, but it cuts out future savings such as for a downpayment on a future car and also comes out of the vacation fund. I called the bank and they opened a ticket to investigate... Yes, I did enjoy the low payment before but I only expected my new payment to be about $1500.

[mdcrim]

I closed my escrow account a few years ago when I realized my mortgage company was holding over $900 as a cushion. I pay my own taxes and insurance. Much better that way. Can you just pay the back money owed to your mortgage company ($1600) and close out your acct to pay your own taxes and insurance?

[boosami]

I had the escrow amount on a property triple the second year once. It was new construction, and the property taxes were virtually nothing the first year because of ongoing construction. When the property taxes were assessed normally, the escrow projections jumped big time! Even though I knew it was coming, it was still a shock to see such a large change in payments. Hopefully your situation will be remedied and your payment will go back down a bit after your escrow account "catches up."

[GREENBACK]

I don't use an escrow account. The bank is in charge of the money and can manipulate it to your disadvantage( they know most people don't monitor what they do....Shhhh!!!, they might be listening). I treat T&I like any other annual or semi-annual bill: Save for it, plan for it and pay it as close to the due date as possible.

[wincrasher]

That seems out of line. If you only need $5600 plus a cushion of 2 months, not over $10k. Someone's made a mistake that you will have fun getting to the bottom of.

A good option, as stated above is to send in the shortfall - most escrows send out a letter to do just that or they will adjust the monthly payments.

Generally with a conventional loan you are required to escrow - part of the underwriting process - there may be equity floor where it's not required - check your contract.

[Like2Plan]

Wow--That is a real shocker!

Here is a link to HUD which has an explanation of the convulted way escrow is calculated....

( If you want to look on the bright side, you have an $1600.00 interest free loan because the bank covered it while they are collecting the shortfall--although they seem to be more than making up for it... )

It looks like just with the ins and the taxes, they should have been collecting at least $467 per month.

The shortfall amounts to 133.00 per month. The bank is allowed to collect another 2 months worth of escrow as a cushion. 467X2/12= 78.00

That would bring your monthly escrow up to $678 per month....then the other factor is the timing of the payments--the bank is not supposed to be in a negative situation in order to pay your tax bill or ins. so they can collect a liitle extra so that doesn't happen... That may be what is up with your situation.... Although, since they underestimated by so much I wouldn't have a lot of faith in their estimates. It is good you are questioning it. Maybe you can run the numbers through yourself using the HUD guidelines.

If the bank lets you do your own escrow, you would have to immediately come up with the shortfall amount and you would have to be prepared to pay the taxes/ins--if that is in the next couple of months, it could be more traumatic than paying into escrow for another year. But, maybe you could look into managing your own escrow next year after you are all caught up?

[project15]

I finally got a copy of the new Escrow statement. It says that the amount should be at $3k right now to get back on track. So in order to make up for the current shortfall, I would have to pay $4600. No thanks. I'll keep that money and my own interest and pay it back throughout the next 12 months. Oh, the joys of homeownership! After a year of this, my payment will go back to it's normal amount of $1350.