A shortage occurs when payments to property taxes and/or homeowners insurance cause your escrow account balance to drop below the required amount. The shortage amount will appear on your Annual Escrow Disclosure Statement.
Some factors that can cause shortages to your escrow account include, but are not limited to:
• Property tax increases
• Insurance premium increases
• Payment of unexpected bills
• Supplemental tax bills
• Additional insurance policies
• Mid-term policy changes to insurance
Escrow Analysis
As taxes and insurance are subject to change, it is necessary that a mortgage servicer complete an annual analysis to determine the current escrow account status and best prepare for any possible changes.
The first analysis of your escrow account is performed within 12 months after your loan closing. After that, escrow analyses are performed annually according to the escrow analysis schedule for your state. Frequently the first tax bills paid are a carryover from the previous owner and do not represent the current tax assessment of your property. The most common of these conditions are new construction, purchasing a home (prior owner exemption differences), partial year bills, and improvements that have not been added to the bill.
There are two ways to pay an escrow shortage in one lump sum.
Option 1: Make a payment in Online Banking with just a few clicks. Your escrow shortage payment must be processed no later than March 15, 2023 in order to avoid impacting your April 1st payment.
Login to Online Banking, select your home loan account, and click 'Make A Payment.'
Enter the exact amount listed on your Escrow Disclosure Statement.
Select 'Make This Payment Escrow Only.'
Please note: the payment amount must match the amount listed in your Escrow Disclosure Statement exactly, to avoid impacting your April 1st payment.
BEFORE clicking 'finish,' review the confirmation screen to ensure the payment amount is correct and 'Escrow Only Payment' was selected.
Check your Transaction History to ensure the Escrow Receipt payment amount is correct.
Option 2: If you would like to mail your escrow shortage payment, please send a check for the correct amount (please write your loan number and "escrow deposit" on the memo line of the check) to GTE Financial P.O. Box 75028 Chicago, IL 60675-5028. Your check must be processed no later than March 15, 2023 in order to avoid impacting your April 1st payment.
If you do not pay your escrow shortage by March 15, 2023, your April 1st payment amount will be impacted. The new monthly payment will automatically reflect any changes to escrowed amounts (such as tax and insurance increases) plus the shortage amount, spread out in equal monthly installments over 12 months. Once the shortage is paid in full, the monthly payment will be adjusted so that it no longer includes the shortage.
An escrow cushion, also known as an escrow reserve, is maintained in the event of shortages in your escrow or impound account because of an increase in your property taxes or homeowners insurance. Federal regulations allow for mortgage servicers to maintain a cushion equal to two monthly escrow deposits, unless otherwise required by state law. If your escrow balance falls below the cushion, it is considered a shortage and you will be required to make up the shortage amount.
Note: Your mortgage insurance (PMI/MIP/RHS), if required by your loan terms, is not included in your cushion amount.
If at the time of your analysis, the funds in your escrow account are more than the required amount, you have a surplus.
The amount of the surplus in your escrow account is sent back to you in the form of a check, and is issued within 30 days from the analysis date.
If your loan is past due 30 or more days at the time it is determined that an escrow surplus exists, a refund will not be sent to you. Once your loan is brought current and if the surplus still exists, the amount of the surplus will be refunded to you in the form of a check and mailed to you.
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