Understanding escrow account

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    Understanding escrow account
    Understanding escrow account

    An escrow account is typically established at the time you close your mortgage loan.  This account is held by the lender for future payment of property taxes and insurance premiums.  Lenders usually require you to pay an initial amount for each of these items to properly fund the escrow at the time of closing.  Not all loans have escrow established. If an escrow shortage exists, your payment amount will be increased.

    Escrow accounts ensure your insurance and taxes are paid timely.  If you have an escrow, you will avoid having to pay a penalty for a late tax payment, your insurance will not be cancelled due to a missed payment, and you will not have to come up with large sums of money to pay for insurance and taxes.

    Why did my escrow payment increase? 

    Your payment amount may have increased due to property tax and/or insurance premium increases.  Please review your Annual Escrow Account Disclosure Statements to compare your bills from one year to the next.  An increase in one or more of your bills will result in an escrow shortage.  The shortage is automatically spread over 12 months.  You may also pay the amount in full, which would lower your payments by 1/12th of the shortage amount.

    The federal government prescribes the exact calculation to be used in determining the proper amount to be held in the escrow.

    What information is on my Escrow Account Disclosure Statement?

    Your Escrow Disclosure Statement shows the projected and historical escrow activity, the current and new payment amounts, and the portion of the payment deposited into the escrow account.

    Your projected escrow activity shows all the escrow deposits we expect to receive from you in a 12-month period, as well as all escrow-related disbursements we expect to pay from your escrow account during the same period.  This activity also shows your anticipated and required monthly escrow balances.

    Your historical escrow activity shows the total amount paid into and out of your escrow account, as well as escrow deposits and disbursements made from the time your escrow was last reviewed to the time of the current review.  This activity also shows the anticipated and actual escrow balances.

    Your Escrow Account Disclosure Statement explains how an escrow surplus or shortage will be handled.

    How may I see what items have been paid through my escrow account?         

    Any disbursements made within the past 12 months are indicated on your Transaction History.  Your most recent Billing Statement will also reflect any disbursement(s) since your last statement was generated.

    Do I earn interest on funds in my escrow account?         

    Certain states require that escrow funds accrue interest at a predetermined rate.  The interest accrued on your escrow funds will be added to your escrow account.

    How may I establish an escrow account?

    If you wish to establish an escrow account for the payment of taxes and/or insurance, please print and sign the Escrow Establishment Form and send it to our Customer Service Department via mail or facsimile.  A list of other required documentation is indicated on the Escrow Establishment Form.  Litton will review the documentation provided and advise in writing whether or not an escrow account will be established.  There is no fee for this service. 

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