Frequently Asked Questions - Escrow
While the principal and interest portion of your payment is a fixed amount, your escrow payment will adjust yearly based off updated escrow figures. Every April, we will send out notification to you regarding your new escrow payment, which will go into effect in June.
To calculate your escrow payment, we simply total your most recent tax and insurance payments and divide that over 12 months. If any shortage, deficiency, or surplus has occurred on the account, this will be factored into the payment as well.
Since the insurance and tax payments that are being paid from your escrow account change yearly, your payment must adjust to ensure sufficient funds are being collected.
The entirety of your escrow payment goes directly into your escrow account. No interest or fees are associated with the account.
Your insurance premium will be paid annually at the renewal of your policy.
Property taxes are paid semiannually in February and June.
Your escrow requires a two month cushion. Essentially, at the time your payment is calculated, your escrow balance must not go below this cushion based off payment projections. For example, if your monthly escrow payment is $300, the cushion required in your account would be $600.
During our annual escrow analysis cycle, you may notice that your account has a deficiency, shortage, or surplus. A deficiency occurs when the escrow balance goes below zero, while a shortage occurs when the escrow balance goes below the required two month cushion. A surplus occurs when we have funds in excess of the two month cushion. As your escrow is calculated based off best estimates for the coming year, it is common for a deficiency and/or shortage or surplus to occur.
Yes, you are able to pay these items. The deficiency and/or shortage will be removed from the monthly payment if you pay these items in a lump sum. While you will still see a change in your total monthly payment from your prior year’s payment, it will be a lower payment than if you choose to pay the deficiency/shortage over your next 12 payments.
Any surplus equal to or greater than $50 will be refunded. If the surplus is less than $50, the amount will be credited against the next year’s escrow payments.
To keep payment changes to a minimum and keep things simplest for both you and the Credit Union, we keep the escrow analysis cycle on an annual basis. If you would like your account and payment reanalyzed outside of the normal annual cycle, the Credit Union can review your loan upon your request. These requests should only occur if there has been a change in any of the factors making up your payment, i.e. change in insurance payment amount, change in tax payment amount, deposit to escrow account for outstanding shortage and/or deficiency, etc.
Any changes to your insurance policy should be conveyed to our Mortgage Servicing department for proper handling. If you happen to move your policy to a new provider, it is best practice to place any refunds from your previous policy back into the escrow account to help minimize any deficiency and/or shortage in the account.
Continuous and sufficient insurance coverage is required for the life of the loan. If for any reason the Credit Union receives information that there is a lapse or insufficient insurance coverage on your property, the Credit Union will buy insurance on your behalf. The insurance the Credit Union buys may not provide as much coverage as an insurance policy you buy yourself and may be more expensive. If this insurance is placed on your loan, your escrow payment will be adjusted to account for the new insurance. Notifications will be sent out prior to insurance being force-placed onto your loan. If you do have an insurance policy in effect, simply provide documentation to the Credit Union in order to stop the force-placed insurance process.
If you qualify for a tax discount or exemption, this process will be handled through your county. If you have been approved for this arrangement, the county will simply provide the discounted rate for the Credit Union to pay. For any questions regarding these programs, please contact your county’s office.
Any balance remaining in the escrow account after your loan has been paid off will be refunded directly into your Share Savings with the Credit Union. At that point, the Credit Union will cease paying taxes and insurance on your behalf.