Escrow Accounts are established by a lender for the collection and payment of real estate taxes, homeowners insurance and mortgage insurance. Escrow funds are collected as a part of the homeowner's total monthly payment and disbursed by the lender as tax and/or insurance bills are received.
Escrow Accounts are reviewed annually by the lender to ensure sufficient funds are collected to meet all anticipated disbursements. The amount collected for the escrow account will adjust up or down to accommodate increases or decreases in the taxes and/or insurance premium. If during the annual review, the lender finds that there is more money than what is needed in escrow, and the amount is greater than $50, a refund of the overpayment will be sent to the homeowner. If there is a shortage of funds in escrow, the homeowner's monthly payment for escrow will be adjusted to collect for both the escrow shortage and the increased amount needed for new tax and/or insurance payments.