Escrow Shortage of $7,600+ every year? Why?

7 Replies

Usually am not too involved with my parent financial matters, but now with things so bad in New York City, I invited them stay with me until New York gets back to normal. Today I picked up mail from their property, and I'm in the process of paying some of their expenses including the mortgage.

They received Escrow Account Statement letter, and I was reviewing it, and it shows the following:

Annual Escrow Breakdown (Expected):
Home owners insurance is: $3000
Property Tax: $4700

Annual Escrow Breakdown (Expect):
Home owners insurance is: $3050
Property Tax: $5000

Great, everything should be find, property tax/insurance did go up, and  $300 -/+ makes sense.

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It also shows a shortage of $7600 - this kind of freaked me out because I know my dad pays his mortgages on time, and entire monthly balance due, so I don't know where this high amount of shortage is coming from?  I started to look into all of his statements and noticed his been paying the Annual Escrow which is $7700 / 12 = $641/month  and shortage from 2018-19 which is again another $7600 /12 = $630/ month

So his statement shows his paying $641 Escrow current and another $630 in Escrow shortage balance, and his interest and principle.


Apparently he had the same amount of shortage last year too, which he was making up for... I didn't know what to think at this point so I registered my dad at the banks website so I can review 7 years of statements, it seem this has been on going since 2014... his been paying a shortage of 7000+ every year? Now I'm really concern their being taken advantage of? if his paying of his shortage balance every year why does it keep returning? I know its normal to have a shortage since tax/insurance goes up... but every year by $7000+ ?

Can someone please help me understand this? is this normal? what can I do?




 

@Rahill Rah something doesn’t add up. If the escrow has a shortage of $7K, that means he should have paid an additional $600/mo last year. Is it there has been a shortage that has just never been caught up?

You should be able to get a yearly escrow summary from the past few years to figure out what’s going on. That should show all the money that went into and out of the escrow.

Of course, anything could happen, but escrow accounts are pretty well monitored by loan services by law, so my first guess isn’t fraud or mistake.

@Rahill Rah

I would pull up his property tax bill for the last couple of years.  It could be that his property taxes aren't getting paid because of the shortfall in the escrow account.

This happened to me on one of my properties and it wasn't until I went to refinance that I found out.  I had to pay them in one lump sum for the refinance to go through. 

Just something to check out.

Originally posted by @Mike McCarthy :

@Rahill Rah something doesn’t add up. If the escrow has a shortage of $7K, that means he should have paid an additional $600/mo last year. Is it there has been a shortage that has just never been caught up?

You should be able to get a yearly escrow summary from the past few years to figure out what’s going on. That should show all the money that went into and out of the escrow.

Of course, anything could happen, but escrow accounts are pretty well monitored by loan services by law, so my first guess isn’t fraud or mistake.

My dad has been paying additional 7-9K every year, because his statement going back to 2014 there has always shown a shortage... I just  spent sometime looking up the property tax payment history of the property over at NYC Finance website going all the way back to 2013. And it show the estimate they calculated are pretty much on point $8000 -/+ $50-70.

But the chart included in the Escrow Account Statement letter shows Actual amount as:  $14,000+ and they forward the balance  to the coming year, it seem they have been doing this for a long time.


I just wanted to make I have done my homework, and I'll call them Tuesday, if they play games I'm going to call NYS dept of finance to file a complaint too.

Does anyone understand the following law:  

Under RESPA, a lender may not require borrowers to pay monthly more than one-twelfth of the total amount of all escrows calculated for one year. However, lenders are permitted to maintain a cushion equal to one-sixth of the total amount of items paid out on a yearly basis. In other words, to ensure that lenders will have sufficient funds to timely pay the real estate taxes (or the insurance), the law does allow a cushion of two months per year.

How now this could apply to the over charge in escrow?  Thanks!