May 18, 2023
Once a year, your lender is required by law to conduct an escrow (or impound) analysis. They'll analyze your impound account along with any changes to your insurance premiums or property taxes (which are almost guaranteed to increase).
Lenders are also allowed to keep a two month cushion in your impound account. This is meant to protect homeowners in the case of an unanticipated increase in taxes or insurance.
Your escrow analysis statement will be divided into several sections.
Your Mortgage Payment
The first section will outline your current mortgage payment including your previous impound payment, your new impound payment, and any anticipated shortage.
In the example below, the customer's old impound payment was $386.03. They were also paying off a shortage from the previous year of $13.07. The new amount required to satisfy their impounded obligations is $435.27. But this borrower is also expected to have a shortage of $995.04 for the year. Thus the monthly shortage ($995.04 divided by twelve months) would be $82.92.
Shortage Payment Options
Your lender will give you three options for paying any anticipated shortage.
The first option is to do nothing! The total amount of the shortage will be divided by twelve months and added to your regular monthly payment. So the borrower in the above example would have a new monthly payment of $1,374.94.
The second option is to pay the lender a portion of the shortage. Let's assume this borrower paid $500.00 of the necessary $995.01. The lender would take the remaining amount owed, divide by twelve months, and add that amount to the customer's payment. Thus his new monthly payment would be $856.75 principal and interest + $435.27 new impound payment + $41.25 remaining shortage = $1,333.27 per month.
The third option is to pay the entire shortage at once and be done. In the below example, the customer's new payment would be $856.75 principal and interest + $435.27 new impound payment = $1,292.02 per month.
Impound Activity History
Your escrow analysis statement should also detail the payments you've made into your impound account for the previous twelve months and the payments the lender has made on your behalf.
In the example below, this customer made payments into his impound account of $399.10 each month. Disbursements for property taxes were paid by the lender in September and April. And the annual insurance premium was paid in March. A running total of the balance of the account is shown in the last column.
Impound Account Projections
Perhaps the most riveting section of the analysis statement is the impound account projections. In the chart below, this person will be paying $435.27 into their impound account each month. The lender anticipates paying property taxes of $1,776.09 each in October and April plus an insurance payment of $1,671.00 in April.
You can also see a running total of the balance in the customer's impound account. Remember, the lender will keep a cushion equal to two months' impound payments. In this instance, the monthly impound payment of $435.27 multiplied by two is $870.53. So the balance of the impound account can never fall below this amount.
You can see that this customer's impound account will be $124.48 in the red in April. Thus, he is anticipated to have an impound shortage of $995.01 (negative $124.48 plus $870.53). Sound familiar? That's the amount of the shortage detailed in the first section.
Why did my payment increase?
It's likely that your property taxes and/or insurance premiums increased. In the example above, the payment for the customer's homeowner's insurance increased from $1,223 to $1,671. I happen to know this customer's property taxes also increased by $142.84. That's a total increase of $590.84 divided by twelve months equals $49.24, the exact difference between the current impound payment and the new impound payment in the first section.
Your insurance agent can help you determine whether your premiums changed (and advise you on what you can do to save money on your insurance).
And the county where your property is located will send you a property tax statement each year. You can also find the amount of your property taxes online (along with a ton of other information).
Jefferson County, WA: Click Here
Clallam County, WA: Click Here
Kitsap County, WA: Click Here
If your county isn't listed above, Google "county name assessor parcel search" and see what pops up. Make sure you're looking at an official county government site and not one that charges money.
If you still can't decipher your escrow analysis statement or determine why your payments are changing, give us a shout. We're happy to look into it for you. Sometimes lenders make mistakes! At the very least, we can help you track down an answer.