What Is an Escrow Analysis?

Learn How and Why Your Escrow Payments Might Change

Freedom Mortgage maintains an escrow account in order to pay your property taxes, homeowners insurance, and mortgage insurance (if required by your loan). The money in your escrow account comes from your mortgage payments. You make payments toward the cost of your taxes and insurance each month, and Freedom Mortgage pays your tax and insurance bills from the escrow account when they come due.

Each year, we perform an escrow analysis to make sure we are collecting enough with your monthly payment to pay your property taxes and insurance premiums. The analysis also calculates the minimum required balance in your escrow account.

We'll send you an escrow analysis statement each year which that details what was paid, as well as projections for what we'll need to collect, to be able to pay the upcoming tax and insurance bills. It also provides your escrow payment amount for the upcoming year.

Why Do Escrow Payments Change?

Your escrow payments can change when the costs of your taxes or insurance change. For example, if your real estate taxes increase, your escrow payments may increase in order to cover the higher cost of your taxes. If you get a new homeowners insurance policy at a lower cost, your payments may decrease. If you are paying for private mortgage insurance and meet the requirements to remove it from your loan, your payments may decrease for this reason, too.

What Does an Escrow Account Analysis Include?

An escrow account analysis ensures that your monthly escrow payments will be enough money to pay your tax and insurance costs when they are due. The escrow analysis includes:

• Escrow account history
• Your current escrow payment amount
• Your new escrow payment amount
• Estimated payments for the following year

What Is a Minimum Escrow Account Balance?

To ensure that the escrow account has sufficient funds to cover the amount of the bill at the time of payment, you may be required to keep a minimum balance in your account. The minimum balance varies by state but will not be more than two months of your monthly escrow payment.

What Is an Escrow Surplus?

A surplus exists when, upon analysis of your escrow account, the lowest projected minimum balance exceeds the target minimum balance. If the projected surplus is $50 or greater, and your account is current, we will send you a check for the surplus amount. If the surplus is less than $50, we will credit the amount to your escrow account unless state law dictates otherwise.

What Is an Escrow Shortage?

A shortage exists when the analysis projects that the funds in your escrow account will fall below the required minimum balance. Your escrow analysis statement provides detailed information on any projected shortage. Escrow shortages are typically made up over 12 months. We will automatically adjust your monthly payment to include the shortage amount.

When Are Escrow Accounts Analyzed?

We typically analyze your escrow account once a year, although, sometimes, the timing of your analysis can vary. For example, we may run a new analysis if you are approved for a loan modification.

How Do You Contact the Freedom Mortgage Escrow Department?

When you have questions about your escrow analysis, please call our Customer Care team at 855-690-5900. Team members are available Monday — Friday, 8 AM — 8 PM, and Saturday, 9 AM — 2 PM, ET.

Last reviewed and updated September 2024 by Freedom Mortgage.