Escrow shortage

[ripvanwinkle]

Over the years I've received notice that my mortgage escrow amount would have a projected shortage. Usually it about $150-$300. If I didn't pay the shortage my monthly payment would go up. I pay the shortage to keep my payment the same.

Now Wells Fargo sent me a notice saying I can't pay the shortage up front. They have to spread it over 12 mo. I can't get a explanation as to why only we don't do it anymore. Luckily the increase this year is only $70. Does your mortgage company do this?

I do understand why the increases. It's because of all the stupid tax hikes and bond measures my city and county imposes and the stupid liberal voters in my area vote them in . Got a problem? Throw enough money at it and maybe it will go away. Money for things like "deferred maintenance" on govt and school building that they should have been doing all along. And a big one, huge PERS retirement (Public employee retirement system) shortage we have to make up but it's ballooned so big all the taxes in the world won't fix it. They've seen this coming for years but just kick the can down the road. (Ok, rant over)

[oped]

I’ve never done escrow so I don’t know? Interesting issue.

[dondub]

Stupid liberals don’t have escrow accounts.

[Tiny]

The Bank Of America mortgage has escrow.  BoA sends me a letter every November and outlines what my mortgage payment is going up to come January 1st of the New Year.    The letter explains/documents the change in expenses the escrow covers.   I don't have a choice... the mortgage payment just goes up.   I just change my automatic payment to handle it.      

I'm kinda pissed at Wells Fargo - I got a brand new Mortgage - closed in November '19.   WF used the property tax value from the previous owner (old, long term resident, so really low property tax).  WF kept documenting my "payment" PI and T and I at about $100 less than what I was expecting.  I mentioned the taxes multiple times in the process... and finally gave up - I just wanted to get the mortgage done.   Low and behold less than a month after I closed I get a letter from WF about how my escrow is too low and my payment is too low and they give me a bunch of options for fixing it.   I opted to pay the initial short fall and then have a bumped up mortgage payment - which should be good for the next couple of years.  

If I was a newbie Home Buyer - and found out my monthly mortgage payment was gonna go up $100 after I closed and before I made the first payment I'd be PISSED.   Yes, it's escrow and it's taxes - but on what feels like dozens of documents about the cost of the house and my monthly payment over a couple of months - that lower 'payment' was always highlighted and talked about.   $100 a month could be a game changer for a first time home buyer.    I wonder how many other buyers get a surprise like that...  I was prepared for it... so I'm just annoyed.  It didn't change my "budget" . 

[oped]

Totally not escrow but building off Ti4ny... the family i tutor for just bought their first house... the phone company says it is no longer doing DSL? Which they found out after they closed... and there are limitations for internet, and their cell phones don't work at the new house and there are already a lot of new expenses and I don't think we talk about these things enough when we talk taking on home ownership... its like, the mortgage payment is blank... as if that is all that goes into the decision. 

[jeffreymo]

We’re on our 2nd mortgage company. We have always receive an annual escrow update with an explanation on how they calculate the reserve requirements and what the new payment will be.

[ripvanwinkle]

Jan 17, 2020 1:15:54 GMT -5 jeffreymo said:

We’re on our 2nd mortgage company. We have always receive an annual escrow update with an explanation on how they calculate the reserve requirements and what the new payment will be.

Yes, I do too but do they allow you pay the shortage to keep your payment the same?

[Apple]

Chase still allows for you to pay the escrow shortage separately (at least for my mortgage).

[wvugurl26]

Pennymac allows my DH to pay the shortage by x date or add it to the normal payment. We haven't received the notice for this year though.

[TheOtherMe]

Last year was the first time my mortgage company spread the expected increase over 12 months and did not give me a choice.

There was actually an overage and they sent me a check.  I put it back in as escrow only and they refunded it again.

I figure I've lost the ability to pay any shortage, which is what I want to do.

[chiver78]

Jan 17, 2020 1:30:08 GMT -5 ripvanwinkle said:

Jan 17, 2020 1:15:54 GMT -5 jeffreymo said:

We’re on our 2nd mortgage company. We have always receive an annual escrow update with an explanation on how they calculate the reserve requirements and what the new payment will be.

Yes, I do too but do they allow you pay the shortage to keep your payment the same?

I'll ignore the unnecessary political rant that has nothing to do with the escrow question.

my mortgage company allows me to pay the shortage in one shot if I'd like to do so. I have Flagstar Bank, if that matters. 

[Wisconsin Beth]

Jan 17, 2020 1:15:54 GMT -5 jeffreymo said:

We’re on our 2nd mortgage company. We have always receive an annual escrow update with an explanation on how they calculate the reserve requirements and what the new payment will be.

Yeah, my math major husband couldn't get the same numbers the bank got, using their stupid formula, for the escrow payment.  After listening to him bitch every year for 2-3 years, we refi'd to get rid of the escrow payment.

ETA - one year we'd be short; so they'd up the escrow amount.  The next year we'd be over and they'd reduce the escrow amount.  Rinse and repeat. 

[Deleted]

I haven't had an escrow account for years- I hate them even though I've never had a problem with them paying the tax and insurance bills.   The last mortgage I took out with an escrow account, in 1997, they told me if I didn't want an escrow account the interest rate would be 1/4% higher!   The cynical part of me says that with interest rates so low, they make less on the float so it's easier to get them to agree to pay them yourself.

My guess is that your bank had the option to require that the shortfall be paid monthly somewhere in the fine print. When you think about it, if the tax bill comes in and there's not enough in the escrow account, they have to pay the tax bill anyway.  So, it's better for them to collect more going forward so they're not put in that position.

And, to add to the rant on taxes- my County did a re-assessment of home values and the results were crazy- mine went up 40% and I wasn't the only one.  Same results for many neighbors and on NextDoor.com.  The County was overwhelmed with appeals (one was mine).  They ratcheted them back and mine went up "only" 25%.  I still think it's a bit above market value.  I wish I could believe they'll do something good with that windfall but I doubt it.

Jan 17, 2020 0:06:46 GMT -5 Tiny said:

I'm kinda pissed at Wells Fargo - I got a brand new Mortgage - closed in November '19. WF used the property tax value from the previous owner (old, long term resident, so really low property tax). WF kept documenting my "payment" PI and T and I at about $100 less than what I was expecting. I mentioned the taxes multiple times in the process... and finally gave up - I just wanted to get the mortgage done. Lo and behold less than a month after I closed I get a letter from WF about how my escrow is too low and my payment is too low and they give me a bunch of options for fixing it.

If I were a newbie Home Buyer - and found out my monthly mortgage payment was gonna go up $100 after I closed and before I made the first payment I'd be PISSED. Yes, it's escrow and it's taxes - but on what feels like dozens of documents about the cost of the house and my monthly payment over a couple of months - that lower 'payment' was always highlighted and talked about. $100 a month could be a game changer for a first time home buyer.

That used to happen a lot but I think most taxing districts have wised up to updating valuations regularly and not just when somebody moves. I still remember my first mortgage and how scary it was, and when we had a $60/month surprise I was a wreck. (Partner had borrowed $2,000 of the down payment from a bank credit line and it turned out they wanted a faster payback than I'd included in my calculations.)

[swamp]

I don't escrow.    I don't see the point.  I know when my taxes and insurance are due, and I know the general amount.  

[Deleted]

Jan 17, 2020 9:40:51 GMT -5 swamp said:

I don't escrow.    I don't see the point.  I know when my taxes and insurance are due, and I know the general amount.  

I agree but for years I had a hard time getting a bank that would do a mortgage without escrow.  As I noted, those were years when they could make a lot of interest on the float so it was more cost-effective for them to service the mortgage.

[gs11rmb]

Jan 17, 2020 9:40:51 GMT -5 swamp said:

I don't escrow.    I don't see the point.  I know when my taxes and insurance are due, and I know the general amount.  

I do escrow because it's one less thing that I have to keep track of and make sure funds are available.

[jeffreymo]

Jan 17, 2020 1:30:08 GMT -5 ripvanwinkle said:

Jan 17, 2020 1:15:54 GMT -5 jeffreymo said:

We’re on our 2nd mortgage company. We have always receive an annual escrow update with an explanation on how they calculate the reserve requirements and what the new payment will be.

Yes, I do too but do they allow you pay the shortage to keep your payment the same?

Oops sorry I didn’t read the whole post. No I never knew that was an option so I’ve never asked.

I do know that with Bank of America we were required to escrow our insurance premium also.
Our new company only escrows taxes which isn’t convenient.

[dannylion]

Jan 17, 2020 9:40:51 GMT -5 swamp said:

I don't escrow.    I don't see the point.  I know when my taxes and insurance are due, and I know the general amount.  

This is another reason I like online bank accounts that let you have lots of subaccounts for many different savings goals.  I know how much my taxes will be within a reasonable margin of error, divide the total into 12, and put 1/12 of the total into the "property taxes" subaccount every month.  Then I pay my taxes online and have it taken out of that account.  Easy peasy.  And the money is earning interest for me, not the escrow company, while it's waiting to be used for taxes.  I have a subaccount for insurance as well.  Insurance is paid annually and goes on a CC that currently gives me 5% cash back for putting insurance payments on it on autopay.   I have an automatic transfer set up from the insurance account to my checking account for the month that the insurance is paid so it's there for that month's CC autopay of the total.

If someone is going to benefit from holding and transferring funds for my taxes and insurance, I would prefer that someone to be me.  It takes a few minutes to set it all up, then it just runs by itself.  

[dogmom]

Jan 17, 2020 11:58:59 GMT -5 dannylion said:

Jan 17, 2020 9:40:51 GMT -5 swamp said:

I don't escrow.    I don't see the point.  I know when my taxes and insurance are due, and I know the general amount.  

This is another reason I like online bank accounts that let you have lots of subaccounts for many different savings goals.  I know how much my taxes will be within a reasonable margin of error, divide the total into 12, and put 1/12 of the total into the "property taxes" subaccount every month.  Then I pay my taxes online and have it taken out of that account.  Easy peasy.  And the money is earning interest for me, not the escrow company, while it's waiting to be used for taxes.  I have a subaccount for insurance as well.  Insurance is paid annually and goes on a CC that currently gives me 5% cash back for putting insurance payments on it on autopay.   I have an automatic transfer set up from the insurance account to my checking account for the month that the insurance is paid so it's there for that month's CC autopay of the total.

If someone is going to benefit from holding and transferring funds for my taxes and insurance, I would prefer that someone to be me.  It takes a few minutes to set it all up, then it just runs by itself.  

Exactly what we do.

[Deleted]

Jan 17, 2020 11:58:59 GMT -5 dannylion said:

This is another reason I like online bank accounts that let you have lots of subaccounts for many different savings goals. I know how much my taxes will be within a reasonable margin of error, divide the total into 12, and put 1/12 of the total into the "property taxes" subaccount every month. Then I pay my taxes online and have it taken out of that account. Easy peasy. And the money is earning interest for me, not the escrow company, while it's waiting to be used for taxes.<snip>
If someone is going to benefit from holding and transferring funds for my taxes and insurance, I would prefer that someone to be me.  It takes a few minutes to set it all up, then it just runs by itself.  

I have sub-accounts in Excel but with the same effect. I used to have checking at USAA and the interest was tiny; I'm pleasantly surprised at how much more it is at Fidelity, so holding onto my money till the bill is due makes a difference. Fidelity also takes the money out of your balance when the check is actually cashed, not when you set it up. I think USAA reduced the balance immediately when you set up a payment.

[dannylion]

Jan 17, 2020 12:05:33 GMT -5 @athena53 said:

Jan 17, 2020 11:58:59 GMT -5 dannylion said:

This is another reason I like online bank accounts that let you have lots of subaccounts for many different savings goals. I know how much my taxes will be within a reasonable margin of error, divide the total into 12, and put 1/12 of the total into the "property taxes" subaccount every month. Then I pay my taxes online and have it taken out of that account. Easy peasy. And the money is earning interest for me, not the escrow company, while it's waiting to be used for taxes.<snip>
If someone is going to benefit from holding and transferring funds for my taxes and insurance, I would prefer that someone to be me.  It takes a few minutes to set it all up, then it just runs by itself.  

I have sub-accounts in Excel but with the same effect. I used to have checking at USAA and the interest was tiny; I'm pleasantly surprised at how much more it is at Fidelity, so holding onto my money till the bill is due makes a difference. Fidelity also takes the money out of your balance when the check is actually cashed, not when you set it up. I think USAA reduced the balance immediately when you set up a payment.

I use Ally savings accounts for the money I'm saving for recurring expenses like taxes and insurance.  I need to look into moving some savings into my Fidelity account now that interest rates are dropping and better returns can be had from different savings instruments. I have USAA insurance and a USAA checking account, but the insurance goes on the CC for the rewards points.  I only got the USAA checking account because they were offering a $600 sign-up bonus for opening the account.  I just use it as a pass-through account for some recurring direct deposits.  Their interest rates are dismal, as you pointed out.  Most of their financial services are not as attractive as those available elsewhere.  

[Tiny]

Jan 17, 2020 11:58:59 GMT -5 dannylion said:

This is another reason I like online bank accounts that let you have lots of subaccounts for many different savings goals.  I know how much my taxes will be within a reasonable margin of error, divide the total into 12, and put 1/12 of the total into the "property taxes" subaccount every month.  Then I pay my taxes online and have it taken out of that account.  Easy peasy.  And the money is earning interest for me, not the escrow company, while it's waiting to be used for taxes.  I have a subaccount for insurance as well.  Insurance is paid annually and goes on a CC that currently gives me 5% cash back for putting insurance payments on it on autopay.   I have an automatic transfer set up from the insurance account to my checking account for the month that the insurance is paid so it's there for that month's CC autopay of the total.

If someone is going to benefit from holding and transferring funds for my taxes and insurance, I would prefer that someone to be me.  It takes a few minutes to set it all up, then it just runs by itself.  

I have another mortgage that doesn't have escrow but I have very high property taxes.   I have a bunch of line items in my "spending plan" that are basically saving to spend and most of them are large amounts.  I take the yearly amounts divide by 12 and that's the monthly amount.   I move the monthly total  for all the "quarterly, semi yearly, yearly" expenses to an account  (aka My Sinking Fund).  It gives me some interest especially since the average monthly amount is pretty big. 

Sounds like alot of us use very similiar methods to handle what would have been handled by "escrow".        

[haapai]

I've never sent a check to cover a projected escrow shortage.  I've always opted to have my PITI go up instead. 

I hate ti suggest this, but if you stare at your last escrow analysis and your mortgage paperwork for long enough, you may see the answer.   

I've got a suspicion that the timing of your taxes and insurances (which your escrow company plays around with plenty) is not only causing your escrow balance to dip too low once a year, but possibly twice a year and possibly into negative territory. 

I feel bad for even suggesting this to you, since it is such a headache to figure out,  but I suspect that something of this nature is going on. 

[HoneyBBQ]

I never escrow. I always get my mortgages without. It's such a stupid thing and the banks NEVER get it right - usually they charge too much. It's infuriating - I sympathize with you.

[teen persuasion]

Jan 17, 2020 13:05:25 GMT -5 haapai said:

I've never sent a check to cover a projected escrow shortage.  I've always opted to have my PITI go up instead. 

I hate ti suggest this, but if you stare at your last escrow analysis and your mortgage paperwork for long enough, you may see the answer.   

I've got a suspicion that the timing of your taxes and insurances (which your escrow company plays around with plenty) is not only causing your escrow balance to dip too low once a year, but possibly twice a year and possibly into negative territory. 

I feel bad for even suggesting this to you, since it is such a headache to figure out,  but I suspect that something of this nature is going on. 

Our escrow amount would yoyo up and down every other year due to the timing issue.

Property taxes and insurance hit in January, while school taxes hit Oct 1.  The escrow calculations always were done in August, just before the school tax bill came out in September.  So they were using old amounts and projecting forward.  I believe they wanted a minimum balance of 2 months worth of escrow at all times.

Set the total slightly too low in August, pay larger than expected school tax bill Oct 1, and can't recover enough to pay both property taxes plus insurance in January plus have 2 months balance in reserve.  Raise escrow enough that the projected monthly balance never drops below 2*escrow bill.  Now collecting too much annually.  There was a max surplus figure, too, don't recall the amount.  Next year, they issue refund check of surplus.  And now they are too low again because school taxes changed, again.  Rinse and repeat.

It was all a function of timing - if they'd calculated the new escrow AFTER the school tax bill was available, they could have tweaked it better.  Or if they'd let me tell them the billed amount, they could just add and divide by 12.  Nope, no sensible option available.


I hated escrow because I couldn't count on them actually paying the bills!  More than once we received notices that our insurance hadn't been paid, and they were going to assign us a company and bill us for it unless we provided proof of insurance. Hello - that's your screw up, not ours.

[TheOtherMe]

I've had escrow accounts on mortgages since the late 70's and everything has been paid on time.

[Blonde Granny]

When ING bank first showed up years ago we had numerous individual savings accounts.  Today it is just a personal escrow account for 13 separate line items.  The first of each year I rebalance to see how much is carry over and how much I need to deposit into 1 Wells Fargo savings account.

This year monthly deposit will be $500.

[Bonny]

Jan 16, 2020 22:31:42 GMT -5 ripvanwinkle said:

Over the years I've received notice that my mortgage escrow amount would have a projected shortage. Usually it about $150-$300. If I didn't pay the shortage my monthly payment would go up. I pay the shortage to keep my payment the same.

Now Wells Fargo sent me a notice saying I can't pay the shortage up front. They have to spread it over 12 mo. I can't get a explanation as to why only we don't do it anymore. Luckily the increase this year is only $70. Does your mortgage company do this?

It sounds like you've had this mortgage for many years. Is it possible to remove the escrow feature?

I think our last escrowed loan was 30 years ago when we bought our first house FHA. I could live without trying to squeeze that last bit of interest on "the float". But it drove me crazy that they could never estimate the amount right. We had Prop 13 for heaven's sake. Max was a 2% escalation. It wasn't as if we were getting reassessed every year!

[Deleted]

I'm not a fan of escrow accounts even though I never really had an issue with them.  I'm too much of a control freak with my finances and I hated the huge buffer they used to keep.  I dropped it maybe 15 years ago now and am much happier paying my taxes and insurance on my own. 

[Deleted]

Jan 17, 2020 2:04:49 GMT -5 Apple said:

Chase still allows for you to pay the escrow shortage separately (at least for my mortgage).

Yes, mine too.  But your payment still goes up, but only by half as much.  Remember that the shortage isn't a one-time thing.  It is created by rising insurance premiums or rising taxes or both.

I'm not sure you can pay the escrow shortage X 2 to avoid a higher payment or why you would really want to.

By the way, I pay my shortage every year.  As I am saying, the payment still goes up.