If you’re a homeowner, you’ve probably heard the word “escrow,” but you may not know exactly what it means. Luckily, Peoples Bank is here to help.
Your monthly mortgage payment usually includes three things: principal, interest, and escrow. Escrow can include property taxes, insurance, and private mortgage insurance if applicable.
An escrow account is a special account attached to your mortgage and functions similarly to a checking account. It’s set up so that you can make small monthly payments toward your property taxes and insurance, rather than having to pay them all at once out of pocket, when they’re due. Then, when the time comes to pay them, the Bank will send the payment on your behalf.
Your escrow account also includes a reserve, or “cushion”, typically equal to two months’ escrow payments. The reserve ensures that there are enough funds to cover any unexpected increases in tax or insurance payments during the year.
On a typical, fixed-rate mortgage, your principal and interest payment stay the same for the life of the loan. Your escrow payment, however, can change each year as property taxes or homeowners’ insurance go up or down.
An Annual Escrow Analysis, completed by Peoples Bank, will estimate the coming year’s expected payment based on the past year’s actual payments. The escrow year runs from July through June. This means your escrow payment could change each year in July, based on fluctuations in your taxes and insurance payments. The annual analysis will also determine if there is a shortage, deficiency, or surplus in your escrow account balance.
You should receive your Annual Escrow Analysis by the beginning of May. It will show you all the activity in your escrow account during the past year and the estimated activity for the coming year. It will also tell you what your new monthly escrow payment will be, starting July 1. If there is a shortage, and you would not like to spread the shortage payment over the next 12 months, you will have a couple of options to pay the amount due.
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- Mail your check to Peoples Bank, Attn: Loan Servicing, PO Box 32210, Bellingham, WA 98228 (write “Escrow Shortage” on the memo line).
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- In person at any Peoples Bank branch (tell your banker you have an escrow payment).
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- Call our Customer Service Center at (800) 584-8859 to transfer funds from your Peoples Bank account.
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- Use the Online Payment Portal for ACH payments from another bank.
An escrow account is there to help you throughout your journey of homeownership. FAQs are included below. Additional questions? Contact your local mortgage specialist or our Customer Service Center at (800) 584-8859.
FAQs
What is the Annual Escrow Account Disclosure?
An Annual Escrow Account Disclosure is generated for any loan with active escrow items, such as insurance, property taxes, and private mortgage insurance.
This notice shows estimated escrow costs for the coming analysis period, actual costs from the previous period, and the resulting surplus, shortage, or deficiency based on those numbers.
When will I receive the Annual Escrow Account Disclosure?
Our escrow analysis period runs annually from July 1 through June 30, and you should receive the Annual Escrow Account Disclosure in early May.
What do the terms on my Annual Escrow Analysis mean?
- A surplus results from having more funds than needed in the account. Any funds in excess of the required minimum balance over $50 will be automatically disbursed via check a week after the Annual Escrow Analysis occurs.
- A deficiency is caused by having a negative balance in the account. A deficiency portion of an analysis will be the amount to get the escrow reserves to a $0.00 balance.
- A shortage is the amount due to bring the account to the required minimum balance, which is typically two months’ worth of escrow payments. This minimum balance, also referred to as a cushion, helps lessen the impact of deficiencies or shortages.
How do I determine if I have a shortage, deficiency, or surplus?
On the Annual Escrow Account Disclosure, below the estimated activity for the coming year, there will be a section with a breakdown of what the starting balance in the escrow reserves should be, and how a surplus, shortage, or deficiency will accomplish meeting the starting balance.
The starting balance is the minimum amount that should be in the escrow reserves at the start of the analysis period to be able to make all projected payments and maintain a required minimum balance in the reserves.
If you have a surplus, the amount will be listed in the section described above. Any surplus checks will be mailed out one week after the Annual Escrow Account Disclosure is generated.
Should you have a shortage or deficiency, the section following with the ‘Impact of Analysis on Monthly Payment’ will break down the amount being added to the monthly payment for the shortage and/or deficiency, with a total at the bottom. This total is what the monthly payment would be if the shortage and/or deficiency payment are not made prior to June 2.
Just below this, you will see a line that shows the projected payment amount should you choose to pay any shortage and/or deficiency prior to June 2. This amount will likely differ from your existing payment amount due to consistent increases in tax and insurance costs.
Is there an amount I can pay to keep my payment amount the same?
Due to limitations within our system, we are not able to calculate the Annual Escrow Analysis to accommodate this request. Any amount paid in excess of the true escrow shortage amount will be refunded to the payee.
When and how can I pay my shortage/ deficiency?
Payments for shortages and deficiencies must be made by June 2nd. We will not accept any payments after this date.
You may spread the shortage or deficiency payment over the next 12 months, or you can pay the amount due in a lump sum a few different ways:
- Mail your check to Peoples Bank, Attn: Loan Servicing, PO Box 32210, Bellingham, WA 98228 (write “Escrow Shortage” on the memo line).
- In person at any Peoples Bank branch (tell your banker you have an escrow payment).
- Call our Customer Service Center at (800) 584-8859 to transfer funds from your Peoples Bank account.
- Use the Online Payment Portal for ACH payments from another bank.
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