One of the nightmares of a customer service representative that works in the billing department for a mortgage is explaining escrow. The majority of the escalated calls that we have are due to an upset customer requesting information on why suddenly their monthly mortgage went up and upon research, the main contributor is the escrow.

When you have a mortgage loan, you also have an escrow account. Majority of loans would require you to have an escrow as this will serve as your savings account intended to pay the taxes and insurance when they are due.

Every month, as you pay your monthly mortgage due. You are also paying a portion to escrow. The amount paid to escrow would be fixed and spread for 12 months in default.

Frequent Questions Asked by customers

Can I opt-out having an escrow in my mortgage loan?

• Yes, but some loans are requiring such as the government-backed loan. Some of the criteria that they may consider removing your escrow account by request is if you have a good history of payment. No default for 12 months and your loan is more than a year already. If it is a new loan, your mortgage company will reject your request onset and will advise you to try again next year.

The Escrow payment is quite high, is there a way for it to be lowered down?

• Check your insurance provider, ask if they can provide you a lower premium covering your basic needs. If in case that the premium offered is not matching on your budget, you can shop around other insurance providers to compare their prices and coverage.
• Avoid at all cost having a " forced placed insurance" on your loan. forced place insurance means that the mortgage company did not receive the necessary paperwork from your insurance company or either you are not able to give the home insurance information to them. Because of that, the mortgage company will be adding insurance directly to your loan and they will avail only the basic coverage but with a higher cost versus what is offered in the market.
• What I suggest is when your insurance renews, make sure to reach out to both parties, the mortgage and your insurance provider to make sure that everything is placed correctly. Most of the time, there's a miscommunication with both.

I received a notice that I am short paid the balance in Escrow, what happened? I thought that I am paying it on time.

• The escrow balance is calculated based on your last year's computation. If there is an increase either to your tax or insurance payment this year this explains why you have the short paid. The mortgage company, paid it in advance for you, hence it is now showing in your statement so that the borrower would be aware of the charges.

I am on a fixed income and can't pay an extra amount for the shortage on the escrow. Is there a way to spread it out more than for more than 12 months?

• In most cases, no but based on my experience I was able to stretch an escrow payment for 2 years. But by spreading it by 2 years I explained to the borrower that after the next run of escrow report next year. If the taxes and insurance will be increasing again he will be in a trouble with paying it off.

I received a check from my escrow saying that I have some funds as an overpayment what should I do.

• I would suggest returning it to your mortgage company, that handles the escrow transactions. If you are not needing the money to be used for other bills. As we cannot determine the price of the market for taxes and insurance better have a buffer to your account rather than having a negative balance.

Can I request to re-run the escrow analysis as I feel that it is incorrect?

• For whut? Kidding aside, yes you may but take note that if you will request to re-run the analysis, make sure that all information is updated especially if you have a new insurance provider. Otherwise, you might end up in negative.

Can I use my escrow as a payment for my mortgage loan if in case I cannot make any payments for my monthly amortization?

• No, if you want to use your escrow balance to pay your mortgage loan. Your mortgage company may suggest closing your account first before proceeding. As the main purpose of escrow is to pay for the home insurance and tax.

Explaining this to customers especially if the price is astronomically high would trigger frustrations. But at the end of the day once you have layout all your cards to them. They will decide to keep one or not.

That's all for now and I hope you learned something from me :)