What is an escrow account?
An escrow account allows Carrington Mortgage Services, LLC (“Carrington”) to pay the required taxes and/or insurance on the property you own. Within your monthly mortgage payments, you pay a certain portion of your taxes and/or insurance premiums. When those taxes and/or insurance premiums come due, Carrington will pay them on your behalf with the money you have paid into your escrow account.
What are the benefits of having an escrow account?
Escrow accounts are a great source to help you budget for large expenses such as property taxes and insurance costs. Another benefit is that Carrington will take care of the payments so it is one (1) less payment to keep track of.
ESCROW ANALYSIS (ANNUAL AND FOR RECENTLY TRANSFERRED LOANS):
What is escrow analysis and how often is it performed?
Carrington completes an escrow analysis each year to (1) ensure your escrow account is funded correctly, (2) determine any surplus or shortage, and (3) adjust your monthly payment accordingly in order to cover all of the bills that are paid through your escrow account – property taxes, homeowners’ insurance, mortgage insurance (if required), and flood insurance (if required).
Additionally, for loans transferred to Carrington from a different servicer, Carrington completes an escrow analysis within sixty (60) days of the transfer date.
Carrington maintains a cushion equal to two months' estimated taxes and insurance (unless limited by your loan documents or state law). This measure helps to avoid a negative balance in the event of increasing tax and/or insurance amounts.
How are tax and insurance projections calculated for the next year?
First off, every year can be different. During your annual escrow analysis, Carrington will calculate the amount projected you will need in your escrow account for the upcoming year. Your payment must be adjusted to ensure that your monthly balance will remain above a required minimum balance for the duration of the following twelve (12) months. Carrington mandates a minimum of two (2) months of escrow payments cushion unless otherwise required by state law.
SHORTAGES & SURPLUSES:
What’s an escrow shortage or surplus?
Shortages occur when the escrow account balance falls below the required minimum balance. The required balance for the escrow account is equal to two (2) months of the intended escrow payments. It is designed to help protect you from paying any unexpected tax and/or insurance premiums that can increase.
However, if your taxes and/or insurance costs were lower than expected, your escrow account may have a surplus. If you have a surplus, you will be issued a check equal to the surplus amount.
How could I have a shortage?
Shortages may occur when you do not have enough money in your escrow account to meet the minimum balance. Some of these reasons are:
- Property taxes and/or insurance premiums increase
- Taxes have been reassessed
- Insurance provider(s) changed, resulting in higher costs
- Due date of the property taxes and/or insurance premiums changed
- Did not make the appropriate payments into the account to cover costs
If you have any questions or concerns about potential increases in your property taxes or insurance premiums, please contact your local taxing authority or insurance agent.
ONLINE RESOURCES FOR ESCROW ACCOUNTS:
How will I be notified of any changes to my escrow account?
You will receive an updated escrow statement and can view a copy within your online account. Log in to your online account and click “Billing and Tax Documents” to view your latest statement. If you have opted into paperless statements, you will receive a notification when the document is available online.
Where can I find information about my escrow account?
For more information on your escrow account, including current balance, current payment, and recent disbursements, log in to your online account and click “Escrow Information.”
How do I add or cancel an escrow account?
If you have an FHA, USDA, or VA loan, we are unable to remove the payment inclusion from your escrow account. The escrow account is a requirement of your loan and is designed to reduce the burden of larger annual payments.
Why is my escrow amount different than it was with my previous mortgage servicer?
Different servicers may follow different escrow procedures. Carrington requires each escrow account to have a cushion of two months’ worth of estimated taxes, homeowner’s insurance, and mortgage insurance (if applicable). Having a two-month cushion in your account helps to avoid a negative balance in the event of increasing tax and/or insurance amounts at the end of the year.
What actions can I take to try to lower my escrow amount?
In order to keep your payments as low as possible, we always encourage you to shop for insurance that best meets your current needs and to follow your county’s process for disputing your property tax amount. If you receive a refund check from your previous home insurance policy, we recommend forwarding the check to us to deposit into your escrow account. If you choose to cash and keep the refund check, your escrow account may be underfunded resulting in a temporary increase in your escrow payment.
What if I change insurance companies and receive a refund check?
If you receive a refund check from your previous home insurance policy, we recommend forwarding the check to us to deposit into your escrow account. If you choose to cash and keep the refund check, your escrow account may be underfunded resulting in a temporary increase in your escrow payment.
Do you have any videos that do a better job of explaining escrow?
Check out our escrow resources here or directly in your account dashboard by selecting “Escrow Summary” on the left menu.