What are escrow adjustments; overages, shortages and reserves?
When performing an escrow analysis some estimates of expenses are made. Up-to-date tax and insurance bills may not be available. In estimating an escrow account, over-collection and under-collection may sometimes occur. If there is a surplus of funds in your account after the annual analysis, this is called an overage. If the overage is more than $50.00, it will be refunded, provided your loan is current. When funds have been under-collected, a shortage occurs. The amount of the shortage would be the maximum negative amount that your account would reach if an adjustment to your payment were not made. If a shortage does occur, your monthly loan payment will be adjusted to include the escrow payment amount plus 1/12 of your escrow shortage. You also have the option of paying off the shortage in one lump sum.
