Understanding Escrow Analysis

2021 Escrow Analysis Changes

If you have a home loan with First Interstate, each year we review the funds needed to pay your taxes and insurance, based on the amounts assessed at the time of the analysis. If there are not enough funds in a loan’s escrow account, you could make a lump-sum payment or adjust the monthly payment to cover the shortage. However, new regulations for 2021 no longer allow a lump-sum option, so payments will be adjusted in order to collect the shortage over the next 12 months. 

We will also provide the required annual escrow account analysis on dates that more closely coincide with property tax payment assessment updates. This means: 

  • Borrowers will receive an out-of-cycle statement during 2021 that will reset the annual date for future escrow account statements. This may impact the payment amount based on changes to your property tax and/or hazard insurance premiums.
  • Any payment adjustments due to a change in property taxes will be completed in a more timely manner to avoid large monthly payment increases.

Additional information regarding your escrow account will be included in your 2021 statements.

Frequently Asked Questions

We maintain an escrow account on your behalf to ensure your annual expenses are paid in full and on time. Every time you make a mortgage payment, a set amount of your payment is deposited into your escrow account. We use this amount to pay your property taxes, hazard insurance premiums, and if applicable, your flood insurance and/or mortgage insurance premiums.

An annual escrow statement shows the amount of taxes and/or insurance paid on your behalf in the past year as well as what is expected to be paid in the next year. As part of your annual review, we ensure the escrow portion of your monthly mortgage payment is enough to cover your taxes, insurance, and other applicable expenses. Under the Real Estate Settlement Procedures Act (RESPA), we are required to provide you an escrow account disclosure statement that shares the results of this review and its effect on your monthly mortgage payment.

As part of the annual escrow account review, we project the amount that will be needed to pay your expenses. This projection is based on the amount of your expenses at the time of your escrow analysis. If your taxes and/or insurance change during the year, you could have a shortage or surplus in your account.

An escrow shortage is the result of differences that occurred in the past—when the funds in your escrow account were less than what was required to cover the actual payments from your account. The escrow portion of your new monthly mortgage payment is based on projected activity for the coming year. Your payment may increase if your annual property tax or annual insurance premium increases.

Changes to the escrow portion of your monthly mortgage payment are typically the result of changes in your property taxes and/or hazard insurance. The principal and interest portion of your payment is never impacted by this analysis. If the loan was for a newly constructed home, the amount assessed for property taxes may have only included the land and will increase in the first cycle after the home is complete.

Under federal law, we can maintain a cushion of funds in your escrow account. We use this as a safeguard in case your property tax and/or insurance payments increase. Your escrow account minimum balance is equal to no more than one month’s escrow payment for your property taxes and hazard insurance. Mortgage insurance is not included in this calculation.