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Understanding Your Escrow Account

An escrow account is an easy way to manage property taxes and insurance premiums for your home. You don't have to save for them separately because we collect them as part of your monthly mortgage payment, then pay them on your behalf when they're due. Your escrow account usually covers your property taxes and insurance premiums (like homeowners’ insurance, mortgage insurance, or flood insurance).

Tax rates and insurance premiums change over time. At least once per year, we will review your escrow to see if any changes have been made. If so, we will adjust your monthly payment accordingly to ensure that your escrow account never drops below a minimum balance. We will send you an escrow analysis statement outlining any changes.

Frequently Asked Questions

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.

A copy of your new declarations page can be emailed to FirstInterstateBank@ProctorLP.com or mailed to us at the address below. If you have any difficulty, or have additional questions, please give us a call at 855-254-2891. Please note, changes to your homeowner’s insurance may impact your escrow account.

First Interstate Bank

ISAOA/ATIMA

PO Box 5900

Troy, MI 48007-5900

You have the right to request PMI be cancelled on or after the date your principal balance is first scheduled to reach 80% of the original value of the property or the date the principal balance reaches 80% of the original property value. “Original Value” means the lesser of the contract sales price of the property or the appraised value of the property at the time the loan was closed. If the loan was to refinance an existing loan, the “original value” means the value relied on by the lender to approve the loan.

If your loan is current, PMI will automatically terminate on the date the principal balance of the loan is first scheduled to reach 78% of the original value of the property. If payments are not current as of this date, PMI will automatically terminate on the first day of the month immediately following the date the loan becomes current. PMI removal can also be based on your current appraised value. Contact Mortgage Laon Servicing at 866-295-1339, Option 3 to learn more.

Once your loan is paid in full, a release will be submitted to the county for recording and becomes public record. Any funds you have remaining in your escrow account will be returned to you. If you still own your home, you will need to contact your insurance agent and county tax assessor to have annual bills directed to you.

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