What is an escrow and how is it used?
An escrow account helps budget for annual property-related expenses, such as property taxes and hazard insurance. Rather than pay for these items in one or two lump-sum payments each year, you can make smaller monthly payments along with your mortgage payment into an escrow account that we then use to pay for those property-related expenses. Check your most recent Escrow Account Disclosure to determine which items we will pay for on your behalf.
Each year we analyze the amounts that you paid into your escrow account and the amounts that we paid out of your escrow account. We will adjust your total mortgage payment amount to account for any changes, whether a decrease or increase. Your new mortgage payment amount will be updated annually after the escrow analysis each year.
Escrow disclosures
Multiple disclosures may be included with your Annual Escrow Account Disclosure Statement.
- Copy of Previous Year’s Projection: This is a summary of the transactions we thought were going to occur in your escrow account during the last year. We used it to determine last year’s escrow payment. You can compare this disclosure to what actually transpired in your escrow account, which is listed on the Account History disclosure.
- Account History: This is a summary of the actual activity in your escrow account. This is like a bank statement. Review it carefully to make sure that it shows the correct amounts of deposits and withdrawals. The last few months of history will show estimated deposits and withdrawals, since they have not yet occurred at the time of the escrow analysis.
- Projections for Coming Year: For most people, this contains the most important information from the escrow analysis. This disclosure shows our summary of the transactions we think will occur in your escrow account during the upcoming year. Importantly, it also indicates what your new escrow payment will be beginning April 1 and how we determined that amount.
Escrow waivers
We generally require our members to escrow for property-related expenses, such as property taxes, hazard insurance, flood insurance, and private mortgage insurance. We may approve a waiver for the requirement to escrow for property taxes and/or hazard insurance (flood insurance and private mortgage insurance are not eligible for an escrow waiver).
To be eligible for a waiver:
- Your principal balance must be less than or equal to 80% of the original value. “Original value” is defined as the lesser of the sales price or the appraised value at the time of loan consummation.
- No late payments in the last 12 months.
- No payment 60 or more days past due in the last 24 months.
If the escrow waiver is approved, you will be responsible for paying hazard insurance premiums and property taxes on time. Escrow waivers can be revoked if payments are not timely.
