Escrow is a legal agreement where someone holds something of value (often money) for you until specific conditions are met; then they release the money to meet whatever need you set it aside for.
MFE escrow. Is a long-term holding account that we maintain for you. We will draft a monthly payment, and we deposit your payment into your escrow account to cover your property-tax and homeowner-insurance bills—which we pay for of our homeowners.
As noted above, an escrow account (sometimes called an “impound” account) is a type of holding account that is set for you to accumulate and hold funds for future payouts.
An escrow account is like a savings account, but only we can draft monthly payments from you to fund your account and we can make the withdrawals to pay the proper taxing authorities or insurance companies.
We setup an automatic monthly payment directly from your checking account to deposit and accumulate funds in your escrow account to cover the estimated costs of your property taxes and homeowner’s insurance premiums. Then when those bills come due, we pay them for you out of the funds in your account.
An escrow account provides you with some practical benefits:
YES. As part of the setup of your escrow account, we do need a copy of your latest tax bill and insurance bill if you want us to pay those bills when they become due.
We also need to know if taxes or insurance premiums change so adjustments can be make to your monthly payment to ensure there are always enough funds to pay them when they become due.
Once you are setup, in most cases your local property-tax office and your homeowner’s insurance company send us copies of your bills. If we should ever need you to send us anything, we’ll let you know.
Because taxes, insurance premiums, and other fees can change, the amount you need to pay into your escrow account to cover those bills can also change. To help ensure you have enough money in your account for us to pay those bills, we analyze your account at least once a year.
After we finish our analysis, we tell you about it—and about any resulting change in your mortgage payment—by emailing you a personalized analysis report.
There are several escrow-related reasons that can cause your payment to change:
Changes in taxes or insurance premiums. These are the most common reasons for a change in your payment. Although taxes and insurance costs can decrease, they usually increase.
Escrow shortage. Our analysis may have determined that your account did not have enough funds in it (a “shortage”). We make up for the shortage by increasing your payment amount.
To help cover unexpected increases in your taxes or insurance premiums, we maintain a “cushion” (minimum balance) in your account. The cushion is equal to no more than two months of escrow payments. Despite the cushion, there are still some reasons why your account may have a shortage:
Unexpected cost increases. Your property taxes or insurance premiums may have increased more than we expected (this is the main reason for escrow shortages). That’s because the amounts we use to analyze your escrow account for next year’s tax and insurance bills are estimates, based on your previous year’s bills. We try very hard to use accurate estimates, but sometimes your final bills simply amount to more than we anticipated.
Due date change. The due date of your insurance or tax bills may have changed.
Insufficient deposits. Less than we expected may have been deposited into your account.
Unexpectedly high payouts. We may have paid out more from your account during the previous year than we expected.
You don’t need to do anything—we’ll automatically deduct the new amount from your bank account after proper notification. There will never be any unexpected deductions from your account.
Call us. It’s possible (although rare) to have a problem with your escrow account. If you believe there’s an error—or if you believe your tax or insurance bill was not properly paid—call us immediately. We’ll work closely with you to help you find a solution to any problem you may encounter.
Here are a few things to watch for:
Yes. Property taxes are deductible, but be sure to work with your tax advisor to learn the details. Also, be sure not to make the mistake of deducting the amount we deposited into your escrow account—only the actual tax amount we paid is deductible.
Remember: While we deposit payments we draft from you into your escrow account, we don’t pay your taxes until the bill comes due—which may be once or several times a year, depending on your local tax authority. As part of your annual escrow analysis, we always tell you the actual amount we paid. You can also see the amount we paid for property taxes by checking the IRS Form 1098 (Mortgage Interest Statement) that we create for you every year.
To review your most recent escrow statement on our website, sign in with your Username and Password.
Not really. If you choose not to have an escrow account, be sure to plan ahead and manage your money well, so you can pay your tax and insurance bills on time and avoid costly penalties or lapses in coverage.
It’s worth noting that many people who aren’t required to have an escrow account have one anyway. That’s because it’s an easy and convenient way to pay your tax and insurance bills.
Yes. You can ask us to cancel your escrow account any time. Please do that in writing by logging onto your account on our website and then visiting the Contact Us section. We’ll process your request refund any funds we are holding.
Canceling your escrow account is not something you should do on a whim. So before you submit your request, stop and think: