Everything you need to know about an Escrow Account.
What is an escrow account?
An escrow account may be set up by Community First Guam Federal Credit Union to collect and hold funds to pay property expenses. These expenses often include property taxes, homeowners’ insurance, flood insurance and mortgage insurance. An escrow account is a convenient way to have Community First Guam Federal Credit Union manage the payment of your tax and insurance bills for you.
How does it work?
A portion of your monthly mortgage payment may include an amount to be paid into your escrow account. The amounts we pay out for your property taxes and insurance are deducted from this account.
What is an escrow balance?
Escrow balance refers to the amount of funds available in your escrow account for the payment of escrow items such as property taxes and insurance. If you have an escrow account connected to your mortgage loan, your monthly mortgage payment will typically include 3 components. One part of your mortgage payment goes toward reducing the principal amount of the loan, one part of the payment goes towards paying interest due and the other portion is applied to your escrow balance. The balance in your escrow account is used to pay upcoming expenses like real estate taxes and homeowners’ insurance.
Can I access my escrow balance?
Since your escrow account is established by the terms of your loan documents specifically for the payment of taxes, insurance, and may include certain fees related to your property, you can't access the balance of your escrow account.
What is an Escrow Analysis?
Property Taxes and insurance amounts are subject to change; therefore, it is necessary for Community First Guam Federal Credit Union to complete an escrow analysis to determine if the current escrow balance is adequately funded. The analysis includes a projection of the anticipated monthly escrow balance based on payments to be received from you and payments made from your escrow account for taxes and insurance for the 12 months included in your escrow analysis year.
How often does the Analysis happen?
Federal regulations require us to perform the escrow analysis at least once annually and at the time of loan payoff. The first analysis of your escrow account is performed within 12 months after your loan closing.
What to expect after the Analysis happens?
The amount you pay into your escrow account is calculated at closing and then analyzed annually. These payments can increase or decrease as your property taxes or insurance premiums change. As your lender, Community First Guam Federal Credit Union does not control these changes. Real Property Tax Division of Guam and or your insurance company establishes what must be paid.
If the projected low balance is below the required escrow cushion amount (also known as the allowable low balance), it results in a shortage that will be spread equally over 12 months and is added to your monthly mortgage payment. Alternatively, you may have the option to pay the escrow shortage in one lump sum. If the shortage is paid in one lump sum, your monthly payment will be reduced by the amount pertaining to the shortage payment only. Your base escrow payment will stay the same.
If the projection shows a surplus of $50 or more, the surplus will be refunded to you in the form of a check or automatically deposited into your share savings/share checking account. If your loan is past due 30 or more days at the time it is determined that an escrow surplus exists, a refund will not be sent to you. Once your loan is brought current and if the surplus still exists, the amount of the surplus will be refunded to you in the form of a check or automatically deposited into your share savings/share checking account.
Regardless of whether there’s a shortage or surplus, if there has been a change to your taxes or insurance amount, your escrow payment may decrease/increase as your base escrow payment is always calculated as 1/12 of your projected annual taxes and insurance premiums.
Once your analysis is completed, we’ll send you a summary outlining any changes (called an escrow analysis statement) before the changes to your monthly payment amount take effect.
What is an escrow cushion/escrow reserve?
Federal regulations allow for mortgage servicers to maintain a cushion equal to two monthly escrow payments. It is maintained in the event of a shortage. If your escrow balance falls below the cushion, it is considered a shortage and you will be required to make up the shortage amount.
Note: Private Mortgage Insurance, Mortgage Insurance Premiums or Rural Housing Service Guarantee Fee (PMI/MIP/RHS), if required by your loan terms, are not included in your cushion amount.
What if I want to change insurance providers?
You may change insurance providers at any time but you must notify us immediately by emailing our insurance team at firstname.lastname@example.org so we do not pay the previous insurance company. We will also need a copy of the new declarations page/billing so we may issue payment on the new policy. As a reminder, please cancel your previous insurance policy with your agent/insurance company.
What should I do if I receive a refund check from my insurance company?
If you have an escrow account and after changing insurance companies there may be a refund issued to you. Any refunds received by you should be deposited back into your escrow account to avoid an escrow shortage. Should you receive a refund check for a cancelled insurance policy or for any other insurance concerns please email us at email@example.com
Can I cancel my mortgage escrow account and pay the costs directly?
You may be eligible to pay your taxes and insurance independently; however, if flood insurance is required on your home, it must be paid through an escrow account. To cancel your escrow account, submit a request for an escrow waiver. Requests may be emailed to our Loan Servicing Group at firstname.lastname@example.org
Some criteria we consider for escrow waivers are:
Loan-to-value ratio (LTV): Your LTV ratio must be lower than 80%.
Occupancy: The property must be your primary residence.
Age of your loan: Your loan must be older than 6 months.
Escrow balance: Your escrow account balance must be positive.
Loan type: VA and FHA loans generally require escrow.
Payment history: Your loan must be current with no late payments.