Annual mortgage escrow analysis

Once every year mortgage lenders do an escrow analysis to determine if the escrow payments have accumulated the proper amount to pay future taxes and insurance. My first escrow analysis was done at the end of December 2007 and the results showed that I had an overage of $1,592 in my account. The mortgage lender will be mailing me a refund check and, in addition, my monthly mortgage payment is going to decrease by about $85. I plan to use that extra money to build up my emergency fund with I have decided is woefully underfunded at the moment.

My mortgage lender includes an escrow cushion equal to 1/6 of my projected taxes and insurance. I used to think that some sort of state law required that but an escrow cushion is held at the discretion of the lender. Housing and Urban Deveopment (HUD) regulations limit the amount that a lender can hold in escrow. A few states require that interest be paid on escrow accounts, unfortunately my state does not.