What is Escrow
Escrow is an amount of money your mortgage lender holds to pay for expenses such as property taxes and homeowner’s insurance. If you have been late on your mortgage payments, and/ or your escrow reserves are not sufficient to cover escrowed expenses you would likely have something called escrow deficiency which means that the mortgage company has paid more for taxes insurance or other escrowed items on your property even though you have not paid the mortgage.
There is also something called a projected escrow shortage which means you are not actually delinquent on property taxes, but the mortgage lender needs more money in reserves to pay the property taxes or other escrowed expenses when they become due. You can typically pay the escrow shortage in full or have it broken down and added to your monthly mortgage payment.
If you are late on your mortgage payments, then the lender will also put in “force placed” homeowners’ insurance on your home. Having a deficiency on your mortgage can increase your monthly payments significantly when you include the arrears and the escrow that gets behind. The mortgage lender does not shop for the cheapest insurance.
You are usually better off finding and pricing your own homeowner’s insurance. That could be a several hundred dollar a month savings to you. If you are behind on your mortgage payments, you have the option of filing a Chapter 13 to get it current and catch up the arrears over a 60-month period. It’s always better to try to catch it before it gets too far behind. My office will offer solutions that would work best for your situation.
