Escrow shortage?

**sinebar** · 05-20-2008, 04:57 PM

Ok so my home owner insurance doubled and the mortgage company calculated a shortage of about $600. The insurance company said they increased the dewelling coverage to the projected cost to rebuild the house. They also increased the personal property loss all without my concent so apparently they didn't need it. Anyway I cancelled the the policy and found cheaper insurance by half. I recieved a refund from the first insurance company. Now my question is can I pocket this refund? And will my escrow payment go back down with the cheaper insurance. My property tax did not increase.

**jamesww** · 05-20-2008, 05:19 PM

Originally Posted by sinebar

Ok so my home owner insurance doubled and the mortgage company calculated a shortage of about $600. The insurance company said they increased the dewelling coverage to the projected cost to rebuild the house. They also increased the personal property loss all without my concent so apparently they didn't need it. Anyway I cancelled the the policy and found cheaper insurance by half. I recieved a refund from the first insurance company. Now my question is can I pocket this refund? And will my escrow payment go back down with the cheaper insurance. My property tax did not increase.

To be able to answer this question we to know wheather or not you paid the new insurance up for a year or not. Your are going to be required to pay extra beyond the monthly amount needed to pay the insurance premium until you have a reserve of 6 months of insurance payments in excess of the current month.

If you have the reserves caught up or you paid the insurance ahead then you should have your escrow requirments be 1/12 of the new yearly insurance premium.

**sinebar** · 05-20-2008, 05:36 PM

Originally Posted by jamesww

To be able to answer this question we to know wheather or not you paid the new insurance up for a year or not. Your are going to be required to pay extra beyond the monthly amount needed to pay the insurance premium until you have a reserve of 6 months of insurance payments in excess of the current month.

If you have the reserves caught up or you paid the insurance ahead then you should have your escrow requirments be 1/12 of the new yearly insurance premium.

The premium of the new insurance is $521 a year. I paid $150 down so no I didn't pay a whole year up front. The new insurance company only required $150 down and about $44 a month there after.

**jron** · 05-20-2008, 11:26 PM

Clearly James put out a good point on your query. I think it depends if you can pocket the refund but you must probably try to ask for advise from people who are involved in the transaction

**jamesww** · 05-21-2008, 12:31 AM

Originally Posted by sinebar

The premium of the new insurance is $521 a year. I paid $150 down so no I didn't pay a whole year up front. The new insurance company only required $150 down and about $44 a month there after.

What you need to do is contact both your lender and the escrow company explain that you canceled the old insurance and have reestablished a new policy. Tell them how much it is per year and ask what needs to be done so that you do not get any unpleasant surprises.

I am recommending this because once the lender gets a letter from the old insurance company and have not been contacted by you with the new insurance companies information they will set up insurance for you and it will be very high. All of a sudden you will get a unpleasant letter saying that if you do not start paying on the policy they established for you they will consider you in default and call the loan due. At that time you can inform them but being proactive and not having to deal with that stress is worth a million. Let us know how things go and we are always here to help.

**sinebar** · 05-21-2008, 04:55 AM

Originally Posted by jamesww

What you need to do is contact both your lender and the escrow company explain that you canceled the old insurance and have reestablished a new policy. Tell them how much it is per year and ask what needs to be done so that you do not get any unpleasant surprises.

I am recommending this because once the lender gets a letter from the old insurance company and have not been contacted by you with the new insurance companies information they will set up insurance for you and it will be very high. All of a sudden you will get a unpleasant letter saying that if you do not start paying on the policy they established for you they will consider you in default and call the loan due. At that time you can inform them but being proactive and not having to deal with that stress is worth a million. Let us know how things go and we are always here to help.

I already contacted the mortgage company with the new insurance information. What I would like to know now is can I force the mortgage company to do a new escrow analysis without having to wait a year.

**jamesww** · 05-21-2008, 05:47 AM

Originally Posted by sinebar

I already contacted the mortgage company with the new insurance information. What I would like to know now is can I force the mortgage company to do a new escrow analysis without having to wait a year.

The mortgage company is not who you should contact on this it is who ever you have the escrow account with. No, you can not force them to reevaluate the deposits in escrow but it has been my experience that some of the escrow companies will do it you ask. Just remember the entity that you want to contact on that is the escrow firm.