Residential Mortgages

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What is an Escrow Account?
Escrow accounts are generally required and controlled by a mortgage lender to guarantee that a homeowner is able to budget, on a monthly basis, the additional costs associated with owning a home. Typically, these expenses include, but are not limited to, property taxes, homeowners insurance, flood and optional insurance, as well as private mortgage insurance (PMI). An escrow account provides a convenient, no-hassle service by allowing Valley National Bank to pay your tax bills and insurance premiums for you. Escrow accounts protect both Valley, and our customers.

What is an Escrow Analysis?
Every year an escrow analysis is performed on your escrow account. This is an examination of your account to determine if the current monthly deposits will provide sufficient funds to pay your taxes and insurance for the next full year, as well as provide the appropriate cushion. The escrow analysis identifies any overages, shortages, or deficiencies that exist at the time the analysis is performed, and adjusts the total monthly payment accordingly.

How is my escrow payment calculated? Can Valley National Bank make any adjustments?
The escrow payment is calculated as required by the Real Estate Settlement and Procedures Act (RESPA). Valley estimates the amount we will have to pay over the next 12 months for your real estate tax and homeowner?s insurance bills. We base this estimate on information from your loan closing documents, your taxing authority and insurance company, or your previous tax and insurance bills. However, if the annual amount has changed for any escrowed item reflected on the statement, the bank may perform a new escrow analysis to correct your monthly escrow payment. If these costs have changed, please notify Valley National Bank at 1-800-526-9098.

Why did my payment change?
The annual amount required to fund your escrow account depends on the amounts that your insurance company and taxing authority office invoices Valley National Bank. Since these amounts may change, the escrow payment may also change. Please see your escrow analysis for more information.

What is a shortage?
Escrow shortages occur when your real estate taxes or insurance premiums increase, or turn out to be higher than originally projected at loan closing. If this occurs, there will be a shortage in your escrow account, and additional funds must be collected to satisfy the shortage.

How do I pay my shortage?
If the shortage is greater than one monthly escrow installment, Valley will collect the amount over a 12 month period. If the shortage is less than one monthly escrow installment, Valley will collect the amount over one month.

You may also choose to pay the shortage in full by sending the required payment amount (clearly identified as a shortage payment) separately or with your current required monthly mortgage payment. You may also pay by telephone by calling Valley's customer service department using the number listed on your statement. (A fee may apply for telephone payments.)

Will my escrow payment amount remain the same if I pay my shortage in full?
Even if you pay your shortage in full, your monthly escrow payment will still change if your annual real estate taxes or insurance premiums change.

What is a surplus?
If your real estate taxes or insurance premiums are less than the projected amounts, it could result in a surplus in your escrow account. This means that your escrow account has more funds than will be needed to pay your escrowed items over the coming year, including the cushion. You will be reimbursed the entire amount if the surplus is $50.00 or more. A surplus under $50.00 will be placed into your escrow account and your monthly escrow payment will be reduced accordingly.

What is a deficiency?
If the actual, final escrow balance is negative, it is called a deficiency. Both a shortage and a deficiency will increase your monthly escrow payment unless you choose to pay these amounts in full immediately.

How do I pay my deficiency?
If the deficiency is greater than one monthly escrow installment, Valley will collect the amount over two months. If the deficiency is less than one monthly escrow installment, Valley will collect the amount over one month.

What does cushion mean?
The cushion is the amount of money that a mortgage lender requires a borrower to pay into an escrow account to cover unexpected disbursements for escrow items, or for disbursements that have to be made before the monthly escrow payments are available in the escrow account. The cushion for your account is shown as the ?REQUIRED LOW BALANCE? on your annual Mortgage Escrow Account Statement. The amount of your cushion is governed by applicable law and the terms of your mortgage loan.

When I closed my loan I paid real estate taxes and insurance as part of my closing costs. Why are you collecting funds for bills I already paid?
The tax or insurance payments you made at closing were for required disbursements that were due immediately after closing, or to fund the initial required amounts for your escrow account. We continue to collect funds in your escrow account to cover future real estate taxes and insurance premiums when they are due.

What can I do to keep my escrow payment from increasing?
You should review your annual real estate tax assessment and discuss any concerns or discrepancies with your local taxing authority. You may qualify for exemptions that you are not aware of. You may also consider obtaining competitive quotes for homeowner?s insurance to ensure you are receiving the best premium for the amount of your coverage.

What if I have questions about my monthly mortgage payment?
Please contact Valley National Bank Mortgage Servicing at 1-800-526-9098, Monday through Friday, 8:30 AM ? 4:30 PM EST.

Guide to Understanding your Mortgage Escrow Account Statement