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Frequently Asked Questions About Escrow Accounts

• Why is it necessary to maintain escrow accounts?


• Could there ever be a surplus/shortage in my escrow account?

Additional Questions

Why is it necessary to maintain escrow accounts?

When you signed your mortgage contract you agreed that a certain amount of your monthly payment would be held in escrow by WHEDA for payment of insurance and taxes.

An escrow account works like a savings account, but the money in the account can only be used for one purpose. You are setting money aside each month to meet your annual real estate tax bill and insurance premiums. In addition, WHEDA pays you interest on your escrow accounts. This interest is credited to your escrow account at year-end.

Could there ever be a surplus/shortage in my escrow account?

Yes. If insurance premiums or tax rates decrease from the previous year, an escrow surplus may be created. When we send you the annual analysis of your loan, we will inform you of any escrow surplus. This money (if more than $50.00) will be returned to you if your account is current and there are no late charges due.

Normally insurance premiums and/or real estate tax rates increase each year. This would then create an escrow shortage over a 12-month period. This will be indicated on your annual escrow analysis.