Escrow

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The lender establishes an escrow account for the purpose of collecting and disbursing various payments associated with your mortgage loan.

Your mortgage payment consists of principal, interest, taxes and insurance also known as PITI. When your monthly payment is made each month it goes into your escrow account from which the monthly principal and interest payment is made.

The remaining funds are then set aside to cover any escrowed tax and insurance items that will come due during the year such as real estate taxes, homeowners insurance and mortgage insurance. Condominium association fees may also be included as an escrow item. However, special tax or condominium project assessments are not items for which a lender will provide escrow services.

In accordance with the Real Estate Settlement Procedures Act (RESPA), your lender is required to conduct an annual escrow analysis and provide you with a statement and notification of any escrow and mortgage payment changes within 60 days of completing the analysis. The amount of funds that can be retained in your escrow account is prescribed by RESPA based on loan type. Your lender will be able to provide you with this information.