Servicers frequently miscalculate escrow accounts—projecting inflated taxes, padding insurance estimates, or building excess "cushions." When your payment suddenly spikes, you have the right to demand a corrected analysis.
Your monthly mortgage payment typically includes principal, interest, AND escrow. The escrow portion covers property taxes and homeowner's insurance. Your servicer collects these funds monthly, holds them, and pays your taxes and insurance when due.
Under 12 CFR 1024.17, servicers must perform an annual escrow analysis and can only maintain a "cushion" of up to 2 months' worth of escrow payments.
Using wrong tax parcel, projecting increases that didn't happen, or doubling payments
Projecting premium increases far beyond actual policy cost or using force-placed rates
Holding more than 2 months' cushion—the maximum allowed under RESPA
Demanding immediate lump-sum shortage payment instead of 12-month spread
Your annual escrow analysis statement must show:
The #1 escrow error is wrong property tax projections. Look up your actual tax bill on your county assessor's website and compare it to what the servicer is projecting. They often use the wrong parcel or inflate expected increases.
The Real Estate Settlement Procedures Act gives you important escrow protections:
Servicers can only hold a cushion equal to 2 months of escrow payments (1/6 of annual disbursements). Anything more violates RESPA.
If your escrow account has a shortage, you have options:
If your escrow has a surplus over $50, the servicer must refund it within 30 days. Smaller surpluses can be credited to future payments.
California CC § 2954 also regulates escrow impound accounts, limiting amounts servicers can collect and requiring proper accounting.
It depends on why. Legitimate reasons for large increases include:
Illegitimate reasons to challenge:
Possibly, but it depends on your loan terms and LTV:
To cancel, submit a written request. If denied, ask for the specific reason and cite the governing regulation.
Under RESPA, servicers must:
If they miss these deadlines, they've violated RESPA. You can file a complaint with the CFPB and potentially recover statutory damages ($2,000 for pattern/practice violations) plus actual damages and attorney fees.
You have options:
Never ignore an escrow shortage notice. If you disagree, dispute it in writing while also making your current payment to avoid default.
I help California homeowners challenge inflated escrow calculations and demand RESPA-compliant accounting. If your payment spiked due to servicer error, I can help you fight back.