Carrington Mortgage Services, LLC (“Carrington”) utilizes escrow accounts to manage property taxes and insurance payments for homeowners. This comprehensive guide explains how Carrington’s escrow accounts work, their benefits, and how potential shortages or surpluses are handled.
What is an Escrow Account and How Does it Work?
An escrow account with Carrington simplifies homeownership by incorporating property tax and insurance payments into your monthly mortgage payment. A portion of your monthly payment is allocated to your escrow account. When your tax and insurance bills are due, Carrington disburses payments directly from this account, eliminating the need for you to track and pay these large expenses separately.
Benefits of an Escrow Account with Carrington Mortgage Services
Carrington’s escrow service offers several key advantages:
- Simplified Budgeting: By including taxes and insurance in your monthly payment, escrow accounts help you budget for these significant expenses, avoiding large lump-sum payments.
- Automated Payments: Carrington handles the timely payment of your taxes and insurance, ensuring you avoid late fees and potential lapses in coverage.
- Financial Protection: Escrow accounts help safeguard against unexpected increases in tax or insurance premiums.
Annual Escrow Analysis and Loan Transfers
Carrington conducts an annual escrow analysis to ensure your account is adequately funded. This analysis evaluates:
- Projected Costs: Carrington calculates the estimated annual costs for property taxes, homeowner’s insurance, mortgage insurance (if applicable), and flood insurance (if applicable).
- Account Balance: The analysis compares projected costs to your current escrow balance.
- Payment Adjustments: Your monthly payment may be adjusted to maintain a minimum cushion of two months’ worth of estimated taxes and insurance, unless restricted by loan documents or state law. This cushion helps prevent shortages due to unexpected increases.
For loans transferred to Carrington, an escrow analysis is performed within 60 days of the transfer date to establish a proper funding level.
Understanding Escrow Shortages and Surpluses
- Shortage: An escrow shortage occurs when the account balance falls below the required two-month minimum. This can happen due to increased taxes or insurance premiums, reassessments, changes in due dates, or insufficient payments.
- Surplus: A surplus occurs when your account balance exceeds the required minimum, typically due to lower-than-expected tax or insurance costs. Carrington will issue a refund check for any surplus amount.
Common Causes of Escrow Shortages
Several factors can contribute to an escrow shortage:
- Increased Taxes or Insurance: Rising property values or insurance premiums can lead to higher payments.
- Property Tax Reassessments: Periodic reassessments can result in higher tax bills.
- Insurance Changes: Switching insurance providers or coverage levels may impact costs.
- Payment Changes: Missed or insufficient payments can deplete your escrow balance.
If you anticipate potential increases in your property taxes or insurance, contacting your local taxing authority or insurance agent is recommended.
Managing Your Escrow Account Online
Carrington provides online resources for convenient escrow management:
- Escrow Statements: Access updated statements online through your account portal under “Billing and Tax Documents.” Paperless statement options are available.
- Escrow Information: View your current balance, payment amount, and recent disbursements in the “Escrow Information” section of your online account.
- Adding or Removing an Escrow Account: For FHA, USDA, or VA loans, removing the escrow account is not permitted due to loan requirements.
Escrow Account Differences Between Servicers
Escrow practices can vary between mortgage servicers. Carrington’s two-month cushion requirement helps mitigate potential shortages due to fluctuating tax and insurance costs.
Lowering Your Escrow Amount
To potentially lower your escrow payments:
- Shop for Insurance: Compare insurance quotes to find the best coverage at the most competitive price.
- Dispute Property Taxes: Follow your county’s procedures for challenging your property tax assessment.
- Apply Insurance Refunds: Forward any refund checks from previous insurance policies to Carrington for deposit into your escrow account. Cashing these checks could lead to underfunding and increased payments.
Additional Escrow Resources
For further information, refer to Carrington’s escrow resources here or access the “Escrow Summary” within your online account dashboard.
