Escrow Shortage in Florida: Why Your Payment Went Up and What to Do
An escrow shortage Florida homeowners see after the annual analysis comes from insurance and tax increases the account did not anticipate. You can pay it in a lump sum or spread it, and you can shrink the next one.
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An escrow shortage Florida homeowners find on the annual analysis comes from insurance and tax increases the account did not anticipate.
You can pay it in a lump sum or spread it over twelve months, and you can shrink the next one. Our guide to escrow accounts in Florida covers how the account works.
What the analysis is
Once a year the servicer compares what the escrow collected to what it paid and projects the next year.
The CFPB explains escrow analyses and the rules.
A shortage means the balance fell below the required cushion.
A deficiency means the balance went negative.
The statement shows both and the new payment.
Why Florida shortages are large
Insurance premiums have risen sharply.
See our guide to Florida homeowners insurance cost.
Property taxes reset after purchase.
See our guide to property tax estimates for new buyers in Florida.
Both hit hardest in the first two years.
The first-year reset
The escrow was set from the seller's capped tax bill.
The November bill after purchase reflects the reset.
The shortage appears in the next analysis.
The payment can jump by hundreds a month.
Expect it and budget for it.
Your options
Pay the shortage in a lump sum and take the smaller payment increase.
Spread it over twelve months on top of the new escrow amount.
Some servicers allow longer spreads on request.
Either way the new monthly escrow reflects the higher bills.
The lump sum only removes the catch-up portion.
Reading the statement
Prior year: projected versus actual disbursements.
Coming year: projected disbursements and the required cushion.
The shortage figure and the two payment options.
Check the disbursement amounts against your actual bills.
Errors happen.
The cushion
Federal rules allow the servicer to hold up to two months of escrow payments as a cushion.
Florida servicers usually hold the maximum.
The cushion is part of the shortage math.
You cannot waive it on an escrowed loan.
It is returned when the loan pays off.
Shrinking the next one
Shop the insurance at renewal.
See our guide to wind mitigation inspections in Florida.
File for homestead and any additional exemptions.
See our guide to the Florida homestead exemption.
Appeal the assessment if the value is high.
Insurance changes mid-year
A non-renewal and a new carrier at a higher premium produce a shortage the servicer did not project.
Send the new declarations to the servicer immediately.
Ask for a mid-year analysis.
A force-placed policy is worse than any shortage.
Keep coverage continuous.
Tax appeals and the escrow
A successful appeal lowers the November bill.
See our guide to property tax appeals in Florida.
The servicer pays the lower bill and the next analysis shows a surplus.
Surpluses over a small amount are refunded.
Tell the servicer about the appeal.
Removing escrow
Conventional loans below 80 percent loan-to-value can sometimes waive escrow.
See our guide to loan-to-value in Florida.
FHA, VA and USDA require it.
A fee or rate adjustment may apply.
You then pay taxes and insurance yourself, in lump sums.
Refinancing and escrow
A refinance sets up a new escrow from current bills.
See our guide to rate-and-term refinancing in Florida.
The old escrow is refunded after payoff.
The timing gap can mean funding the new escrow while waiting for the old refund.
Plan the cash.
Servicing transfers
A new servicer inherits the escrow balance and runs its own analysis.
See our guide to mortgage servicing transfers in Florida.
Errors in the transfer produce phantom shortages.
Compare the balance before and after.
Dispute in writing.
Condos and assessments
Association dues are rarely escrowed.
See our guide to CDD fees in Florida for non-ad valorem lines that are.
CDD and municipal assessments on the tax bill go through escrow.
A new assessment produces a shortage.
Read the tax bill for new lines.
Qualifying for the next loan
Lenders use the real tax and insurance figures for your next application.
See our guide to maximum DTI in Florida.
A payment that rose with the escrow counts at the new amount.
That can affect a refinance or a second purchase.
Bring the current escrow statement.
Disputing the analysis
Write to the servicer with the correct bills if the projection is wrong.
Servicers must respond to written inquiries within set deadlines.
Keep copies.
An overcollection is refunded once corrected.
The CFPB takes complaints if the servicer does not respond.
Timing the analysis
Most Florida servicers run the analysis after the November tax bill and the insurance renewal.
The new payment usually takes effect in the new year.
Watch for the statement in December or January.
A mid-year analysis can be requested after a large insurance change.
Do not wait for the surprise.
Where to start
Read the analysis against your actual tax and insurance bills.
Choose lump sum or spread based on your cash.
Then start a conversation if the new payment makes a refinance worth running.