Escrow Analysis Overview
Escrow analysis helps lenders determine how to collect money into escrow accounts in a way that will be consistent with the law, but also ensure that they will have enough to make needed payments from the escrow accounts when they come due. In a typical escrow analysis, the lender will enter information on planned disbursements (payments) they will make out of those accounts. The lender will usually also specify a cushion amount for each escrow account (typically equal to escrow payments). The cushion is the target low balance for the account over the escrow calculation year.
Escrow analysis will take all this information and determine how much will be in the escrow account at its lowest point. There are three possibilities: surplus, shortage, and deficiency. A surplus means the amount exceeds the cushion amount for the account. A shortage is an amount less than the cushion, but greater than $0.00. A deficiency is an amount less than $0.00.
Escrow analysis only needs to be performed at the beginning of a loan and once a year after that. When the analysis is performed, there are specific documents that need to be provided to the borrower. These documents can be generated by LoanPro.