Escrow analysis
Audit escrow funds to make sure they fulfill disbursement requirements.
Escrow analysis is a periodic audit of escrow funds received to determine whether funds collected into escrow accounts will be sufficient to fulfill estimated escrow disbursements (payments made from escrow). In a typical escrow analysis, the lender will enter information on planned disbursements they plan to make for the accounts. The lender will usually also specify a cushion amount for each escrow account.
Escrow analysis will take all this information and determine if the amount collected in escrow so far, plus the amount that will be collected before the disbursement date will cover the estimated disbursement amount. At the end of the analysis, LoanPro will generate a downloadable statement to show the results. The statement will be different depending on the presence of a surplus, shortage, or deficiency.
Escrow analysis only needs to be performed at the beginning of an account and once a year after that. When the analysis is performed, there are specific documents that need to be provided to the borrower, which you can create with Dynamic Templates.
Running an Escrow Analysis
Before you run an analysis, you'll need to set up escrow buckets on whichever accounts you want to analyze. First create a bucket at the tenant-level and then be sure to set up the Escrow Calculator or an adjustment using the desired bucket. You should also add an estimated disbursement on the account. Once you've got accounts set up to collect and disburse escrow, you're ready to perform an escrow analysis.
Setting Accounts
From the Loan Manager, search for the set of accounts that you want to perform an escrow analysis on. Click the data options drop-down and select 'Run Escrow Analysis'. This will bring up a screen where you can select which accounts from that group you want to run the analysis on. When you've got the right list of accounts, click the 'Start Escrow Analysis' button in the top right corner and pick the escrow bucket that you'd like to analyze.
This will bring you to the next page, where you enter two key dates for future escrow analysis:
- Escrow Analysis Start Date – This is when the analysis is performed.
- Escrow Computation Year Start Date – This is when the escrow year starts.
When you've entered the dates, click the 'Set Dates' button to continue.
Step 1 - Starting Balance
On the Starting Balance page, you'll see a quick summary of your current balance, estimated disbursements, and the difference between them, called the starting balance.
Step 2 - Anticipated Disbursements
On this page, you'll see a review of anticipated disbursements you've already saved. If there aren't any there yet, you can add them now.
To add a disbursement, you'll need to enter the date, amount, frequency, category, and vendor. You can also add a memo to explain what the disbursement is for.
Step 3 - Initial Trial
This step shows the account schedule according to the plan you've created so far. It shows how much escrow is collected with each payment, and what this contributes to the balance of the escrow bucket. The yellow highlight shows which line has the lowest balance in the computation year.
Step 4 - Adjustment/Analysis Summary
This step shows the escrow you'll collect over the computation year and compares it to the total disbursements. Depending on the difference between those figures, you'll have one of three possible outcomes:
- A surplus means the amount exceeds the cushion amount for the account. You'll likely collect more than you'll need to cover all the anticipated disbursements and the cushion. You can credit the additional funds towards the next year's escrow or the account's balance, or make no change at all.
- A shortage is an amount less than the cushion, but greater than $0.00. You'll be able to cover all anticipated disbursements, but you haven't reached the cushion amount. You can choose to let the shortage exist, or add some additional escrow payments to make up the difference.
- A deficiency is an amount less than $0.00. You won't collect enough escrow to cover your anticipated disbursements. You can either keep things how they are, or add some additional escrow payments to cover the difference.
Step 5 - Escrow Analysis and Actions Confirmation
This step summarizes the analysis and lists the actions that you're about to make. The left side of the screen shows a summary of your projected escrow balance.
Step 6 - Statement Output and Summary
This step is similar to the previous one. On the left, it shows the same basic analysis information, but on the right it shows the escrow schedule for the coming computation year, listing each payment and disbursement in chronological order.
When you click 'Finish', you'll exit the escrow analysis tool.
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